Renaissance Corporation Limited - the year in review
2012 has been another year of upheaval for the company. There has been lots
of change. Businesses have been sold, activities shut down. Historic assets
have been written out of the accounts.
Now though, the balance sheet is stabilising. The business is "right-sized".
Focus has returned to the retail and education businesses and we have ended
the year with a platform from which to grow.
These are the main events that affected us this year.
o The Christchurch campus finally relocated to Mairehau (March 2012) after
being in temporary premises since February 2011.
o The earthquake insurance claim has been settled.
o The board made the decision to exit Distribution in September 2011 and this
was finally concluded in September 2012 after a tortuous process.
o We exited the Quay Street & Onehunga premises.
o We exited the Insite PC build business.
o In retail we have:
? Closed five StudentIT stores (March 2012)
? Shifted to new premises in Hamilton (December 2011) and Wellington
(February). Since balance date the Dunedin store has been relocated.
? Opened new stores in Cashel St Container Mall (November 2011), Riccarton
Mall (July 2012) and Sylvia Park (August 2012).
? Dealt with all slow moving stock
o Moved to a direct supply arrangement with Apple Inc. and faced a reduction
in credit terms from 45 days to 30 days.
o Overall staff numbers reduced from 268 in September 2011 to 184 in
The result for the year is a surplus after tax of $2.029m. However, most of
the above events are not in the ordinary course of business and as a result
there are a lot of non-recurring items in the make-up of this figure.
The resulting accounts are very complicated. In the appendix to this review,
we provide additional information, which should help shareholders understand
the major changes to our balance sheet between 2011 and 2012.
Yoobee School of Design, the newly named Natcoll, produced an outstanding
EBIT result of $2.25 million in 2012. This was up from $1.5 million in 2011,
a year that was severely affected by the Christchurch earthquakes. Both
figures are before any income from insurance recoveries, which have been
treated as non-recurring items.
Ruth Cooper joined us as General Manager of Yoobee School of Design in
January 2012. She has quickly grasped the opportunities that are there for
our education business.
Yoobee School of Design has successfully registered with the Australian
Skills Quality Authority as a Registered Training Organisation (RTO) in New
South Wales. The RTO status is valid until September 2017. Management is
evaluating the best way to commence trading in Australia.
At its October meeting the board accepted a proposal to start online course
delivery. We aspire to deliver a ''mixed learning'' experience. This is a
combination of "online" and "classroom" teaching. By the end of the first
year, we aim to have rolled out eight short courses online with work started
on projects that are more ambitious.
We do not expect a contribution from these investments in 2013 but by 2014,
both should be contributing positively.
Yoobee School of Design''s budget for 2013 is shown below
Education Budgets 2013 ($000)
Revenue 11,827 11,205
EBIT 2,425 2,250
Yoobee Retail produced an EBIT loss of $0.374m in 2012, reduced from an EBIT
loss of $0.923m in 2011, excluding one-off items.
Trading was difficult in the second half, which was also impacted by the
start-up costs of new and relocated stores.
We are now operating 10 stores throughout the country. The store format has
been refreshed and the main change is that a Guru Bench is being rolled out
into all stores. Customers can now get their new device set up, linked to
other devices and working in store before they go home. We are working to
the slogan of "Connect, Protect, Enhance" as we expose customers to solutions
for their communication needs.
Yoobee Retail is different. It is not a big box mover. It specialises in
Apple devices and mobility. Apple Inc. has been fully supportive of the
approach we have taken and the relationship with Apple is entering a new era
after the long one we experienced as their distributor in this country.
We have been struggling with our information system. Our current retail POS
system was installed in December 2008. The initial switch over did not go
well and then support for the product retreated to the UK. Users have
grappled with the idiosyncrasies of the system and that has been a huge cost
in both stock adjustments and diverted effort. Motivated by frustration we
commenced implementing an alternative system in early 2012.
However, our current supplier is now back providing support in this part of
the world with increased functionality around inventory metrics and we have
re-committed to them. Based on stock takes over each of the last two months
integrity of the system seems to have been restored.
While management have identified potential new store locations the board
wishes to see substantially improved bottom line results from the current
format and enhanced systems before making a commitment.
The Apple range steadily grows. With expectations for more product
refreshes, new product like the iPad Mini and a new focus on retail, the
prospects are encouraging. However, while Apple has produced great offerings
we are struggling at getting the right SKUs in the quantities to fulfill
demand. The sales are going to be across an increased number of SKUs and we
need better supply than we have achieved at the beginning of this financial
year to achieve targets.
The 2013 budget that has been accepted is shown below.
Retail Budgets 2013 ($000)
Revenue 51,936 43,787
EBIT 626 (374)
The 2013 budget reflects a full year''s operation of the two new stores opened
in July and August, the introduction of the Guru benches, unchanged per store
Apple sales and a 10% per store growth in third party accessories.
Management was charged with submitting a budget we will meet and conservatism
Group overhead structure
Renaissance is now a much smaller company than it was. The remaining
businesses are quite discrete and largely self-sufficient but the overhead
structure still reflects a consolidated group. The board has been actively
considering future structures or alternative solutions and is determined to
achieve a more balanced overhead cost. However based on the structure which
currently prevails the 2013 overhead cost is:
Overhead cost 2013 ($000)
Prospects for 2013
The Consolidated budget for 2013 becomes:
Consolidated 2013 ($000)
Depn & Amortn (1,171)
NZ Sales has been absorbed into retail, post balance date and is immaterial
The balance sheet is more fully addressed in the appendix to this review.
At the Special General meeting in July when shareholders met formally over
the sale of the distribution activity, we presented a pro-forma balance
sheet. That balance sheet anticipated that the sale of the distribution
business had happened at, and was based on management accounts to, 31 March
2012. That analysis suggested a balance sheet with net cash of $1.1m and
group equity of $12.8 m.
The comment was made at that time that "...there is uncertainty surrounding
any write-offs of fixed assets or inventory we may incur once the sale of the
distribution business has been effected". At September 30, the balance sheet
actually had $1.1m of net interest bearing debt and shareholders'' equity of
The slippage in closing equity of $1.9m is the result of four factors.
o Below expectation trading in the second half. The protracted sale process
led to trading losses in Distribution and the Retail and NZ Sales operations
also posted losses. The impact of this was $1.5m.
o The asset write downs and provisions (including a $0.5m onerous lease
provision) resulting from the final exit from Distribution and our PC build
business, Insite Technology, accounted for a further $1.7m.
o A comprehensive reappraisal of retail inventories and fixed assets at year
end gave rise to write downs of $0.85m
o Offsetting these were insurance recoveries of $1.35m and a write-back of
tax provisions at the half-year of $0.8m..
The factors impacting the $2.2m cash shortfall are set out in more detail in
the addendum. In summary, approximately:
o The wind up of distribution realised less than book value. ($0.5m)
o Cash trading loss incurred in the six months. ($0.5m)
o Net cash received on insurance. $0.9m
o Capex investment, mainly in retail store fit out. ($0.9m)
o Net investment in working capital, mainly inventory in retail. ($1.2m)
We need to record the support we received from the Bank of New Zealand during
this period. It is easier to talk about now. At the peaks of our cash flow
deficiencies, we were recording midmonth peak borrowings of $10m and more as
our main supplier reduced our credit. We should all be grateful that the
Bank believed in the path we have taken.
It has been a turbulent couple of years. Employees have been through major
change which has no doubt seemed never-ending. We thank them for their
efforts and we all hope for a progressive future.
I wish to acknowledge the role of my fellow directors through what has been a
very turbulent time. It has often been difficult to see the real issues
through a mass of numbers and external events. Their support through those
very difficult times is acknowledged.
Two years on, you only have to go to Christchurch and see the temporary
accommodation for both the education and retail operations to understand how
much the earthquake affected us. However a new normal has been reached. The
Apple distribution business and its attendant stretch of the balance sheet
are over. The company looks forward with confidence now that the upheavals
of the last two years are behind us. It is refreshing and exciting to be
able to consider and implement plans for the future again.
For and on behalf of the Board of Directors
Appendix to Directors Review
Appendix 1 and other related documents
End CA:00230176 For:RNS Type:FLLYR Time:2012-11-23 14:52:36