RNS
21/05/2013 11:38
HALFYR
REL: 1138 HRS Renaissance Corporation Limited
HALFYR: RNS: Interim result to March 31 2013
Interim result to March 31 2013
Renaissance Corporation Limited (RNS) announces a net loss after tax, in the
six months to 31 March 2013 from continuing operations of $3,091,000 compared
to a profit in the prior corresponding period of $1,833,000.
A more relevant comparison excludes the impact of insurance proceeds in 2012,
the impairment of goodwill on the retail subsidiary in 2013 and other
non-operating gains in this period. Operating earnings before depreciation,
amortisation, interest and tax were $203,000 in 2013. The comparable number
in 2012 was $1,016,000.
Continuing operations 6 months to 31 March 2013 v. 6 months to 31 March 2012
$000
Please see attached for Table.
We thought we were sailing into clear air after the agonies of the earthquake
and the sale of distribution in July last year. That has not been the case.
Our retail operation has been extremely disappointing and our constant action
on overheads never seems to be enough and trails behind the level of
activity. Overheads remain too high for the remaining businesses. The
bright spot has been education which continues to perform well despite the
appreciating $NZ and a slow international student market.
Retail
Retail has been the main reason for the poor performance in the first half of
2013. In the half year to March 31 retail made an operating EBIT loss,
before impairment of goodwill, of $511,000. This compares with a profit of
$164,000 in the same period last year.
There have been issues, a combination of management and overall Apple supply
and demand.
Before Christmas we were severely constrained for Apple stock. This was a
worldwide phenomenon for Apple. After Christmas we have not had the benefit
of new models to boost sales. Nonetheless we have lifted unit sales in all
categories except iPhone.
Please see attached for Table.
Notwithstanding this, Apple revenue for the period is down 26%. We have
achieved lower per unit sale prices in all our Apple product lines and unit
sale prices of the iPad, since the advent of the 'mini' are down 28%. When
Apple announced their results for the quarter to March 31 we noted that
revenue in "the rest of Asia" was down 20% on the immediately preceding
quarter. Unfortunately Apple does not share their results for New Zealand so
a direct comparison is not possible. When Apple sales are down, sales of
third party products follow.
Our average gross margin on Apple product declined from 11% in the first half
of 2012 to 8% in the first half of 2013. Apple dropped its margins on mini
iPads when they were introduced so that has contributed to the gross margin
decline. On top of that, many of our competitors use Apple product as a loss
leader to attract customers to their store. It has been a tough environment.
Over the period we have consistently missed budgeted revenues. We
re-forecasted after December and we have missed those numbers. Retail has
our full attention and we are working through solutions. The simplest
analysis is that the overheads management needs to run the retail business
are too high by comparison with our Apple-only international peers.
Our retail division is work in progress and we are working systematically
through options. We decided that we should write off the goodwill
attributable to the retail division because the forecasts that had sustained
that value at the full year have clearly not been met.
Education
By comparison Education is going well. While we are struggling along with
everyone else for international students, EBIT in the first half was $854,000
and we remain on target for an EBIT contribution of about $2.2m for the full
year.
We have probably grown as big as we can domestically because Equivalent Full
Time Students (EFTS) are capped. The industry is demanding Yoobee graduates
and we are filling every available role. Our employment outcomes are some of
the best of any private college in New Zealand. Unfortunately demand for our
domestic graduates does not necessarily translate into opportunities for
Yoobee because of the government cap on student numbers.
In this period we have shifted into the new campus in Auckland and the uplift
in morale amongst staff and students can be felt. It is a great facility.
All the costs of the shift except fit out have been expensed in this period.
We have nearly concluded arrangements with the Open Polytechnic to offer a
degree program, which we aim to deliver on the Auckland campus in July. We
already have an internship program running. This is running successfully
with 6 Yoobee interns employed to work 20hours per week, aiming to complete
their degree in one year.
Our online learning project is in the home straight. Our first four courses
have been developed and one has been tested in the market with great
feedback. Promotional videos have been developed. A marketing strategy has
been scoped. The first courses will be offered in June. All the costs of
development have been charged against profits as we have incurred them.
We see synergies between our online project, marketing, short courses and
publishing and our Sydney campus. The outlook for education is really
encouraging.
Overheads
With the sale of Distribution in July last year and retail shrinking we have
been in what seems a continuing attempt to right size our overheads.
The table below shows our efforts on overheads related to Retail and our
Corporate overheads. In the year to September 2012 our overhead in retail
was $2.0m. We are currently running at about $1.4m on an annual rate and by
the next financial year they should be about $1m. Our Corporate overhead was
$2.4m in the year to September 2012 and is currently running at about $1.1m
per annum. In the next financial year it should be about $0.9m.
Please see attached for Table.
We press for more reductions.
Conclusion
The result for this period is bitterly disappointing after everything we have
been through. At the AGM at the end of March we expected to be able to put a
proposal to shareholders in the near future. To date this has not been
possible. We continue to work on different proposals and we will revert to
shareholders as soon as we can.
Colin Giffney,
Chairman,
On behalf of the Board
End CA:00236467 For:RNS Type:HALFYR Time:2013-05-21 11:38:23
