Renaissance breaches banking covenant

IT distributor and retailer Renaissance Corporation has announced a preliminary unaudited pre-tax loss of $2.7 million for the full 2009 year.

The announcement, posted on the NZ Stock Exchange website this afternoon, says the loss was due to $3.4 million worth of one-off expenses and write-offs, without which the result would have been a $1 million profit.

The extent of the loss is such that Renaissance has breached one of its banking covenants, relating to interest cover, but the filing notes that given the loss was due to the one-off items and write-offs, “the board does not anticipate having to make any changes to be able to maintain positive interest cover going forward”. Computerworld understands new Renaissance CEO Richard Webb met recently with the company's bankers recently and they were satisfied with the situation.

The one-off items and write-offs comprise $1.8 million of items that were dealt with “above the line”. These are: $1 million on stock obsolescence and stock take variances, just over $500,000 on costs associated with changes in the senior executive team, and just under $200,000 in “other recognitions”.

The rest of the abnormal items comprise the write-off of $980,000 of goodwill associated with Insite Technology and the now-defunct Educational Computers division, now a part of Student IT.

The remaining $755,000 consists of final charges relating to the cessation of Txttunes, Widget and Renaissance Indemnity initiatives, ventures embarked upon to diversify Renaissance’s revenue base, but which proved unsuccessful.

Natcoll performed “well above expectations”, but the Magnum Mac and Renaissance Education divisions were “impacted by the recession”. Magnum Mac lost $1.6 million in trading and another $740,000 from stock adjustments and other one-off costs.

The report says the directors are confident of the future of these stores under the new leadership team assembled during the last six months.

It notes: “New CEO Richard Webb has commenced a full review of the business and during his preliminary analysis has recommended that the organisation structure be realigned to better serve its customers to lift revenue growth. As part of this realignment the balance date of the company will move to 30 September to improve the company’s ability to forecast earnings in an environment where the December quarter is seasonally high and volatile”.

Webb’s plans will be detailed when Renaissance reveals its annual report in March.

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