Interim Results
Torex Retail PLC
20 September 2004
20 September 2004
Torex Retail plc
Maiden Interim Results
Torex Retail plc ('Torex Retail' or 'the Group'), a leading provider of IT
solutions to major European retailers, today announces its maiden interim
results.
Highlights:
Financial
• Pro forma* operating profit increased by 29.5% to £4.1 million (2003:£3.1
million)
• Pro forma* profit before tax up 90.0% to £2.0 million (2003: £1.0 million)
• Strong cashflow representing 142% of operating profit
• New business model drives higher margins and profitability from increased
software sales, despite lower overall revenues
• Profits and EPS in line with expectations
* Pro forma information reflects results for the Group as if it had been
trading in its current form for the full six month period ended 30 June 2004.
Business
• Software and service revenues increased by 22% with ten major contract wins
worth £15 million and total order intake for H1 of some £20 million
• Excellent visibility of second half revenues gives confidence for full year
performance
• LUCAS launched in the UK and established as Group's main EPoS offering
across Europe
Since period end:
• £7 million outsourcing contract to 2007 signed with WHSmith Travel
• £8.7 million acquisition of KPOS Computer Systems significantly strengthens
UK customer base and integration well underway
• Acquired remaining 30.2% stake in Logware Information Systems GmbH.
Both transactions are expected to be earnings enhancing in the current year
Rob Loosemore, Executive Chairman, said:
'Our maiden interim results reflect strong growth in profitability backed by an
excellent performance in cash generation, with order intake of some of £20
million surpassing our expectations.
Whilst concentrating on financial performance during the period, we have also
ensured that the purchase and subsequent AIM flotation was a huge success. In
addition to these two major achievements we have also established a management
team of immense capability which, coupled with our emphasis on long term
strategic planning, bodes exceptionally well for the future. I couldn't be more
pleased with the last six months and we look forward to the rest of this year
and the future with a high level of confidence'.
- ends -
For further information:
Torex Retail plc Citigate Dewe Rogerson
Rob Loosemore, Executive Chairman Ginny Pulbrook / Seb Hoyle /
Richard Thompson, Finance Director Freida Moore
Telephone: +44 (0) 870 050 9900 Telephone: +44 (0) 20 7638 9571
Interim Results for the period ended 30 June 2004
Introduction
I am delighted to present our first set of results since the admission of the
Company to AIM on 2 March 2004. The Group has made very good progress during
this period and I am pleased to report that trading is in line with
expectations.
At the same time, we have also delivered against the principal objectives we set
ourselves at the time of the IPO, namely to strengthen the senior management
team and to enhance the sales and marketing function within the business.
We are now extremely well positioned to aggressively pursue our overall
objective of establishing Torex Retail as the leading independent solutions
provider to the European retail IT market.
Trading results
The reported results represent the trading of the Group for the five months
since the Company's incorporation on 4 February 2004. These show turnover of
£25.1 million and operating profit before amortisation of goodwill of £4.3
million.
In order to provide a better understanding of our first half trading results we
have produced below pro forma information which shows the results for the Group
as if it had been trading in its current form for a full six month period.
Comparative pro forma information is provided for the similar period last year.
The basis of the preparation for this pro forma information is given in the
notes to the interim statement below and is consistent with that adopted in the
AIM Admission Document. The pro forma financial information shows that if the
Group had been in its current form for the full six months to 30 June 2004
results would have shown an increase over the same period for 2003 in underlying
operating profit of 29.5%.
Pro forma six months Pro forma six months
ended 30 June 2004 ended 30 June 2003
(unaudited) (unaudited)
£'000 £'000
Sales
Store Management Solutions 22,088 25,458
Petrol & Convenience 6,852 6,293
28,940 31,751
Operating Profit
Store Management Solutions 2,795 2,177
Petroleum & Convenience 1,278 967
4,073 3,144
Goodwill Amortisation (1,553) (1,553)
Interest Payable (558) (558)
Profit on ordinary activities before Taxation 1,962 1,033
Taxation (1,055) (776)
Minority Interest (191) (133)
Profit on ordinary activities after taxation 716 124
Proforma earnings per share basic 0.47p 0.08p
Proforma earnings per share diluted 0.43p 0.08p
I am pleased to report that the Group has achieved improved gross margins across
the business. This has resulted in a slight fall in turnover as low margin
hardware sales have reduced from 40% of total sales in 2003 to 28% in 2004. The
percentage of higher margin software sales has increased from 18% to 21% over
the same period.
The Group has continued its focus on cost savings and efficiencies in all areas
of the business and the above results show the impact of that work, in
particular benefiting from the full year effect of cost saving exercises carried
out in 2003.
Balance sheet
The balance sheet as at 30 June 2004 shows net assets of £51.3 million. Goodwill
of £60.2 million, after the current period charge, is being written off over
twenty years and arises from the acquisition of the Torex Retail Group from
iSOFT Group plc, the previous parent company on 16 February 2004.
Cash in the bank amounted to £6.0m and resulted from net cash flow from
operating activities achieving 142% of operating profit. Net debt amounted to
£15.3 million.
Dividends
It is the Board's intention to ensure that shareholders benefit from the success
of the Group with a progressive dividend policy whilst also balancing the
continuing investment needed to increase earnings. Consequently an interim
dividend of 0.1 pence per ordinary share is being declared today. This dividend
will be paid on 29 October 2004 to shareholders on the register at the close of
business on 1 October 2004.
Review of operations
Store management solutions ('SMS')
Our SMS business has made excellent progress in both the UK and Germany. We
have continued to experience strong new sales success for LUCAS, the Group's
market leading JAVA based electronic point of sale ('EPoS') solution, with a
number of significant contracts from major international retailers including
Breuninger, Otto, Esprit and Mont Blanc. LUCAS was formally launched in the UK
at the Retail Solutions trade exhibition in June 2004 to a very encouraging
response from analysts and retailers alike. The first UK sales successes for
LUCAS have already been achieved with contracts being won for a specialist
retail chain and a major regional department store. These are extremely
important new business wins as they will act as valuable reference sites for
future sales success.
Other important wins in the UK include a confirmed EPoS roll out for Matalan and
a new EPoS win for the Co-operative Group Pharmacy chain of 300 stores.
We were also pleased to recently announce a £7 million contract renewal to
provide full IT outsourcing services for WH Smith Travel Retail. The contract
which runs until 2007 represents a significant renewal for Torex Retail and
follows the successful provision of this service to WH Smith Travel Retail over
the past four years. This win demonstrates our continued ability to retain high
profile blue chip business.
Operationally, SMS is involved in large roll outs for Matalan, Kaufland and
Ipswich and Norwich Co-operative Society. The Matalan roll out features the
first implementation in the world of IBM's new operating system for retailers
and we are very proud to have received a prestigious IBM Solution Provider
Excellence award for our work on this account. Pilot sites have recently been
successfully installed in the US for Mont Blanc and Esprit as the start of
global roll outs for both companies. In the UK market, a number of estate wide
implementations for Chip and PIN solutions are currently underway.
In August, we enhanced the SMS business in the UK with the acquisition of KPOS
Computer Systems Limited ('KPOS'). KPOS is a long standing supplier of IT
systems to the UK retail market with an outstanding reputation for customer
service. The acquisition of KPOS creates significant cross selling
opportunities to the expanded customer base, increases our channel to the UK
market and augments our domain knowledge with the expertise and market
experience of the KPOS employees. Integration is well under way and we are
continuing to identify new areas of synergy to exploit going forward.
Petroleum & convenience ('P&C')
P&C has continued to make good progress in the first half of 2004 and enjoyed a
record order intake for its Iridium and Prism EPoS solution which reinforces our
position as the leading supplier of systems to independent petroleum retailers
in the UK. One of the main drivers behind this growth has been our success in
winning significant business from the rapidly emerging service station groups
such as Malthurst, who have acquired a number of sites from BP.
P&C's main competitive advantage to petroleum retailers is that its systems are
approved by all the major oil companies and symbol convenience groups. Our
strong relationship with the symbol groups is now assisting our push to sell
more into the convenience market.
In addition to our business with the independent sector of the market, two
notable projects have been won with larger customers. The first is for the
supply and support of up to 450 EPoS and back office systems to a major UK
retailer's petrol and convenience stores, including their new franchise
operations. Whilst the main benefit of this contract will accrue in 2005,
installations have begun and the number of potential locations is growing
because of that customer's aggressive stance and investment in the convenience
market. The other business is for the supply of our forecourt site controller to
all of BP's service stations in Greece. Again, this contract will benefit 2005,
as well as the current year.
P&C look forward to the second half with confidence based on a large order book
for systems to independent groups and owners, together with the prospect of
significant roll out activity for the installation of Chip and PIN solutions for
the major oil companies and their dealers. In addition work continues on a large
roll out for Kuwait Petroleum for all their sites across the Benelux countries.
Management
The senior executive management team has been significantly enhanced during the
period with the appointments of Mark Pearman as Chief Executive and Richard
Thompson as Group Finance Director, both of whom have strong operational
expertise and acquisitions experience. Juergen Heck, Managing Director of Store
Management Solutions - Europe and former CEO of Logware, also joined the Board
as Chief Technology Officer, contributing a vast knowledge of the European
retail IT industry. In addition, David Hallett, currently Client Services
Director at Sun Microsystems Inc and formerly IT Director of Littlewoods and
Argos, was appointed as a Non-executive Director and will greatly contribute to
the strategic direction of the Group. The appointment of a further Non-Executive
director with an IT industry background is expected in the second half of the
financial year.
Sales and marketing
Under the ownership of Torex plc the sales model adopted by Torex Retail was to
principally focus on its existing customer base with only limited resources
being allocated to marketing and new business. A key part of the strategy of
the newly independent Torex Retail is to shed its image as 'one of the best kept
secrets in retail IT' and substantially raise the profile of the business as a
supplier of a comprehensive range of innovative and market leading retail
management solutions.
As part of this process new corporate branding, including a new fresh modern
logo and website (www.torexretail.com), has been introduced and rolled out
across the UK. The European business units will transition to the new branding
with all the Group's subsidiaries due to trade under the Torex Retail name by
the end of the first quarter 2005.
This strong marketing initiative to promote Torex Retail as the leading
technology innovator in European retail systems has been supported by the
appointment of Mark Sprigg, as Group Sales and Marketing Director and the
appointment of a number of experienced sales executives to drive new business,
particularly in the UK market. The benefit of this investment is starting to be
felt with the development of an encouraging sales pipeline for 2005.
In addition to strengthening our direct sales capability, much greater emphasis
is being placed on the use of partners as a channel to market. Initial
discussions with potential partners are very encouraging and I am delighted to
report that Torex Retail has recently been appointed as an IBM Premier Business
Partner. This is IBM's highest category of partner and there are only two other
similar status partners in the UK retail IT market. We are confident that
working more closely with partners going forward will help us win increased
levels of business, particularly amongst larger retailers.
Strategy
The group's sales strategy is based around the development of modern and
innovative products which can sold throughout the Group's blue chip customer
base across Europe. Our market leading LUCAS EPoS product provides a platform
for a suite of integrated store management solutions including loss prevention,
labour scheduling , time and attendance , and queue management .These leading
productivity tools provide retailers with high return on investment and act as
good entry points to new customers as well as cross selling opportunities to our
existing base.
In addition to our drive for organic growth we will continue to look for
suitable acquisitions to accelerate the overall growth of the Group by expanding
our customer base, adding additional products and entering new geographic
markets.
Outlook
We have commenced the second half of 2004 on a strong footing. The integration
of KPOS is well underway and we have been experiencing strong levels of interest
for our products in key markets. With the strengthening of the management team
and the additional focus on our sales and marketing starting to bear fruit the
Company is well positioned to begin the next phase of our expansion across
Europe.
The sales pipeline is continuing to build and the Board remains confident about
the Group's future prospects for 2004 and beyond.
Group profit and loss account
Note Unaudited
five months
ended
30 June
2004
£'000's
Turnover 8 25,118
Cost of sales (7,416)
Gross profit 17,702
Administrative expenses (13,447)
Operating profit before
amortisation of goodwill
Continuing operations 8 4,255
Amortisation of goodwill 2 (1,294)
Operating profit
Continuing operations 8 2,961
Net Interest payable (465)
Profit on ordinary activities before taxation 2,496
Taxation on ordinary activities (1,088)
Profit on ordinary activities after taxation 1,408
Minority interest (171)
Dividends 3 (154)
Retained profit 1,083
Earnings per share before amortisation of goodwill 4 1.6p
Basic earnings per share 4 0.8p
Fully diluted earnings per share 4 0.7p
Dividend per share 4 0.1p
Group balance sheet
Note Unaudited
30 June
2004
£'000's
Fixed assets
Intangible assets 2 60,154
Tangible assets 1,333
Current assets
Stocks 6,157
Debtors 5 16,368
Cash at bank and in hand 5,965
Creditors: amounts falling due within one year 6 (21,493)
Net current assets 6,997
Total assets less current liabilities 68,484
Creditors: amounts falling due after more than one year 7 (17,020)
Minority interests (125)
Net assets 51,339
Capital and reserves
Share capital 1,535
Deferred consideration 4,181
Share premium account 44,712
Profit and loss account 911
Shareholder's fund - equity 51,339
Group statement of cashflows
For the five months ended 30 June 2004 Unaudited
five months
ended
30 June
2004
£'000's
Net cash inflow from operating activities 4,202
Return on investments and servicing of finance
Interest paid (503)
Interest receivable 38
Taxation
Corporation tax paid (357)
Capital expenditure
Payments to acquire tangible fixed assets (173)
Acquisitions and disposals
Purchase of subsidiary undertakings (66,282)
Net cash flow before financing (63,075)
Financing
Issue of ordinary share capital 47,820
Net loan advances 21,220
Increase in cash 5,965
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year 5,965
Cash in flow from increase in debt (21,220)
Movement in net debt in the year (15,255)
Net debt at 4 February -
Net debt at 30 June (15,255)
Analysis of net debt
For the five months ended 30 June 2004 At 4 February 2004 Cash flow At 30 June 2004
£000's £000's £000's
Cash at bank and in hand - 5,965 5,965
Debt due within one year - (4,200) (4,200)
Debt due in more than one year - (17,020) (17,020)
- (15,255) (15,255)
Net cash inflow from operating activities
For the five months ended 30 June 2004 Unaudited
five months
ended
30 June
2004
£'000's
Operating profit 2,961
Depreciation charges 340
Amortisation of goodwill 1,294
Increase in stocks (734)
Increase in debtors (1,034)
Increase in creditors 1,375
4,202
Statement of total recognised gains and losses
For the five months ended 30 June 2004 Unaudited
five months
ended
30 June
2004
£'000's
Profit for the financial period 1083
Exchange difference on retranslation of net assets of subsidiary undertakings (172)
Total gains and losses for the financial period 911
Notes on the financial statements
1. The interim results for the period ended 30 June 2004 are unaudited and do
not constitute statutory accounts within the meaning of s.240 of the
Companies Act 1985. They have been prepared in accordance with accounting
policies adopted in the admission document issued in relation to the
admission of Torex Retail plc to the AIM market ('AIM') on 2 March 2004.
2. The goodwill arose on the acquisition of the Torex Retail Group from iSOFT
Group plc, the previous parent company, on 16 February 2004. A number of
provisional fair value adjustments have been made in arriving at this
number. These will be reassessed as at 31 December 2004. Goodwill is
being written off over twenty years.
3. Dividends for the period ended 30 June 2004 total £153,541 and comprise a
proposed interim dividend of 0.1 pence per ordinary share. It is proposed
that the interim dividend will be payable on 29 October 2004 to all
shareholders on the register at the close of business on 1 October 2004.
4. Earnings per share for the five month period ended 30 June 2004 is based on
the profit after taxation and minority interests of £1,237,000 divided by
the weighted average number of shares during the period, 153,541,523
(basic) and 165,218,715 (diluted) 1p ordinary shares.
A reconciliation of the basic and fully diluted number of shares used in
the five month period ended 30 June 2004 is:
Weighted average number of shares 153,541,523
Dilutive share options 4,530,183
Dilutive deferred consideration 7,147,009
Diluted 165,218,715
5. Analysis of debtors
Unaudited
30 June
2004
£'000's
Trade debtors 10,944
Prepayment and other debtors 5,424
16,368
6. Analysis of creditors amounts falling due within one year
Unaudited
30 June
2004
£'000's
Trade creditors 3,525
Bank loans and overdrafts 4,200
Finance leases 748
Deferred income 5,358
Dividend 154
Corporation tax 257
Other 7,251
21,493
7. Analysis of creditors amounts falling due after more than one year
Unaudited
five months
ended
30 June
2004
£'000s
Bank loans 17,020
8. Segmental analysis
Unaudited
five months
ended
30 June
2004
Turnover Operating
£'000's profit
£'000's
By class of Business
Store management solutions 19,168 2,987
Petroleum and convenience 5,950 1,268
25,118 4,255
Goodwill amortisation (1,294)
2,961
9. A copy of this interim statement is being sent to all shareholders and
copies are available from the Company's Registered Office at the address
below.
Torex Retail plc, Telfer House, Range Road, Witney, Oxfordshire OX29 0YN
Notes on the Pro Forma (Unaudited) Results
1. The pro forma results for the six months ended 30 June 2004 comprise the
actual results of the Torex Retail Group for the period, on the basis of
current accounting policies and include the January 2004 loss for the
month.
2. The pro forma results for the six months ended 30 June 2003 comprise the
actual results of the Torex Retail Group for the period, on the basis of
current accounting policies, after adjusting for the full year effect of
acquisitions made in 2003, notional plc costs, notional interest costs and
an assumed tax rate of 30%.
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