Renaissance shares fall 13% on loss, warning

UPDATE Nov 29: Renaissance shares [NZX:RNS]  fell 13.04% to 10 cents as trading opened today, and are still at that level in early afternoon trading.

The company is now at the bottom of its 52-week trading range of 35 cents to 10 cents.

The fall follows yesterday's preliminary 2011 result (below) and a warning from its chairman that a 2012 earnings forecast downgrade is "probable."

Renaissance slides to $4.4m loss; warns 2012 downgrade 'probable'
Nov 29: IT distribution, retail and education company Renaissance lost $4.4 million in the 12 months to September 20 on revenue up 18% to $182 million.

The results released to the exchange were preliminary, and unaudited.

Last year, the company made $301,000 on turnover of $145 million.

The poor result was blamed in part on a poor result in its NZ Sales unit, and partly on the Christchurch quakes.

Renaissance has an unresolved $3.6 million insurance claim for damage to buildings and lost sales.

"Without speedy restitution of our insured losses, the company is under-­capitalised. Some sort of recapitalisation may be necessary," chairman Colin Giffney wrote in a statement accompanying the result.

"Perfect storm" warning too optimistic; downgrade probable
On September 9, Renaissance warned in a letter to shareholders that it faced a "perfect storm" of problems, ranging from earthquake costs to recession to a margin and credit squeeze from its once-exclusive brand, Apple.

In today's announcement, Mr Giffney said that assessment could have been too optimistic.

It is now "probable" that the 24-month forecast issued in September will be downgraded, Mr Giffney wrote.

In its September 9 letter, Renaissance predicted $4 million ebitda in 2012 (against -$3.59 million for 2011).

The chairman said Renaissance had fallen into breach of its banking covenants for a period but "we are now compliant with a new banking facility which runs through to May 2012, we need to see a substantial improvement in trading performance."

Negative equity
Mr Giffney reiterated previous comments that a sale of the company's distribution division is possible.

The distibution arm accounted for $101 million sales (and a $910,000 profit) for 2011, making it easily the largest unit of Renaissance by revenue (the retail operation lost $1.1 million on $50 million sales; education made $956,000 on $9.7 million; "NZ Sales" lost $2.2 million on $21 million sales). 

For now, the company's balance sheet is stretched.

Liabilities of $25 million exceed $8.9 million.

The company's debt-to-equity ratio has worsened from 264% a year ago to 280%.

Has future
"There is no doubt in the minds of the directors that Renaissance has a future," Mr Giffney reassured shareholders.

Renaissance shares [NZX:RNS] were flat in midday trading at 12.5 cents, with only a single trade during the session.

The stock has a 52-week range of 10c - 35c.

Rennaissance 12-month chart courtesy CapitalIQ

Life after Apple
Beyond the immediate impact of the quakes, Renaissance has been struggling to diversify since losing its exclusive contract to distribute Apple products in New Zealand (global giant Ingram Micro became Apple's second NZ agent in October last year, and Apple has added direct sales via the web).

Diversification efforts have included the purchase of design school Natcoll, and the Magnum Mac retail chain.

Magnum Mac was re-branded "Yoobee" by chief executive Richard Webb, who announced his resignation on November 18, capping a series of executive departures.

Long-time senior director Rick Ellis resigned from the board on the same day. Mr Ellis is leaving his role of TVNZ chief executive in the new year to join Telstra in Australia.

The company has cut staff from 367 to 268 of the past year in a bid to cut costs and break-even.