Pick of Apple's crop sparks Renaissance

By PETER GRIFFIN

The market has not heard much from IT distributor and PC assembler Renaissance Group over the past year as the company has adapted to radical restructuring.

That has been a deliberate strategy on the part of managing director Paul Johnston.

"The strategy is to under-promise and over-deliver," he said.

"To be a little boring."

Boring maybe, but Renaissance's share market performance in 2003 was anything but.

The company's share price gained 156 per cent last year, from 23c to 59c.

The increase helped to make Renaissance the best performing share on the local market, rewarding shareholders with a gross return of 191 per cent, according to Forsyth Barr.

That return was a marked turnaround from the previous year, when Renaissance shares fell by 38 per cent as the market came to grips with the company's move to pull out of the PC distribution business, nearly halving its revenue of $200 million.

A slimmed-down and more focused Renaissance has obviously agreed with the market. The fact that the company turned a small profit of $700,000 for the half year to June and paid out a 4c dividend can only have helped.

While Renaissance remains an exclusive distributor for niche computer maker Apple, the computer box-shifting business it used to engage in is long gone.

"We found that putting at risk so much capital for little return was not sensible," said Johnston.

"Companies like Tech Pacific concentrate on delivering a product an hour faster than everyone else. They're very good at it," he said of the country's largest PC distributor.

Renaissance dispensed with its big PC relationships to concentrate on Apple which, thanks to a smart product line-up and falling prices, has experienced its own little renaissance in New Zealand.

The iPod (Apple's stylish digital music player) and the new G5 Mac computer had driven retail sales.

"It's at the stage now where 50 to 60 per cent of iPods are being bought by non-Mac users," said Johnston.

"We literally can't get enough of them. Retail sales have gone very well, through the likes of Pacific Retail Group and Harvey Norman."

Renaissance also distributes electronics and software for some popular names from the IT world - Palm, Epson, Asus, Macromedia, McAfee and Sony among them.

The other businesses in the Renaissance fold also came right in the last year. The Insite PC assembly business maintained its focus on building high-end servers and business PCs and has stayed clear of the fiercely competitive consumer PC market, which last year claimed large PC maker The PC Company, which went into receivership in October.

"We've seen large discounts offered to buy market share. It's just not sustainable," said Johnston.

After initially gearing up for expansion that never materialised, the company's supply chain management and web-hosting business Conduit was in better shape.

"It's held in there. We've seen a good return from a cash point of view."

He said the Itas division, which sells software for managing schools, was out of its heavy investment phase. Despite having to deal with longer-than-expected sales cycles, it was gaining important accreditation from the Government.

"It's small from a market share position and it's soaked up a fair bit of money. But we'll make a profit from it this year," said Johnston.

It took a solid year for Renaissance to "flush the old stuff through the system" and to slim down head office to meet the new company structure.

Now that it's profitable and its businesses are more mature, the plan was to focus on developing sales. There would be no acquisition sprees any time soon, said Johnston.

"We're funding everything internally. If we were looking at acquisitions we might look to raise capital but the business model doesn't allow for that at the moment."

Instead, Renaissance was rewarding investors who had stayed with the company through tough times.

"We're still hopeful that another dividend will be coming for the full year," said Johnston."

* Gross return calculations include share price increases as well as any dividends, capital distributions and imputation credits.