Fone Zone and Next Byte revenue falls, 35 store closures in 12 months

Vita Group Limited, the company responsible for both Fone Zone and Next Byte retail chains has just released an update on its FY09 results. It has been a tough 12 months for the business with 35 store closures and a 5 per cent drop in revenue.

According to the release issued to the ASX, Vita Group retailers Fone Zone and Next Byte demonstrated a revenue drop of 5 per cent to $295 million for the period ending 30 June 2009. This is compared to $311 million achieved in FY08.

The decline in revenue is set to hurt the company and therefore its profit expectations for FY09 is for an EBITDA of between $11-12 million, around 35 per cent lower than the result achieved in FY08.

According to the announcement, the recent Store Optimisation and overall cost reduction program had a positive impact in ensuring both Fone Zone and Next Byte continued to remain profitable during tough trading conditions, but overall it has adversely impacted the overall profit of the company.

Over the past 12 months there has been a total of 35 store closures across the business (31 Fone Zone and 4 Next Byte) and only four new store openings (1 Fone Zone and 3 Next Byte).

“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,” said David McMahon, CEO of Vita Group Ltd.

McMahon went further to discuss the dealer arrangement it has had with Telstra over the past 15 years.

“As previously announced, Vita Group is in discussion with Telstra regarding the early renewal of the company’s long term dealer arrangement,” he said.

“It was anticipated by both parties that the new arrangement would be in place by 30 June 2009. Finalisation of the discussion has been slightly delayed and it is now expected that the new arrangement will be in place within the next few weeks.”

McMahon commented that once this arrangement has been finalised the company will provide an update to the market.

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