Thursday 31st October 2013
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Struggling Apple products retailer Renaissance Corp is to realise around $14 million from the sale of its design school, but its Yoobee brand of Apple-only stores is "no longer viable," chairman Colin Giffney says.
Investors' immediate reaction was to welcome the sale announcement and accompanying statements in which Giffney indicated a cash return was in prospect once the firm worked through the Yoobee School of Design sale and rationalisation of its Yoobee stores.
Shares in Renaissance surged 43.5 percent at the opening of trading this morning to 15.5 cents.
In a statement to the NZX, Renaissance says earnings before interest, tax, depreciation and amortisation will show a surplus of around $2 million, but gross margins in Yoobee stores have fallen from 11.6 percent to 7 percent.
The Yoobee Design School had under-performed thanks in part to lower international student numbers and will be sold to the Academic Colleges Group, which has 10 private campuses in New Zealand and runs foundation skills courses for international students, as well as owning private schools in Vietnam and Indonesia.
The moves are the latest in Renaissance's long performance slide, which saw it breach bank covenants last year and what Giffney described in May as a "bitterly disappointing" loss in the first half of the financial year of $3.1 million.
The shares' most recent high point was 24 cents in late January, having slid from 45 cents over the last five years to close yesterday at 11 cents apiece.
Giffney said the design school "will not be as strong as was anticipated in our half year announcement" despite "considerable investment" in developing six online learning courses. While the drop in international students would affect the 2013 result, there were signs of improving prospects.
"The core business is performing well," he said.
The firm's Yoobee stores, however, had "continued to struggle," with lower cost new models such as the iPad Mini contributing to a 20 percent fall in revenue, even as unit sales increased by 13 percent.
"The board believes the model for a dedicated chain of Apple-only retail stores is no longer viable. It continues to look for ways to reposition the business," said Giffney.
Significant one-off writedowns would affect the net result for the current financial year, most of which had been recognised at the half year result, although it was not possible to give an accurate fix on the full level of writeoffs.
"The figure that will be most relevant to shareholders is the net cash consequence of these actions.
"Directors cannot easily address the long-term future of the company until the outcome of the transaction with the Academic Colleges is completed and a viable model for retail is found," although it should be resolved in the short term.
"Ultimately, directors would like to return cash to shareholders," he said, noting the company had net interest bearing debt on its books of $3 million and other liabilities of around $1.5 million relating to lease severances, net of inventory and other receivables.
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