Next Byte still underperforming

Vita Group is aiming to squeeze a better contribution from its Apple-branded Next Byte stores and grow the enterprise share of its Telstra-licensed shopfronts.

The group, which is also the parent of Fone Zone, reported a 32 percent rise in EBITDA to $22.1 million for the 12 months to 30 June 2103, off the back of a 6 percent increase in revenue to $434.7 million. 

Vita's Apple reseller operation, Next Byte, remains an underperforming part of the portfolio.

Next Byte saw a 16 percent drop in revenue to $90.2 million, which the company attributed to a lack of Apple product launches, as well as disruption from store openings and closures. 

Vita Group announced plans last year to rebrand and relocate many stores in its Next Byte network. Some of the outlets – such as its shop in Broadway, Sydney – were competing with Apple-owned outlets and were closed.

As a result, Vita Group recorded a one-off $15 million impairment charge for the Next Byte business in its last financial year.

In yesterday's results statement, Vita Group said: "The Next Byte result was subdued, reflecting portfolio disruption as the transition to the new-format Apple Premium Reseller (APR) model continued.

"Revenue was down 16% to $90.2 million resulting in a $1.8 million EBITDA loss for the period. The limited Apple product releases during the second half also weighed on performance."

Next Byte's new-style stores are remodelled to have the look and feel of Apple's own retail temples, as part of the Cupertino-based tech giant's global APR program

[Related: Apple aims iPad at retailers]

Vita Group chief financial officer Andrew Leyden said Next Byte's APR-format stores were seeing better trade than the old retail model, "primarily because they are located in locations that don’t compete head-on with Apple stores". 

Townsville and Mackay were the best performing Next Byte outlets, while the stores in south-east Queensland and its newest shop in Victoria needed improvement, he said.

"We still have a way to go to meet expectations."

Next Byte's APR stores are now operating as "regional geographic fill-ins for the Apple brand", said Vita Group chief executive Maxine Horne.

It is part of a "closer strategic alignment" between Vita Group and Apple over the past year.

She conceded that a closer relationship to Apple had been along time coming.

Vita Group currently operates 17 Next Byte stores, nine of which have been fitted out as APR stores, with the other eight still bearing the "version one" layout.

Big boost in telecoms

The telecoms business was Vita Group's best segment; revenue rose 14 percent to reach $344.5 million, with EBITDA up 42 percent to $23.9 million.

The focus is on the company's 84 licensed Telstra stores and 12 Telstra Business Centres, rather than the 34 Fone Zone shopfronts, which saw "revenue down, fewer stores and limited investment".

Leyden told CRN that Fone Zone was less of a focus because it attracted fewer prospects than Telstra stores.

"Fone Zone has got smaller. That is a fact. It was 100-odd stores at one time… Fone Zone is not likely to get bigger, but I think it will be around for some time."

During the results call, Leyden said the enterprise customers were of increasing importance to the telecoms business. 

Vita Group's B2B segment currently represents 6-10 percent of the company's overall business, and represents better margins than in other segments, Leyden said.

"It is an area of the market we are very excited about. The market is fragmented, it is growing and it is clearly an opportunity for us because the categories are adjacent to the ones we sell in.

"I anticipate that becoming a bigger part of our mix."