Distributor Renaissance’s net profit before tax has fallen 70% year on year, down from $5.13m for the full year to December 2007 to $1.54m in 2008.
In a statement to the NZSX, Renaissance says sales and margins fell “significantly below expectations” in the last quarter of 2008. It says retail, education hardware sales and the core distribution business were the worst affected by the economic downturn.
The company has reviewed its business divisions and discontinued “a number of activities”. These include what it says are two higher risk investment projects it has been working on for the past two to three years.
Renaissance wrote down expenses incurred to date on its online data insurance product, along with the final portion of the write down for the discontinued widget-based Digital Media service. The costs of discontinued businesses totalled $3.08 million.
“Given the uncertainty over future trading conditions, the company believes reducing risk in the business is the best option,” Renaissance says.
In a market announcement last November, the company predicted its net profit before tax for the full year to December 2008 would be between $3 million to $3.5 million, well below previous market guidance. However, it said the Christmas trading period would have a significant impact so a more accurate prediction was not possible.
Renaissance says the current economic conditions make forecasting for the year ahead difficult.
However, it says the company will benefit from the reduced costs that will result from the discontinued investments.
Renaissance expects the Apple Division’s contribution to the business will drop by $1.5 million in 2009 over 2008. It is optimistic about the company's “new education activities”, but acknowledges uncertainty in regards to overseas student enrolment levels.
It bought design college Natcoll in 2007.