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Renaissance braces for fall on loss of exclusive Apple business

Renaissance braces for fall on loss of exclusive Apple business

Renaissance is bracing for a fall in its Apple profit and sales after losing exclusive distribution rights to the business.

The company says some retailers it supplies will be able to “multi-source’ Apple products, as is the case in other countries.

“This means that certain large customers of Renaissance, such as the mass merchants, will be able to source from Renaissance or directly from Apple, or a combination of both,” managing director Paul Johnston said in a statement.

The company expected the full impact on the Apple distribution business would be spread over 2008 and 2009.

Johnston says the changes in Apple's go to market strategy aren’t surprising and Renaissance talked about the possibility at its last AGM and in its half year result.

“We fully expected it to be introduced into New Zealand at some time in the future. It’s just a model we’ve got to get on with.”

He says the company is pleased it has a new contract with Apple, and that it is on track to achieve the net profit before tax it expects for the year to December 2007 (between five and five and a half million dollars).

The distribution model changes only apply to what Apple defines as tier one resellers, which in New Zealand are the large retailers, Johnston says.

He says Renaissance’s distribution margin will reduce slightly between now and October, so that it is in line with the Australian model.

Renaissance has adopted a diversification strategy to reduce its dependence on the Apple business, which included the acquisition of Apple retail chain Magnum Mac and tertiary design college Natcoll.

Last August, Johnston said “[The acquisition of Natcoll] provides diversification for the company, but in two market segments where we already have very strong ties – education and the creative industry.”

In the most recent statement, Renaissance said non-Apple-distribution activities would grow from an EBITDA contribution to overhead of less than 10 percent in 2006 to one that is projected to be greater than 60 percent in 2008.

“It has been our strategic aim to shift the earnings of the Group to brands that Renaissance owns and controls.”

Changes to the distribution margin structure would be phased in before October, it said.

The new arrangements would bring the New Zealand distribution structure for Apple products "broadly" into line with those that prevailed in Australia and other countries, Johnston said in the statement.

Renaissance anticipates the year to December 2007 will finish with a net profit before tax of between five and five and a half million dollars, as it previously indicated.

It said it had experienced record Apple product sales in the last quarter of that year, as supply constraints eased after several months of shortages, especially of iMacs and Apple portable computers.

The distributor saw brighter prospects for its two recent acquisitions – Magnum Mac and Natcoll, both of which had traded well and are set to be expanded this year.

Renaissance opened its first new Magnum Mac store last November in the new Westfield shopping mall in Albany, north of Auckland.


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