Interim Results
Torex Retail PLC
26 September 2005
Monday 26 September 2005
Torex Retail plc ('Torex' or 'the Group') Interim Results
Torex Retail plc, the market leading international provider of innovative IT
retail solutions, today announces its interim results for the six months ended
30 June 2005.
Highlights:
Financial
• Sales up by 81% to £52.5 million (2004: pro forma* £28.9million);
• Operating profit** increased by 95% to £8.0 million (2004: pro forma*
£4.1 million);
• Earnings per share** up 50% to 2.4p (2004: pro forma 1.6p);
• Underlying organic sales growth of 9%;
• Software and services sales revenues increased to 41% of total sales.
Business
• Management team restructured to provide bandwidth for global business;
• Successful integration of major new businesses Alphameric and Retail
Store Systems now completed;
• Integration of XN Checkout and Anker well underway and will contribute
positively to the second half;
• Proposed acquisition of Systech Retail Systems Corp (Openfield) for
up to C$38.5 million to provide further penetration of US market;
• Focused product strategy continues to provide strong organic growth
with LUCAS now installed in over 200 UK stores and over 11,000 lanes
throughout Europe;
• Strong new wins with Co-Op Home Stores, Ann Taylor, Bargain Crazy,
RD Scotts and Slaters;
• Acquisitions of Hoffmann Datentechnik GmbH and CTN Systems Ltd
completed in June 2005 already contributing positively.
Commenting on the results Chris Moore, Executive Chairman of Torex said,
'These results pay tribute to our highly professional team, our focused product
strategy and infrastructure to manage the rapid changes undertaken during the
Group's exciting corporate developments. The proposed acquisition of Openfield
will be immediately earnings enhancing, expands our US activities and takes us
into the massive market for Tier 1 grocery and supermarket systems for the first
time with a market leading application.
Torex Retail's strategy of becoming a global leader in the provision of
innovative retail solutions is well underway: we have the management bandwidth,
business model and product strategy to manage our strong growth prospects both
organic and from the successful integration of our recently acquired businesses
in the UK, Europe and the USA. '
*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.
** Before goodwill amortisation and exceptional items.
Enquiries:
Torex Retail plc +44 (0) 870 050 9900
Chris Moore, Executive Chairman
Richard Thompson, Finance Director
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Ginny Pulbrook / Seb Hoyle
Notes to Editors:
About Torex Retail plc
Torex Retail is a leading independent provider of cutting edge retail technology
solutions to many of the world's principal retailers. Since the company's
flotation in spring 2004 Torex Retail has achieved rapid growth across all of
its markets and has rigorously pursued its goal of becoming the provider of
choice. As a result, the company now has a presence in all of the major markets
around the world and has built a strong platform for future growth in line with
its strategy. Torex's Retail's product and solution set spans high street and
out-of-town retail as well as the petroleum and convenience sector and with over
6,000 customer relationships, including Tesco, Woolworth, Selfridges, Shell and
Argos, the company has earned a leading reputation amongst retailers. Torex
Retail has more than 2800 staff based in 17 countries. www.torexretail.com
Torex Retail plc Interim Results
Chairman's Statement
'I am delighted to present the results of the business for the six months ended
30 June 2005. The Group has made excellent progress during the period and I am
pleased to report that trading is ahead of expectations.
This excellent set of result reflects strong organic growth from both our UK and
European Store Management Solutions ('SMS') business, coupled with the
integration synergies and benefits arising from recent acquisitions.
Following the recent acquisitions of XN Checkout Plc ('XN') and Anker Plc ('
Anker'), which were completed on 29 July 2005 and 23 August 2005 respectively,
we are now well positioned to aggressively pursue our overall objective of
establishing the Group as the leading independent IT solutions provider to the
global retail market.
Trading Results
The reported results for the first half of 2005 show sales of £52.5 million up
by 81% on the pro-forma figures for 2004 and operating profit before
amortisation of goodwill and exceptional items of £8.0 million up by 95% on the
same period last year.
As the Company was incorporated on 4 February 2004 we have reproduced below
pro-forma figures for 2004, which show the results for the Group as if the Group
had been trading for a full six month period. We believe that this provides a
better comparative to our first half trading results. The pro-forma figures have
been extracted directly from our interim results statement for the period ended
30 June 2004 and the basis of the preparation for this pro-forma information is
given in the Notes to the Financial Statements below.
Actual six months Pro forma six
ended 30 June 2005 months ended 30
(unaudited) June 2004
(unaudited)
£'000
£'000
Sales Store management solutions 43,712 22,088
Petroleum and convenience 8,754 6,852
52,466 28,940
Operating profit before goodwill Store management solutions 7,180 2,795
amortisation and exceptional items Petroleum and convenience 779 1,278
7,959 4,073
Adjusted earnings per share before
goodwill amortisation and exceptional
items 2.4p 1.6p
The Group has achieved strong sales growth during the period with ongoing sales
increasing by 81%. Whilst much of this growth is attributed to acquisitions made
since June 2004 the underlying organic growth is an impressive 9% reflecting the
strength of our product offering, the improving market conditions and the
excellent efforts of all our staff.
We are particularly pleased with the growth in sales of software and services,
which have increased to 41% of total sales, up from 37% for the same period last
year. This is in line with our stated business objective of pursuing higher
margin software sales.
Hardware sales have remained constant as a percentage of total sales at 27.9%.
This reflects the effect of the acquisitions of the KPOS and RSS businesses,
whose sales are traditionally more hardware based. Without the effect of these
acquisitions the Group's hardware sales would have fallen to 23% of total sales,
which again reflects our success of increasing higher margin sales at the
expense of lower margin hardware sales.
Maintenance sales have fallen to 29% of total sales, due to the different sales
mix in the Group caused by the recent acquisitions.
Gross margins were strong in all areas of the business, and are in line with
management's expectations.
The Group has continued to focus on cost savings and improving efficiencies in
all areas of the business with a particular emphasis on the Alphameric Retail
division which was acquired in November 2004. This has resulted in a
restructuring charge of £1.8million which primarily reflects redundancy costs.
The interest payable figure in the period includes a charge of £0.6 million for
the write off of costs associated with setting up the original bank finance,
which were being prepaid over the life of the loan. As described below, the
Group has recently negotiated new bank facilities
The minority interest charge shown in the 2004 pro forma figures arose from the
30.2% minority interest in Torex GmbH, which was acquired by the Group in
September 2004.
The Group has made four acquisitions during the six months ended 30 June 2005
and Retail Store Systems Inc ('RSS'), Flexiline Forecourt Services Ltd ('
Flexiline') Hoffmann Datentechnik GmbH ('Hoffman') and CTN Systems Ltd ('CTN').
All these businesses have made positive contributions since acquisition.
Balance Sheet
The balance sheet as at 30 June 2005 shows net assets of £79.5 million,
including goodwill of £105.2 million, which is being written off over twenty
years and arises from the acquisitions made during 2004 and those made in 2005,
described above.
During the period the Group has negotiated a new bank facility of £150 million
with the Royal Bank of Scotland. This will be used to finance the Group's growth
plans. As at 30 June 2005 the Group had net debt of £40.2 million. Since the
period end this has increased due mainly to the acquisitions of XN and Anker.
Operational Review:
Store Management Solutions
The SMS business has performed extremely strongly in both the UK and Germany
achieving new wins for Lucas, the Group's market leading JAVA based electronic
point of sale ('EPoS') solution. New customer wins include several major
customers in the UK, including Co-Op Home Stores and Mitsukoshi and more
recently Bargain Crazy and Slaters. Whilst overseas, new business has been
secured with Reiss, Deichmann and Esprit.
Lucas is now installed in over 200 stores and 500 lanes in the UK with more
planned over the next few months during our peak trading period. These
installations show the strength of our flagship EPoS product and will also act
as excellent reference sites for future sales wins.
Through RSS, which was acquired for $27.9 million in May, we are already making
progress into the US, the largest market in the world for retail IT systems.
Lucas was launched at the retail systems exhibition in Chicago earlier this year
and has already generated a significant amount of interest and is included on
several short lists with major customers.
In addition, the Group's market leading merchandising product 'Smart Decision'
has continued to achieve new contracts wins with Ann Taylor, Littlewoods,
Oldrids and Modelo Continente in Portugal (part of the €1.6 billion Sonnae
group). More recently there has been a further contract win with Slaters and
talks are ongoing with major US retailers, where significant benefits can be
achieved from optimalising local stock and range planning to reflect the
demographic and climatic differences across North America..
On 25 August the Group completed its £98.5 million acquisition of Anker, a major
European supplier of IT retail solutions. This acquisition made the Torex Retail
Group the biggest independent supplier of retail IT solutions in Europe and
significantly increased its geographic footprint. The integration of Anker into
Torex Retail is well underway and we have already achieved a significant part of
the £6 million savings identified at the time the acquisition was announced.
Hospitality and Leisure
On 29 July Torex Retail completed its acquisition of XN for a consideration of
£72.2 million and as a result became the market leader in the UK hospitality
sector. The acquisition provides the Group with a profitable business with a
blue chip customer list and an excellent product portfolio. Since the
acquisition was announced, XN has secured new contract wins with Cafe Nero (£3
million over four years) to install a web based solution into over 200 stores,
the National Union of Students (£5 million over 3 years), Ladhar Leisure (£1
million) and the next phase of a rollout to 500 Punch outlets (£5 million over 3
years).
Petroleum and Convenience ('P&C')
Petroleum and convenience in the UK has made good progress in the first half of
2005, where work has commenced on the recently announced £3.3 million deal with
Somerfield to install our market leading EPoS solution and back office system
into 225 stores across the UK.
In addition P&C has just completed a very successful trial with a major
supermarket group to fully support a number of their existing petrol forecourt
operations. A further announcement to expand the trial is expected in the near
future.
The acquisition of Flexiline for £2.1 million in January has enabled the
division to broaden its product offering in the UK and be able to fully support
retailers' petrol forecourt installation and maintenance requirements. This
makes P&C UK particularly attractive to the supermarket chains and major oil
companies ('MOCs'). Similarly, the recent purchase of RPS in Ireland for a
maximum consideration of €9 million in August 2005, has given the Group the same
capacity in Ireland and opened up several exciting opportunities with MOCs.
Sales in the P&C division in Europe have fallen back in the first half of 2005,
reflecting the completion of a significant roll out programme across the Benelux
countries for Q8 in 2004. Work is underway to develop our European operation in
other geographic regions and this is expected to yield results in 2006 and
beyond.
Strategy
The Group's strategy is built around the development of modern and innovative
products that cover all of today's retailers' IT requirements. These leading
edge products can then be sold both to new customers and to the Group's existing
customer base.
In addition there is an opportunity for the Group to act as a key consolidator
within the fragmented global retail IT market. By identifying correctly priced
acquisition targets and using an experienced management team to integrate the
business into Torex Retail, the Group can acquire strong customer relationships
which it can nurture by selling its leading edge products. In addition,
significant operational synergies can be achieved by eliminating unnecessary
duplication of ancillary central costs and services.
Management Restructuring
In order to provide the management bandwidth to support the Group's ambitious
growth plans the following executive management restructuring has been put in
place:-
Chris Moore is appointed Executive Chairman.
Ed Dayan (XN's former CEO) has been appointed to the main board as
Chief Technology Officer.
Philip Cox, previously a senior director of Royal Bank of Scotland ('
RBS'), is appointed Group Chief Treasury Officer and advisor to the board. Phil
held an Executive Management position at RBS, and more recently undertook three
Managing Director level roles within its corporate Banking division. He brings
with him a wealth of experience in the world of corporate finance, risk
management and broader business management skills. His appointment strengthens
the finance, operations and strategic elements of the business.
Further senior executive appointments announced today are:
o Mark Sprigg, Chief Commercial Officer, encompassing global sales;
o Martin Hogarty, Chief Operating Officer UK;
o Steve Tilley, President USA;
o Jeroen Boon, CEO Central Europe;
o Chris D'hondt as CEO Western Europe.
Rob Loosemore steps down from the board but will continue in a
strategic executive role for the next 2 years. He has undertaken not to dispose
of any significant proportion of his shareholding in the short to medium term.
Expansion into US market with proposed acquisition of Systech Retail Systems for
up to C$38.5M
Torex Retail also announces that it has today made a recommended offer for the
whole of the issued and to be issued share capital of Systech Retail Systems
Corp ( ' Systech' ), a Canadian company listed on the Toronto Stock Exchange
(TSX: 'SYS') but based in North Carolina in the United States. The offer values
Systech in the range of approximately C$29.5 million to C$38.5 million,
dependent on the performance of certain Systech assets post-closing.
Systech which carries on business as OPENFIELD Solutions ('Openfield') is a
leading software solution provider to the US supermarket and grocery sector with
their ISIS and Store Central applications. With a very strong track record in
retail and grocery solutions, Openfield will significantly strengthen Torex
Retail's presence in the US point-of-sale marketplace. Openfield has an
installed base of over 3,000 ISIS user licences and also provides bespoke
software development services with a particular expertise in IBM's 4690 retail
operating system and both SA and GSA point of sale software. Openfield's blue
chip customer base includes Safeway, Food Lion, BJ's Wholesale Club, Academy
Sports & Outdoors, Sedano's and Magruders .
The Openfield customer base in general retail provides cross selling
opportunities for LUCAS, and the Group's other best of breed solutions whilst
Openfield's leading grocery and supermarket solutions provides immediate entry
into the grocery segment in both North America and Europe with a proven
solution, tremendous skills and strong Tier 1 references sites. The proposed
acquisition will also give rise to economies of scale from integrating Openfield
into the Group's existing US activities.
The US is a key part of Torex Retail's strategic growth plans and provides
access for its solutions to the world's largest single market for retail
management systems with annual estimated software sales alone of some $1.2
billion. The US retail systems market is currently experiencing strong growth
with analysts predicting that some 76 % of US retailers will replace their point
of sale systems over the next five years.
In the year ended 31 January 2005 Openfield achieved revenues of C$20.2 million
with a loss before profit and discontinued activities of C$9.1 million.
Openfield had net assets of $14.8 million at 31 January 2005. Trading has
improved during the current financial year as evidenced by the unaudited interim
announcement on 14 September 2005 which reported Operating Profits of
C$0.7million for the six months ended 31 July 2005 on revenues on c$10.3million.
The holders of Systech common equity will receive cash consideration of
approximately C$9.5 million before transaction expenses expected to be
approximately C$3.2 million. Holders of preferred equity have agreed to forgo
their preference and will instead convert their shares into common shares. Torex
Retail will also assume debt and other non-working capital liabilities of
approximately C$29.0 million, of which C$5.0 million will be satisfied by the
issue of Torex Retail ordinary shares and approximately $9.0 million is only
repayable contingent upon the performance of certain Systech assets.
The transaction is structured as a court controlled Plan Of Arrangement and is
expected to complete on 1 November 2005. Under support agreements in respect of
the transaction, holders of least 71% of Systech's share capital have agreed to
vote in favour of the transaction at the general meeting of Systech to be
convened to consider the transaction. Notwithstanding, the transaction remains
subject to shareholder (including, if required, minority shareholder),
regulatory and court approvals.
Outlook
The second half of 2005 has started strongly with the announcement of new
contract wins for our Lucas product with Bargain Crazy, AJT and Slaters. The
recently acquired XN business is continuing to experience strong demand for its
products in the hospitality and leisure sectors and also has some very exciting
opportunities in the gaming market. The integration of Anker in both the UK and
Europe is well underway and is ahead of expectations. The acquisition of
Systech with its blue chip customer base combined with RSS will provide the
Group with improved access to the US retail systems market. In addition, the
sales pipeline is also continuing to build in all areas of the Group.
As a result, the Board remains confident about the Group's future prospects for
2005 and beyond.
Dividends
It is the Board's intention to ensure that shareholders benefit from the
performance of the Group by adopting a progressive divided policy, whilst
balancing this with the continuing investment needed to increase earnings.
Consequently an interim dividend of 0.125p per share is being declared today.
This dividend will be paid on 4 November 2005 to shareholders on the register at
the close of business on 5 October 2005.
Chris Moore
Executive Chairman
26 September 2005
TOREX RETAIL PLC - FINANCIAL STATEMENTS
INTERIM RESULTS 2005
Group profit and loss account
Unaudited six Unaudited five
months to 30 months to 30
June 2005 June 2004
(Restated)
Note £'000 £'000
Turnover 9
Continuing operations 47,069 25,118
Acquisitions 5,397 -
Total turnover 52,466 25,118
Cost of Sales (16,156) (7,416)
Gross profit 36,310 17,702
Administrative expenses (28,351) (13,447)
Operating profit before goodwill amortisation and exceptional items
Continuing operations 7,272 4,255
Acquisitions 687 -
Total operating profit before goodwill amortisation and exceptional 7,959 4,255
items
Exceptional items 5 (1,807) -
Goodwill amortisation (2,355) (1,294)
Operating profit 9
Continuing operations 3,297 2,961
Acquisitions 500 -
Total operating profit 3,797 2,961
Net interest payable (1,711) (465)
Profit on ordinary activities before taxation 2,086 2,496
Taxation on ordinary activities (1,332) (1,088)
Profit on ordinary activities after taxation 754 1,408
Minority interests - (171)
Dividend (1,058) -
Retained (loss)/profit (304) 1,237
Earnings per share before exceptional items and goodwill 4 2.4p 1.6p
amortisation
Basic earnings per share 4 0.4p 0.8p
Diluted earnings per share 4 0.4p 0.7p
Group balance sheet
Unaudited Unaudited
30 June 30 June
2005 2004
(Restated)
Note £'000 £'000
Fixed assets
Intangible assets 105,202 60,154
Tangible assets 3,425 1,333
108,627 61,487
Current assets
Stocks 11,913 6,157
Debtors 6 38,536 16,368
Cash at bank and in hand 3,321 5,965
53,770 28,490
Creditors: amounts falling due within one year 7 (49,061) (21,339)
Net current assets 4,709 7,151
Total assets less current liabilities 113,336 68,638
Creditors: amounts falling due after one year 8 (33,860) (17,020)
Minority interest - (125)
Net assets 79,476 51,493
Capital and reserves
Called up share capital 1,886 1,535
Shares to be issued 1,000 4,181
Share premium account 71,714 44,712
Other reserve 545 -
Profit and loss account 4,331 1,065
Shareholders' funds - equity 79,476 51,493
Group cashflow statement
Unaudited Unaudited
six months five months
to 30 June to 30 June
2005 2004
£'000 £'000
Net cash inflow from operating activities 2,424 4,202
Return on investments and servicing of finance
Interest paid (3,241) (503)
Interest receivable 26 38
Net cash outflow from returns on investments and servicing of finance (3,215) (465)
Taxation (352) (357)
Capital expenditure
Payments to acquire tangible fixed assets (262) (173)
Acquisitions and disposals
Purchase of subsidiary undertakings (17,887) (66,282)
Net cash acquired with subsidiary undertakings (743) -
Net cash outflow from acquisition of businesses (18,630) (66,282)
Equity dividends paid (1,058) -
Net cash flow before financing (21,093) (63,075)
Financing
Issue of ordinary share capital 47 47,820
Net loan advances 13,236 21,220
(Decrease)/Increase in cash (7,810) 5,965
Reconciliation of net cash flow to movement in net debt
(Decrease)/Increase in cash in the period (7,810) 5,965
Cash inflow from increase in debt (13,236) (21,220)
(21,046) (15,255)
Debt acquired with acquisitions (825) -
New finance leases incepted in the period (157) -
Issue costs of new financing 1,528 -
Exchange movement (309) -
Net debt at 31 December 2004 (19,356) -
Net debt at 30 June 2005 (40,165) (15,255)
Analysis of net debt
At 1 January Cashflow On Non cash Exchange At 30 June
2005 acquisition movements movement 2005
£'000 £'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 9,235 (5,914) - - - 3,321
Bank overdraft - (1,896) - - - (1,896)
Debt due within one year (3,600) (2,900) (825) - - (7,325)
Debt due after one year (24,400) (10,393) - 1,528 (309) (33,574)
Finance Leases (591) 57 - (157) - (691)
(19,356) (21,046) (825) 1,371 (309) (40,165)
Net cash inflow from operating activities
Unaudited six Unaudited five
months ended 30 months ended 30
June 2005 June 2004
£'000 £'000
Operating profit 3,797 2,961
Depreciation charges 500 340
Amortisation charges 2,355 1,294
Increase in stocks (1,529) (734)
Increase in debtors (1,116) (1,034)
(Decrease)/Increase in creditors (1,583) 1,375
2,424 4,202
Statement of total recognised gains and losses
Unaudited six Unaudited five
months ended 30 months ended 30
June 2005 June 2004
(Restated)
£'000 £'000
(Loss)/Profit for the financial period (304) 1,237
Exchange diff. on translation of net assets of subsidiary (85) (172)
undertakings
Total gains and losses for the financial period (389) 1,065
TOREX RETAIL PLC INTERIM REPORT AND ACCOUNTS
Notes to the financial statements
1 The interim results for the six month period ended 30 June 2005 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 Torex Retail Group statutory accounts for 31 December
2004 apart from the adoption of FRS 21 which is effective for accounting periods
commencing on or after 1 January 2005, where dividends proposed by the Company
are recognised in the period in which they are declared.
2 During the period the Group acquired Flexiline Forecourt Services Limited,
Retail Store Systems Inc, Hoffmann Datentechnik GmbH and CTN Systems Limited.
The goodwill on these acquisitions and those made last year is being written off
on a straight line basis over a period of twenty years.
Subsequent to the 30 June 2005, Torex Retail plc has also acquired the Retail
Petroleum Systems, XN Checkout plc and Anker plc groups.
3 The proposed interim dividend of 0.125p (2004: 0.1p) per ordinary share will
be paid on 4 November 2005 to shareholders on the register at the close of
business on 5 October 2005.
4 Earnings per share for the six month period ended 30 June 2005 is based on
the profit after taxation and minority interests of £754,000 divided by the
weighted average number of shares during the period, 182,650,590 (basic) and
188,660,664 (diluted) 1p ordinary shares.
A reconciliation of the basic and diluted number of shares used in the six month
period ended 30 June 2005 is:
Weighted average number of shares 182,650,590
Dilutive share options 6,010,074
Diluted 188,660,664
Any potential dilution from the possible issue of shares to senior management
described in the admission document and the 2004 Report and Accounts have not
been included in the above figures.
5 Exceptional items
The exceptional items represent restructuring costs arising from rationalising
and reorganising companies acquired.
6 Analysis of debtors
Unaudited Unaudited
30 June 2005 30 June 2004
£'000 £'000
Trade debtors 17,807 10,944
Prepayments and other debtors 20,729 5,424
38,536 16,368
7 Analysis of creditors: amounts falling due within one year
Unaudited Unaudited
30 June 2005 30 June 2004
(Restated)
£'000 £'000
Bank loans and overdrafts 9,221 4,200
Finance leases 405 748
Trade creditors 13,472 3,525
Corporation tax 1,348 257
Other 13,159 7,251
Deferred income 11,456 5,358
49,061 21,339
8 Analysis of creditors: amounts falling due after more than one year
Unaudited Unaudited
30 June 2005 30 June 2004
£'000 £'000
Bank loans 33,574 17,020
Finance Leases 286 -
33,860 17,020
9 Segmental analysis
Unaudited six Unaudited five
months ended 30 months ended 30
June 2005 June 2004
Turnover Operating Turnover Operating
profit profit
£'000 £'000 £'000 £'000
By class of business
Store management solutions 43,712 7,180 19,168 2,987
Petroleum and convenience 8,754 779 5,950 1,268
52,466 7,959 25,118 4,255
Goodwill amortisation (2,355) (1,294)
Exceptional items (1,807) -
Operating profit 3,797 2,961
10 A copy of this interim statement is being sent to all shareholders and
further copies are available from the Company's Registered Office at the address
below as well as on the Company's website: www.torexretail.com.
Torex Retail plc, Telfer House, Range Road, Witney, Oxfordshire OX29 0YN
Notes to the pro forma (unaudited) results
1. The pro forma results for the six months ended 30 June 2004, as disclosed in
the Chairman's statement, 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.
This information is provided by RNS
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