Renaissance charts course to combat profit slide

Renaissance is banking on boosting its education and retail business in a continued bid to reverse a trend of falling profits.

The distributor’s recently-announced $280,000 net profit before tax for the half year to June was 87 percent down on the previous corresponding period.

This followed a drop of 70 percent year on year in net profit before tax for the period to December 2008, from $5.1 million for the full 2007 year to $1.54 million.

The company has cited difficult trading conditions in each of the last several result announcements and market updates, amid reduced margins and a challenging retail environment.

It sustained a $528,000 loss in its retail operation during the first half year and incurred $396,000 in costs for discontinued businesses.

Managing director Paul Johnston says retail and education will be “significant contributors to the business going forward”.

“The education business has done very well, particularly Natcoll, and so has education sales business. Retail has bounced back quite nicely and we have a lot of belief that business will grow. We are looking for significant growth in the retail business in the next two to three years.”

The company wants to make further acquisitions in the education space, as Natcoll has proved a successful buy for the company, says Johnston. Though he would not say how many it wanted to make or when these were planned.

Renaissance will make ongoing investments in its Magnum Mac retail chain, he says. Three stores have been opened or refurbished, including two in Auckland and one in Christchurch. Further stores will be opened or refurbished as suitable locations are found.

New general manager Eddie McGrory has recently taken the helm of the Magnum Mac business, replacing Murray Wood who left last year. Johnston says he carried out these duties part-time for six months prior to McGrory’s arrival. Wood left the company to focus on other business interests, including a directorship at Christchurch Television.

McGrory has 20 years’ experience in IT retail in the UK and Ireland, says Johnston.

The December quarter is critical to Renaissance achieving its full year target of between $1.7 million and $2 million.

“[The quarter] it combines two areas that tend to peak then, which are retail and education,” says Johnston. “Last year we flagged the December quarter came up very short of the expectation because the financial crisis hit the market at that time. That has quietened down a bit now. December needs to be a good quarter, but we are not setting any unreasonable expectations.”

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