Renaissance shareholders unruffled in face of glum news

By ADAM GIFFORD

Directors of listed IT products distributor Renaissance Corporation got an easy ride from shareholders yesterday, despite telling the annual meeting that they had almost halved the size of the company over the past year and made a $4.6 million loss.

The only question from the floor was about plans for Conduit, the e-commerce subsidiary Renaissance separated out with the intention of listing on the Singapore Stock Exchange.

Chairman Richard Ebbett said many shareholders would have invested in Renaissance because of those plans.

He said the price paid by a Development Bank of Singapore nominee company for a 16.7 per cent stake in Conduit was the major factor in driving the share price from the 30c to 40c range to a high of $1.35. The price dropped back below 40c after Renaissance announced it was postponing the listing indefinitely.

"There will be no listing in the next six months, but the possibility is not dead," Ebbett said.

"The Singaporean shareholder is taking an active interest, but we have withdrawn from [Singapore] operationally and are seeking to consolidate on early successes in the Australian market."

He said Conduit, which provides a hosted service for distribution companies wanting to do business with their customers online, made a first-quarter profit and should continue to trade profitably. Development costs have been expensed.

Ebbett said the distribution business became the meat in the sandwich, squeezed between the volume demands of global IT companies struggling to meet their profit targets and a soft and highly competitive local market.

Rather than continue to make deals at uneconomic margins to satisfy suppliers and retain customers, Renaissance dropped some of its largest suppliers, including Microsoft and Compaq.

Ebbett said the company was now in a stronger position to generate profits, and had done so every month this year.

While shareholder funds were reduced by the past year's loss, the remaining business needed much less capital.

"Our total assets at March 2002 were $30 million, down from $50 million the previous year," Ebbett said.

"At this level shareholders' equity funded 40 per cent of total assets, up from 33 per cent in the previous period."

He said Renaissance wanted to focus on exclusive distribution arrangements like that with Apple Computer and British education software supplier RM.

Ebbett said directors wanted to see the half-year results before making a decision on resuming dividend payments.

Bruce McKay, head of research for sharebroker DF Mainland, said a fair value for Renaissance shares was probably closer to 45c than the 39c it was trading at yesterday, but much depended on its dividend policy.

"They have invested a lot of money in the business, particularly in the education side and in Conduit," McKay said.

"There comes a point they have to say they want that money back."