The iPod phenomenon continues to drive Apple distributor Renaissance Corporation's profits higher, but the company says a sales downturn in traditional Apple products will drag its profit down this year.
Renaissance's bleak outlook came as it yesterday reported net profit after tax of $6.2 million for the fullyear to December, up 22 per cent on the previous year. Group revenues were $163 million, up from $155 million.
Managing director Paul Johnston said the 5 per cent rise in sales could have been even higher.
"We were unable to meet full demand for the iPod so we exited the year with a backlog, and we were unable to get the timing right with the supply of other products," he said.
Renaissance expected strong sales growth for the iPod. Johnston refused to say how much profit would fall.
The company had wrongly expected that retailers selling only Apple products would have been buffered from the downturn in the second half of last year, he said.
"We thought they would grow a bit this year but they didn't. We are working with a number of them to put in place investment plans," he said.
The gloomy forecast sparked its share price to fall 13c yesterday, closing at $1.35.
On continued speculation that Renaissance would lose its lucrative contract with Apple, Johnston said the detail of the contract was confidential, but the terms remained unchanged.
"It's a contract that we value very highly and we will do everything we can to meet Apple's expectations."
The company lost responsibility for maintaining Apple's New Zealand website and online store as the computer giant launched iTunes in December.
It earns roughly half of its revenue from Apple products, which it imports and distributes to retailers.
Johnston said Renaissance was aggressively seeking distribution deals with companies with good brand management. "They don't necessarily have to be in the IT sector but anybody who has a business model that suits us, that ideally would be in the distribution business."
As of yesterday, Renaissance still had outstanding orders with its clients but Johnston did not want to say which product lines or retailers.
Renaissance also stopped supplying major web design and development software Macromedia in 2006, which was purchased by Adobe.
But it secured new brands, including Allot Communications, Tomato, Canon and Novatel.
"We managed the exit of some brands as well as bringing on others, and still managed to see growth in that area," said Johnston.
The company's education division suffered a loss last year because it had withdrawn some products but was expecting a profit increase this year.
"We can see the cost structure that is in place and have greater visibility of the whole business.
"We've done the hard yards in 2006 and I think it's time to reap the benefits."
Sales through the online store launched last year had exceeded expectations, he said.
The company's PC business Insite also boosted sales by 40 per cent but the acquisition of Ultra Computers and lower margins diluted the effect on the overall profit, said Johnston.
Renaissance also invested in an online music and texting community called Txttunes and an online staff purchase scheme called StaffBuy.
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