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2006 Interim Results

2006 Interim Results. 14 August 2006. Disclaimer.

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2006 Interim Results

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  1. 2006 Interim Results 14 August 2006

  2. Disclaimer Any statements set forth herein or communicated verbally that are not historical facts are forward-looking statements or opinions that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

  3. Contents • Overview • Interim results • New management team and focus • Operational review • Platform for growth • Buoyant market conditions • Real growth drivers • Strong market positions • Best of breed products • Organic growth strategy • Organic growth case studies • Summary

  4. Overview • Business: • International market leading provider of retail IT systems and services • 2005 and 2006 acquisitions successfully integrated • Strong platform for growth now established • Absolute focus on driving organic growth going forward • Financial: • Sales of £131.9m up 151% on 2005 with operating profit of £18.2 million up 129% on last year • Strong underlying organic growth achieved – Sales 8% and Operating Profit 15% • Adjusted EPS of 2.9p represents a 21% uplift on 2005

  5. Interim Results – Profit and Loss Acquisition driven sales growth underpinned by strong organic growth 6% reduction in Overheads* % arising from 2005 restructuring activity Return on sales is effected by increased proportion of hardware sales in Continental Europe *before goodwill amortisation, cost of employee share schemes and exceptional items

  6. Interim Results – Geographical Analysis Sales ROW 8% ROW 17% CE 16% CE 36% UK 76% UK 47% 2005 2006 EBIT ROW 8% ROW 11% CE 8% CE 37% UK 84% UK 52% 2005 2006 The aggressive acquisition strategy has delivered the required presence in key global markets with strong growth across Continental Europe and the US

  7. Maintenance Services Hardware Other Software Interim Results - Analysis of First-Half Revenues 2006 Other Hardware United Kingdom Maintenance Continental Europe Software Services 2005 Rest of World • Software and Services sales in the UK remain strong, representing 41% of sales • Strengthening sales in Continental Europe and the Americas have increased the Hardware proportion of Group sales • The weighting of Software sales in the second half, combined with the contribution from recent acquisitions is expected to bolster the level of software activity and the mix for the full year

  8. Interim Results – Organic Growth 8% 15% • Organic sales growth of 8% remains encouraging. The forecast revenues for the second half are consistent with low double digit organic growth for the full year • The 15% growth in underlying organic profit is reflective of the full period impact of 2005 acquisitions

  9. Interim Results – Balance Sheet Increase in fixed assets arising from acquisitions Positive current trends in working capital management Bank borrowings of £147.9m compare to facility of £160m

  10. Interim Results - Cashflow Net operating cashflow pre exceptional items of £12.1m Operational cashflow and servicing of finance impacted by acquisitions Encouraging cash conversion rates pre Exceptional items

  11. New Management Structure and Focus • Operational management has been restructured to focus on maximising organic growth opportunities in the coming period • More de-centralised style of management to closely address market and customer requirements • Five internal appointments that have been made reporting directly to the Plc Board: • CEO of UK General Retail: Doug Hargrove (age 39) (Previously Chief Operations Officer, UK & Ireland) • CEO for Overseas Business: Phil Cox (age 40) (Previously Group Treasury Officer) • CEO of Hospitality & QSR: Keith Pascal (age 41) (Previously VP Sales & Marketing – Torex Corporation) • CEO of Petroleum & Convenience: Brendan Kavanagh (age 41) (Previously Head of P&C Division Worldwide) • CEO of Americas General Retail : Mike Hess (age 43) (Previously President & COO of Torex North America) • The appointment of Marcus Leek as Group FD and Mark Lovett as UK FD has bolstered the finance function

  12. Operational Review - Retail • Significant level of business wins across all markets from new and existing customers • New - United News, GNER, Boots, Dutch Post Office, Nokia, Bed Bath and Beyond • Existing - Matalan, Schlecker, CompUSA, Stein Mart, BJ’s Wholesale Club • Integration of Anker now virtually complete • Social plan agreed with work force in Germany and operations rationalised to one main site in Berlin • UK operational teams unified • Integration of Retail-J underway with very encouraging response from customers and prospects • Strategy to drive own IPR software sales in US market starting to bear fruit • First win for Lucas (The Picture People) • Continued wins for ISIS (Paramount Foods, Marukai Corp)

  13. Operational Review - Hospitality • Continued success in UK market • Punch Taverns, Elior, Mitchells and Butlers • Entry into international QSR market and McDonalds gained as worldwide POS client with acquisition of Savista • Successful launch of XN GlobalRes product in hotel market and first sale of new in-room entertainment system • Gaming business continuing to perform well with number of significant casino wins in both Europe and Africa

  14. Operational Review – Petrol & Convenience • The P&C division has made rapid progress in the period and is now in a strong position to capitalise on significant global opportunities available as part of the Torex brand • Strategy to target supermarkets, MOCs and large convenience chains progressing well with wins including Budgens, Tescos and Statoil • The divisional restructure into one trading entity is progressing successfully and already benefiting key accounts • Significant extension of services portfolio with acquisition of TQIPS • The integration of TQIPS is proceeding to schedule. New contracts secured through TQIPS include BT, Asda and Tesco • The pipeline of future projects is strong including major contract opportunities in China, Jordan and Romania

  15. Retail applications represent a large, growing market opportunity1 Platform For Growth - Buoyant Market Conditions Market Size ($MM) Region 2005 2009 CAGR North America $3,975 $5,370 7.8% The global Retail software market is highly fragmented; no vendor has greater than 9% market share1 Europe 1,659 2,207 7.4% Asia-Pacific 564 974 14.6% Central & South America 229 505 21.9% Rest of World 209 218 1.1% Total $6,636 $9,274 8.7% In-store and Enterprise Systems represent 60% of all software spending in 20052 Over 50% of global Retailers indicated a near-term project to upgrade or replace existing systems1 Price & Inventory Promotion 10% Management 9% Other Store Operations 8% Retail Planning 9% Other 31% Retail Supply Chain 10% Other Enterprise POS Software 17% Retail 6% • Source: AMR Research, Retail Industry Market Analysis 2004-2009, December 2005. Includes Application License, Subscription, Maintenance and Implementation/Training. • Source: AMR Research, Retail Industry Market Analysis 2004-2009, December 2005. 2005 Retail software license revenue market by application segment.

  16. Platform For Growth - Real Growth Drivers • First major replenishment cycle post Y2K • Massive IBM installed base becoming increasingly old and expensive for retailers to maintain • New JAVA and .NET technologies create real benefits for retailers • Real time data speeds up supply chain • Increased flexibility and speed with pricing & promotions • Improved integration to ERP and CRM systems • Significantly lower total cost of ownership • Simplifies/enables multi-channel retailing Buoyant market conditions set to continue for next 3-5 years

  17. $202 9% 153 7% 153 7% 144 6% 130 6% 113 5% 52 2% 48 2% 46 2% 46 2% Platform For Growth - Strong Market Positions Top Global Retail Software Provider2 Top European EPoS Software Provider2 2005 License Software 2005 Revenue Revenue ($MM)1 Share Company Not known In-house 9% Others 23% 13% Retail-J 2% Wincor Nixdorf IBM 13% 2% NCR 2% TEC 3% Retalix Torex Fujitsu BT Expedite 6% 10% 7% 10% • Source AMR Research, Retail Industry Market Analysis 2004-2009, December 2005. Retail application license and hosting revenue. • Source: Martec primary and secondary research

  18. Platform For Growth – Best of Breed Products • World class POS portfolio with significant growth opportunities via direct and indirect channels • General retail Retail-J and Lucas • Food retail ISIS • Hospitality NewPOS • SME DRS • Complementary portfolio of leading in-store and head office solutions which provide significant cross selling opportunities • Labour Scheduling ePerformance • Merchandise planning Lucas Planning • Warehouse management WMS • Automated compliance Edict • Business intelligence Galaxy • Loss Prevention Lord

  19. Organic Growth Strategy • Platform for growth achieved primarily through acquisition in 2005 and first half 2006 • Focus on organic growth in all markets • Migrate massive installed base to own POS products • Cross sell other applications • Develop indirect channels • Leverage market leadership position and brand • Economies of scale

  20. Organic Growth Case Study - Savista • Increased business with McDonalds • Accelerate POS rollout – 24,000 plus restaurants • Systems integration, implementation and maintenance services • Torex software applications • Hardware supply • Target Top 100 international QSR chains – sales pipeline > $50m of live deals • Develop indirect channel – NewPOS currently implemented in 65 countries • Sell NewPOS through own direct hospitality sales force in UK and Europe

  21. Organic Growth Case study – Retail-J • The Retail-J acquisition has completed the world-class POS portfolio and has created a substantial opportunity for both direct and channel sales • Accelerated penetration of the UK market place has commenced with the product now actively marketed by the Torex UK sales force • The ‘pull-in’ of outsourced portions of Retail-J deals to in-house Torex resource is progressing well (i.e. hardware, services, other software) • The Retail-J solution has been designed as a product that can be sold by third parties. Acceleration of worldwide distribution is a priority and the Group is actively creating an appropriate distribution network

  22. Organic Growth Case Study – Cross Selling Sample of executed deals: • Reiss have signed up to Edict business control software, WMS and Merchandise Planning • Bargain Crazy have signed up to WMS • 99p Stores have agreed to do a pilot of MCast and committed WMS • Slaters Menswear are committed to Merchandise Planning There is an extensive portfolio of cross sell prospects. A sample of those at latter stage discussion include: • International Retail chains considering merchandise planning and business control software • US retailer considering labour scheduling • Tender to US QSR chain for full turnkey solution

  23. Summary Sales and EBIT* target achieved. Strong underlying organic growth - Sales 8% and Operating Profit 15% Results ahead of expectations A massive customer base, extensive geographic reach and leading edge products now in place Platform for growth established Senior management team strengthened with five operational CEOs, alongside new Group and UK finance directors New management team in place 2005 and 2006 acquisitions successfully integrated 100% focus on organic growth *before goodwill amortisation, cost of employee share schemes and exceptional items

  24. Any Questions ?

  25. Appendices

  26. Interim Results

  27. Interim Results

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