Research and Analysis by Patrick Avenell

The most recent publicly available annual report for Retravision Northern reveals the first stages of its slide into non-existence.

Although the privately owned company recorded a net profit after tax of $204,000 and total assets valued at $36 million, a close reading of the report provides some understanding as to why that company is being wound up at the behest of Retravision WA.

The first point to note is the incredible collapse of net profit year-on-year from FY2010 to FY2011. For the 12 months to June 2010, Retravision Northern recorded a healthy net profit of almost $1.2 million — its best result in years — only for the company to suffer an 82.5 per cent decline over the next 12 months.

This was largely due to overhead costs not decreasing at the same rate as Retravision’s revenue decline. Sales fell sharply during that period — down almost 20 per cent to $209 million in FY2011 — but the cost of these sales remained virtually static: 97.8 per cent in FY10 and 97.6 per cent FY11. Without an improvement in gross margin, Retravision Northern was unable to bear such a shortfall in sales revenue.

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One of the major points Retravision WA CEO Paul Holt has made in his letters to members over the last two weeks has been the impact of credit insurers and credit risk on his decision. If suppliers cannot get insurance for stock sold to members on credit, these members cannot set up individual accounts.

Retravision Northern’s annual report makes it clear that even when these stores had the safety net of centralised accounting, many members were still major credit risks.

“Retravision Northern Limited holds securities of 2.5 times a dealer’s credit limit as security,” reads the report. “If the business does not hold sufficient assets then further security is required in the form of a bank guarantee or mortgage over a property.”

In a sign that individual members were beginning to falter in their payments back into the centralised ‘giant pool of money’, Retravision Northern began repossessing properties and assets from one of its members, JMC Logistics trading as John Bradley Retravision in North Queensland, in May 2011. It is not stated if Retravision Northern managed to recover all of this company’s $3.4 million debt.

Perhaps the most interesting titbit of information from this report is this short paragraph co-authored by chairman Brendan Moore and managing director Philip Scarff, concerning that aims of a new “Range Optimisation Program” for the company:

“Ensuring stores are in stock of the models that will be promoted on the proposed Retravision online selling site in order to satisfy customer orders when they elect to pick the goods up in store or have the stores deliver the goods.”

Public discussion of the proposed Retravision online retail site — codenamed Retravision Direct — began in November 2011, when then Retravision Southern CEO Tim Cockayne revealed it in an interview with this journalist.

“We currently have a full online offer under construction and expect this to be launched at the start of 2012, which will allow consumers to purchase from Retravision online,” he said.

Retravision Western CEO Paul Holt confirmed its development was continuing in an interview in the April edition of Appliance Retailer magazine:

“We’re probably a couple of months away from finalising the build, the software solution and the accounting solution that we’re going to use,” Holt said. “We’ve been briefing all of the shareholders in some detail with regard to our intentions with beginning to gently implement that service into the marketplace.”

This could be the one thing all three Retravision entities agreed on — the need for an online site — and not a single product was ever sold online.