KEY POINTS:
If you hear the rumble of a Honda Goldwing motorbike with heavy metal blaring from its speakers it might be Paul Johnston, managing director of Apple distributor Renaissance, listening to his iPod.
He has three iPods and the red Nano matches his motorbike's paint job.
But as much
as Johnston, 52, is a fan of Apple products he is not going to bank the entire future of the company on that one brand.
Although the company does not reveal details, distributing Apple products in New Zealand has been Renaissance's mainstay for several years. But in December Renaissance lost its exclusive distributorship when Apple launched its online store and began selling direct to the public.
Recent purchases of education provider Natcoll and Apple reseller MagnumMac are expected to contribute about $1.5 million a year to pre-tax profit and help a company synonymous with Apple develop a wider portfolio of interests.
The company indicated at its annual meeting that a new pricing policy related to the launch of the online store, Apple setting prices directly and a change in foreign exchange handling would result in a significant drop in margins.
On Tuesday it reported half-year net profit was down 53 per cent at $1.2 million, although a 44 per cent drop in pre-tax profit was largely in line with expectations, Johnston said.
"Historically if you went back a number of years now, if Apple went away ... if they moved to a different distributor or we lost the agency I think it's fair to say that we would have been out of business," Johnston says.
He cannot say how much revenue is earned from distributing Apple products because of contractual obligations but the firm is working to diversify its interests and thereby mitigate potential risks.
"We're still investing in the Apple brand, the foot is hard on the accelerator to drive growth," Johnston says. "But clearly what we've got to try and do is to grow the rest of the business faster than Apple is growing so that the overall effect is that we get a better balance in the business."
The company flagged to the market this week that Apple was also likely to develop a direct relationship with Australasian retail chains.
"It would seem that the next stage for them would be to start dealing directly on an Australasian-wide basis," Johnston says.
"There will be changes to the [Apple] business and we're quite relaxed about it.
"We know that this is a natural progression and we're changing our business model and adapting to suit."
However, Johnston points out that Renaissance has not had any firm indication from Apple that such a change will happen.
Renaissance bought creative digital design technology tertiary course provider Natcoll, subject to shareholder approval, last month for $6 million, including $1 million of Renaissance shares.
Natcoll has 118 staff, has supplied NZQA approved courses to more than 5000 students and had a trading profit - earnings before interest, tax, depreciation and amortisation - of $1.3 million last calendar year.
Renaissance also recently bought Apple reseller MagnumMac, with 62 staff and annual sales of about $28 million.
Other Renaissance divisions include building computers, supplying websites, distributing other brands and a majority interest in a music downloading company launched last month in the US.
Despite producing less profit, the volume of Apple products is growing and the brand is still critical "but it's incumbent upon me as a CEO and the rest of the board to make sure that what we do is look after the shareholders' interest ... not to have an extremely high-risk portfolio".
Revenue for the half-year grew by 14 per cent to $88.2 million and the company is on the look out for more acquisitions.
"We've got a couple of projects under way at this point in time and we're still open to looking at further possibilities," Johnston says.
Five months' contribution from Natcoll and six months from MagnumMac is expected to contribute about $800,000 before tax to the full- year result, although Renaissance has dropped its pre-tax profit forecast from $6 million to between $5 million and $5.5 million.
The company is facing shortages of products including iPods, notebooks and constraints on the new iMac computer.
"We got very good initial supply of the new product but worldwide demand is astronomical," Johnston says.
"We think that overall we've lost more than one full month's sales for the year."
Johnston moved to New Zealand 20 years ago and has worked for Renaissance for nearly 10 years, the last four as managing director.
