Conduit sale lifts Renaissance result

By Phil Boeyen, ShareChat Business News Editor

Tuesday 7th August 2001

Tax credits and the 17% sale of its Conduit subsidiary have helped tech distributor Renaissance (NZSE: RNS) to an improved interim profit.

The company made a tax paid profit of $2.275 million for the six months ended June compared with $626,000 the previous year.

Group sales for the period were $91million, up 25% over the previous year although last year's figures did not include the business generated through Christchurch-based Insite Technologies, acquired in September 2000.

Partly responsible for the company's improved performance was a gain on the 16.7% sale of its e-commerce Conduit business, which was sold to DBS Nominees in February for $6.7 million.

However the rest of the Conduit news is not so bright with the company describing the period as a turbulent one for the business.

"As previously reported to shareholders, the company established offices in Singapore and Australia in January as it sought to position itself for a listing in calendar 2001," the company says.

"However, with very difficult trading conditions in Singapore as their GDP contracted over the last two quarters and with Conduit's revenues not keeping pace with its cost structures this resulted in the subsidiary turning in a loss for the period."

Renaissance says a decision was made in June to withdraw from direct representation in Singapore, to reduce development staff in New Zealand, and to expense all accumulated costs associated with the proposed listing of the company.

It says the decision to try and list in Singapore was badly affected by the tech slump.

"By the time we had positioned Conduit as a stand-alone entity with a market presence in Singapore the technology bubble had well and truly burst.

"This had far reaching implications for Conduit, as technology distributors (who were the prime targets for our software) proved reluctant to make a significant investment in delivery systems when their markets were entering a sharp downturn, and investors turned back to proven companies with strong cash flows."

Renaissance says although Conduit incurred a substantial loss in the period, and it has expensed all costs relating to the listing, from group perspective the losses were more than offset by the gain made on the sale of the 16.7% stake.

Elsewhere in the company it says it's clear that the IT market in New Zealand is suffering along with the rest of the world and there has been further consolidation in the IT distribution sector.

"We have grown our market share in the period and total sales have increased, despite falling unit prices in many of our product lines."

RNS says it is now transacting more than 50% of its distribution business in New Zealand through its successful website and hopes to exceed 60% by the end of the year.

The directors anticipate paying an annual dividend at year-end but have not indicated how much. The dividend for the 2000 financial year was 2 cents per share.

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