I seem to have reported on Torex for most of my life as an analyst. I even knew them back in the 1990s when they were a tool hire company!. I then reported on the acquisitions binge from 1999 which included acquiring healthcare software specialist iSoft in 2003. I then ‘stood back in amazement’ as all the ‘irregularities’ and charges of fraud against its directors unfolded. Then, in 2007, iSoft was acquired by IBA of Australia and the remainder of Torex was ‘rescued’ by Cerberus for £204m. Shareholders got zilch.
Then began a real fightback by Torex Retail. In 2009 they appointed Steve Rowley from Anite as CEO. They have kept a pretty low profile since. But today they have announced their results for the year to 30th June 11. Allowing for some special situations in FY10, revenues for FY11 at £135.5m were flat with software revenues up around 14%. Around 50% of revenues come from outside the UK – which is really rather good to report for a UK HQed company. Indeed Torex’s products are used in 40 countries. Profits in PE-owned companies are always complex due to the cost of financing. But it looks as if EBITDA (OK, you know our scepticism of quoting such things!) is on the right trajectory. Indeed at £11.8m,Torex claim this to be a 5x increase on FY10.
Torex customer list is impressive with new wins in FY11 from Republic, Co-op etc adding to longer term customers like Mothercare, PizzaExpress and Costa Coffee.
Of course, we all know that the retail sector – particularly in the UK – is facing what Torex describes as ‘an increasingly challenging environment’. Technology can really make a difference even in the bricks & mortar part of retail. So I was particularly interested in their mobile payment app via Paypal for PizzaExpress with some 90,000 downloads in the first week. Also an about to be launched HTML5 app called Snapper which allows you to run promotions through social media, track interest, track voucher access, and then critically to see those vouchers being redeemed in real time.
I was recently intrigued to see figures from the ONS which showed that 10% of UK retail sales are now online – up 50% in just 12 months. By comparison, bricks & mortar retail sales have struggled to stay flat. So Torex’s challenge, like its customers, will be to adapt to the new retail landscape.
It will also be interesting to see what the Cerberus ‘Route to Exit’ will be as that crucial 5 year milestone approaches. An IPO was at one time suggested but that would be difficult to pull off in today’s market.
The TechMarketView team are meeting with Steve Rowley and his team at Torex shortly when we will bring you a more in-depth analysis.