The rise and fall of Renaissance

Paul Johnston, former Renaissance Corporation chief executive
A former Yoobee Retail store
Renaissance 12-month price history (NZX.com)

Peruse the LinkedIn profile of former Renaissance Corporation chief executive Paul Johnston and you might think it should still be a thriving business.

He took over as chief executive of the listed technology business in January 2003 and “the business grew from about $97 million turnover to approximately $195 million during the next six years.”

Over that period, Mr Johnston’s profile notes, the company generated cumulative pre-tax profits of more than $25 million, while the company undertook restructuring and made several acquisitions.

Mr Johnston now works for Apple in the UK as education development manager.

By contrast, Renaissance [NZX: RNS] just sold its last remaining business unit for $1.

To misquote John Cleese, Renaissance, once the author of Apple’s fortunes in New Zealand, is dead – ceased to be, bereft of life, kicked the bucket, hopped the twig and bit the dust.

Once its debts are paid, and the balance distributed to shareholders (if indeed that’s the plan), the company will be a barren shell, awaiting someone or something else to breathe life into it.

What happened?

Well, there is the small matter of a recession and also the Christchurch earthquakes. But other businesses have managed to adapt and survive.

More importantly, Renaissance lost its exclusive Apple distribution agency in 2006 and, it seems, never really recovered.

Lost focus
Tech veteran Trevor Grey, a former Renaissance chief executive, previously told NBR, the company lost its focus, with forays into and out of retail, into and out of distribution, and a brief dalliance with rebuilding PCs.

In July 2007, Renaissance bought MagnumMac, New Zealand’s largest Apple reseller, for $3.5 million. As part of that deal, two million shares were issued at $1 each. At yesterday’s market opening those shares were worth $300,000.

The following month it signed a $6 million deal ($1 million in shares) to acquire Natcoll Design College.

Renaissance’s 2008 annual report lists seven significant subsidiaries (one discontinued) involved in marketing of brands and representation, computer assembly and distribution, eBusiness services and solutions, retail of Apple and third-party products, tertiary education, digital music sales and data backup services.

Where once the company’s strategy was to acquire its way out of trouble, more recently it has been shedding business units, including selling its distribution arm to Exeed (2012), Yoobee School of Design to Academic Colleges Group and its Yoobee retail stores to Logical Systems.

There has also been trouble at the top.

After a profit warning in 2009, Mr Johnston (who did not want to comment on NBR's story) and the chief financial officer of the time, Clive Lewis, quit.

His replacement, Richard Webb, resigned in 2011 and, less than a year later, Shaun Rendell also left.

Director Ron Halls became acting chief executive but even he quit nine months later, citing personal reasons.

A brief board foray was made last year by Christchurch accountant Robert Bijl, who was apparently backed by Mr Lewis – who holds a 1.84% stake in Renaissance (down from 4.9%, after the sale of more than 1.3 million shares) – and 14% shareholder Nicki Woods, the widow of Murray Woods, the former MagnumMac owner who died in the CTV building collapse in Christchurch’s 2011 earthquake.

Has the company been mismanaged?

“That’s my observation,” Mr Lewis says. But considering he’s a former director and executive, he says he doesn’t want his comment to appear sour grapes.

“My reaction is I’m just disappointed.”

Tale of woe
Renaissance’s financial statements show the tale of woe – accumulated losses between January 1, 2010 and September 30 2013, including one-off items and tax, were more than $12 million, with most of that in 2013.

Major shareholders have undoubtedly lost money. In early 2006, when it held the exclusive rights to represent Apple in New Zealand, its share price was $1.60. The last time the share price opened at $1 was in July 2007 – this week it’s a pitiful 15c.

NBR ONLINE would have liked to ask chairman Colin Giffney – a board member of the Financial Markets Authority – about the company’s demise, the likely cashed-up value of the company and how long the wind-up is expected to take.

But he didn’t return a phone message – nor did Renaissance chief financial officer Donovan Smith.

Mr Giffney was appointed chairman in May 2006 and, at the time, about 85% of its $11 million of earnings, before head office expenses, came from the distribution of electronic products, including Apple.

Given the level of competition in electronics retailing MagnumMac was going to be a challenge, and that was amplified by falling margins.

The $1 deal to sell Yoobee (with $1 million of creditors still to pay) is illustrative of how terribly Renaissance’s retail arm has performed.

But Mr Lewis says with the new Yoobee retail owners taking on responsibility for leases and employee entitlements, it’s likely onerous lease and employee entitlement provisions in the accounts will not be required.

“Possibly, selling the assets for $1 might make sense in the context of those other two points.”

The $13.3 million sale price of Yoobee School of Design shows the company had some successes.

Mr Lewis, the company’s sixth-biggest shareholder, says he knows little about the future of the business, other than what he read in an information pack about the Yoobee College sale.

He’s not sure of his plans for his 800,000 Renaissance shares, adding: “And I’m not certain how to go about calculating what the cashed-up value of the business is.”

What he is certain of is that the company’s mistakes have been observable, noting: “The business was making money, if you track back a few years.”

dwilliams@nbr.co.nz

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