Vita Group aims for bigger bite of Apple market

Stuart Corner
Tuesday, 26 August 2008 03:57

IT Industry - Strategy

Vita Group (ASX:VTG), which includes the Next Byte chain of Apple retailers and the Fone Zone mobile dealerships, has reported a strong result on the back of the November 2007 acquisition of Next Byte and says it plans to open eight more Next Byte stores in the current financial year.

The company reported revenue of $311m, up from $198m in 2007 and EBITDA in line with guidance of $18.2m, up from $16.5m last year. Net profit after tax was up 14 percent to $7.9m. It said that revenue growth had been driven by the acquisition of Next Byte, "the largest Apple Premium Dealer in Australia," and that since acquiring Next Byte it had bought three more small Apple resellers increasing the number of Next Byte stores by six to 23.

In contrast the Fone Zone arm of the business has been shrinking with the closure of six stores. This 'Fone Zone store optimisation programme' incurred one off EBIT charges of $3.1m in 2008. However the Fone Zone business still accounted for the bulk of the EBITDA, $14.2m, on revenues of $190m, down from $198m last year. The Next Byte business contributed $121m to revenues and $6.7m to EBITDA.

The company said that Fone Zone had an "unacceptable number of poor-contributing stores," and that its strategy was to open new stores in targeted strategic locations and to relocate poorly located stores based on updated analysis.

With the Next Byte business, Vita intends to "instil retail disciplines, fully integrate current stores and expand organically into targeted strategic locations." The company said that "a number of Vita operational, cultural, financial systems and processes have already been introduced and are producing positive results."

However the acquistion of  Next Byte has not been well received by the market. Vita's share price stood at $0.68 at the end of FY07 and at $0.23 at the end of FY08.