Apple dealership Vita (Next Byte) reports falling revenue & profits

Stuart Corner
Friday, 24 July 2009 12:17

IT Industry - Strategy

Vita Group - the listed entity formed by the 2007 merger of cellphone dealer chain Fone Zone and Apple reseller Next Byte - has reported a five percent revenue fall and is forecasting an EBITDA reduction of around 35 percent for the year to 30 June 2009.

Revenue was down from $311m to $295m and EBITDA is expected to be between $11m-$12m. In a statement to the ASX the company said: "The sector of the retail market we occupy has been tough...The fall in retail sales has been across both Fone Zone and Next Byte."

In the past 12 month the company has closed 35 underperforming stores (31 Fone Zone and four Next Byte) and opened one new Fone Zone and three new Next Byte stores.

On a positive note, it said: "Optimisation and our overall cost reduction program have had a positive impact in ensuring both Fone Zone and Next Byte have continued to remain profitable during these difficult trading conditions...Looking forward, early trading results over the last four weeks have been encouraging, with week-on-week sales growth pointing to an improved performance trend."

A year ago Vita was much more bullish. In August 2008, announcing its annual results, it reported a strong result on the back of the November 2007 acquisition of Next Byte and said it planned to open eight more Next Byte stores in the current financial year.

However the Fone Zone business, responsible for the bulk of revenue as struggling: the company said that Fone Zone had an "unacceptable number of poor-contributing stores."

Vita Group, through Fone Zone, has had a dealer arrangement in place with Telstra for over 15 years. This is due to expire on 30 June 2010 and the company had previously flagged that it is in discussion with Telstra regarding the early renewal of the arrangement, and had expected a new contract to be in place by 30 June 2009. It now says: "Finalisation of the discussion has been slightly delayed and it is now expected that the new dealer arrangement will be in place within the next few weeks."