Renaissance takes hit in 'perfect storm'

Staff cut by 26 percent, mostly in distribution and sales

Renaissance Corporation expects to incur a loss of earnings of $2.7 million by the time its financial year ends this month, along with $1.3 million in material damage, according to a statement released on the New Zealand Exchange website today. The statement cited a letter to shareholders saying that Renaissance has "experienced the perfect storm" in its 2010-2011 fiscal year, including Apple's appointment of a second distributor in New Zealand [Ingram Micro], and the Christchurch earthquakes, among other factors. "With the introduction of a second distributor of Apple, it was inevitable that we would lose some market share," the letter states. "What we did not know was how much, in what areas or which customers. Between our year to September 2010 and what we expect for the year to September 2011 sales in distribution and direct sales are down 14 percent. Apple sales in these businesses are down only 8 percent on last year, which is a credible result. We have suffered a slightly greater drop in sales of other product and so, combined with margin reductions, gross margin in this business has declined $1.5 million year on year." Overall, the company expects its whole business, with no adjustment for loss of business in Christchurch gross margins, to have declined $4.0 million, or 27 percent in 2010-2011, but to recover in 2011-2012. Part of that recovery will be due in part to the dramatic staff cuts, from 367 last November to 268 now, with 76 of those being chopped from distribution and sales. "The significant changes we have made in employee numbers and operating expenditure will begin to flow in 2012," the company says in a statement. "While it is early for us to complete a budget management’s best estimate is that we will record a profit of about $1.5 million in 2012 after an EBITDA of about $4.0 million."