Tissue Regenix Group Regulatory News (TRX)

16 Mar 2006 07:04

Torex Retail PLC16 March 2006 Thursday 16 March 2006 Torex Retail Plc ("Torex Retail" or "the Group") Preliminary Results Torex Retail Plc, the market leading international provider of innovative ITretail solutions, today announces its preliminary results for the twelve monthsended 31 December 2005. Highlights: Strong Operating and Financial Performance: • Turnover up 133% to £167.4 million (2004: £71.8 million, pro forma**) • *Adjusted Operating profit increased by 123% to £27.9 million (2004: £12.5 million, pro forma**) • Underlying organic growth of 15% and operating margins of 19% from continuing businesses • *Adjusted EPS up by 58% to 7.9p (2004: 5.0p pro forma**) • Financial results in line with expectations * Adjusted EPS and operating profit have been calculated excluding exceptional items, share scheme charges and amortisation of goodwill ** Pro forma results for the twelve months ended 31 December 2004 as previously reported in the 2004 financial statements Business • Torex Retail is now the number one provider of retail systems and services in the UK and Mainland Europe • Critical mass achieved in chosen markets creating strong platform for growth • Key additions made to main senior executive team ensuring growth is managed and opportunities are fully exploited • Role of Chairman and CEO to be separated reflecting best corporate practice • Integration of acquired companies substantially complete in the UK and progressing well in Germany • Strong order intake and positive start to 2006 • New global investment bank and auditor appointed Commenting on the results Chris Moore, Chairman and Chief Executive of TorexRetail said, "2005 was the first full year of the five year plan to make Torex Retail theglobal leading provider of application software and services to our chosenmarket sectors. We have developed a robust strategy to ensure this vision andambition is fulfilled. Moving ahead we are looking to continue the delivery ofsustainable and profitable growth for the long term. The integration of the acquired businesses is well advanced and this, coupledwith our market leading solution set, means we are well placed to deliverexceptional customer service and enhanced shareholder value. Key to achievingthese goals will be the continuation of strong organic growth and theexploitation of the business opportunity in North America, whilst minimisingbusiness risks in the marketplaces where we already have a leading position. The next 12 to 24 months are set to be an immensely exciting period within theretail sector and I believe Torex Retail is ideally positioned to capitalise onthe significant opportunities which present themselves". - Ends - Enquiries: Torex Retail Plc +44 (0) 870 300 6061 Chris Moore, Chairman and Chief Executive Mark Pearman , 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 technologysolutions to many of the world's principal retailers. Since the company'sflotation in spring 2004 Torex Retail has achieved rapid growth across all ofits markets and has rigorously pursued its goal of becoming the provider ofchoice. As a result, the company now has a presence in all of the major marketsaround the world and has built a strong platform for future growth in line withits strategy. Torex Retail's product and solution set spans general and foodretail as well as the hospitality and petroleum and convenience sectors. Withover 6,000 customer relationships, including Tesco, Woolworth, Selfridges, Shelland Argos, the company has earned a leading reputation amongst retailers. TorexRetail has more than 2,800 staff based in 17 countries. www.torexretail.com Chairman and Chief Executive Officer's Statement On behalf of the Board, I am delighted to present the results of the businessfor the year ended 31 December 2005. Overview The reported results show turnover of £167.4 million and Operating Profit beforeamortisation of goodwill, share scheme charges and exceptional items ("AdjustedOperating Profit") of £27.9 million. Earnings per share before amortisation ofgoodwill, share scheme charges and exceptional items ("Adjusted EPS") grew by58% to 7.9p, compared to the proforma twelve month period to 31 December 2004. During the period under review the Group achieved underlying revenue growth inits core business of 13%. Significant organic growth was also achieved postacquisition: 9% at RSS, 11% at RPS, 12% at Hoffman, 31% at CTN and 32% from XNCheckout. Overall, underlying organic growth was 15%. Reflecting the large one-off acquisition related restructuring costs and thenon-cash share scheme and amortisation of goodwill charges of £35.7 million theGroup realised an Operating Loss of £7.8 million (2004: £9.0 million profit) andBasic Loss per Share was 5.4 pence (2004: 3.0p Earnings Per Share). I am pleased to report we are on track to achieve our five year plan and in thatrespect the Group is now the number one provider of retail systems and servicesin both the UK and Mainland Europe. In 2005, we achieved strong organic growthwhilst also completing a number of strategic acquisitions. We have significantscale and customer base and solution set to deliver sustainable, long termorganic growth. Issues of year 2000 compliance had the effect of synchronising the replacementcycles of the majority of retailers worldwide. Given the typical five to eightyear product life of most retail systems, the technology replacement cycle isapproaching a point where a significant number of retailers will be looking torefresh their systems. In many cases, particularly in North America, thisprocess has already started and we believe this concentrated increase incustomer demand represents a substantial opportunity for Torex Retail. As reported in September, we achieved significant organic growth from both ourUK and European businesses during the first half. Robust, underlying organicgrowth continued throughout the second half of the year, in both revenue andprofit terms. This, coupled with strong order intake and substantial progress inintegrating the businesses acquired last year, has resulted in very pleasingfinancial results which are in line with market expectations. The business doubled in size twice during 2005 primarily as a result ofacquisitions. To manage this growth and capitalise on the opportunities thispresents we have made a number of key additions to both the Group Board and thesenior executive team. Operational Developments Torex Retail is implementing a long term strategy to achieve leading marketpositions, superior scale and profitability throughout our business. A single-minded focus on sustainable organic development is central to our plans and I amtherefore delighted to report that we achieved an impressive underlying salesgrowth of 15% in 2005. I am also encouraged to report that the integration of the businesses weacquired in 2005 is substantially complete in the UK and it is ahead of schedulein Germany, and due for completion later this year. The integration of the acquired companies has represented a major undertakingand its success to date is a tribute to the talents and abilities of ourmanagement team, coupled with the responsiveness and flexibility of our staff.One of the main aspects of integration is the elimination of duplicatedresource, which has resulted in a significantly greater level of ongoing costsavings than we had originally indicated. The scale of change we managed in 2005 is illustrated by the comparativestatistics of key indicators detailed below: INDICATOR 2005 2004 (Pro forma) Turnover £167.4 million £71.7 millionGross Profit £105.2 million £48.4 millionAdjusted Operating Profit £27.9 million £ 12.5 millionAverage No of Employees 2,285 1,000 The integration of Alphameric Retail, which was acquired in November 2004, wasfully completed in 2005 with minimal customer losses and a number of customershave migrated to our leading Lucas software solution. The Alphameric Retailintegration also involved a significant amount of work on resolving product andservice issues arising out of a number of loss making hardware contracts.Following the restructuring of the business, which was loss making onacquisition, and the elimination of non profitable revenue streams, the businessmade an encouraging contribution to Group profits in 2005. Most importantly, the integration programmes have greatly increased theefficiency of our business processes with a resulting improvement in our abilityto deliver the highest levels of service to our customers. Consequently theGroup is in a stronger position to benefit from the numerous opportunities thatlie ahead and we now have the structure and team to become the leading providerof retail systems worldwide. UK Mainstream Retail The year saw eight major roll outs of Lucas Java into the existing customer baseincluding RD Scott, Slaters, Co-op Home Stores, Bargain Crazy, Yeomans, Reiss,Clinkards and Texas Department Stores. Other successes included the implementation of Lucas Java in the Japanesedepartment store, Mitsukoshi, in Regent Street which went live in December 2005as well as deployments of our Lucas OSM solution into Roadchef and Alpha Retailin contracts worth in excess of £2.6 million. Significant new wins were enjoyed in our Productivity and Performance Managementdivision with major contracts secured with a range of customers from blue chiphigh street retailers to convenience store groups, taking advantage of thegrowing realisation that there are innovative ways to budget, reduce and managestaffing costs and increase job satisfaction levels. Contracts includedsignificant orders from Tesco, Somerfield and Hendersons. With growing awareness within retail that merchandise planning delivers realcost savings, increased margins and enhanced customer satisfaction we expectthis area of our business to continue on its current rapid growth curve.Significant wins include Cortefiel Group and a major new order from Ann Taylor.Additionally we saw our Warehouse Management product set enjoy strong growthduring the year adding Bargain Crazy and LPC Pharmaceuticals to significantclients already installed such as Littlewoods, EMI Music, WH Smith and Cow &Gate. Hospitality As well as considerable success within our retail business, I am equally pleasedto be able to report a number of key achievements within our Hospitalitydivision. Since acquiring XN Checkout in July 2005, we have secured a number ofsignificant new UK business wins including a major project worth in excess of £5million in the first phase with Mitchells & Butlers. A commitment of similarsize with leading pub company, Pathfinder, was also secured in addition to arecord number of new wins in the wider hospitality market, including Caffe Neroand Rocco Forte Hotel Group. In entering the hospitality market we became a leading provider of EPoSsolutions to the UK pub and restaurant market with more than 40,000 installeddevices. The acquisition also gave us entry into important niche sectors of thehospitality industry including the hotel sector as well as casinos and gaming.Progress in both of these areas has been significant with a number ofprestigious wins achieved in 2005 including a first phase roll out of electronicgaming terminals to Stanley Leisure Casinos. Moving forward, we expect the hospitality sector to make a key contribution tothe Group's overall performance and we believe there are significantopportunities to cross sell a number of our market leading applications such asloss prevention, business intelligence and productivity management tohospitality customers. Torex Retail's strong service capability has helped the hospitality divisioncapture new service related business, which had previously been outsourced. The order pipeline for 2006 is looking very promising and since the start of theyear we have already secured a number of new contract wins including Elior andthe conversion by Punch Taverns of a number of Spirit-managed houses to leaseformat. New orders in excess of £2 million have also been received from our fastgrowing Middle Eastern channel. Petroleum and Convenience Progress in the Petroleum Retailing and Convenience Division has beensignificant with major support and maintenance contracts secured with Tesco andSomerfield. The acquisition of Flexiline Forecourt Services in February 2005 hasenabled us to broaden our offering to the sector and we are now able to delivera turnkey solution to both forecourt operators and the convenience sector. In Europe, we won the unmanned forecourt business of DATS 24, and commenced apilot with JoPetrol (Jordanian state oil company) where the opportunity is for385 sites. A similar pilot is also underway for RomPetrol in Romania, where theopportunity is for 1,000 sites. As well as success with major multiple operators we have continued to grow ourshare of the important independent marketplace and have more than 8,000installed solutions across the independent sector. Continental Europe In Continental Europe, the breadth and depth of our business has changedsignificantly following the acquisition of Anker in 2005. The opportunity forthe Group is clear - to sell the full range of Torex Retail's products acrossthe vast Anker customer base to maximise software, service and maintenancerevenues on a much reduced cost base. In this we are making excellent progress. In Germany, we have secured additional contract wins with Peek & Cloppenburg andKaufland, and significant new customer wins with Charles Vogele, Gerry Weber,Tegut and Cult Company Our increased scale has enabled us to undertake in-housethe major roll-outs for a number of customers including Tedi and Sport Scheck inGermany, Deichmann in Denmark and Switzerland, and Triumph in Hong Kong, In Western Europe (Holland, France and Belgium) major 2005 wins includedPanelux, Zeeman, Jan Linders, Hema, Bruna, Servex, Decathlon, Platte-Forme DuBatiment and Norma. In Scandinavia, where we have traditionally been strong in hospitality, wecontinue to win the majority of the Nordic Ferry business (the market in Denmarkand Estonia is especially strong). Major software contracts for Lucas OSM in2005 included Nordesgruppen and the Finnish Post Office. We have already secureda major Lucas OSM sale with Avecra Oy for high class restaurant and cateringservices at railway stations and on trains in Finland. The Lucas Java pipeline across Continental Europe for 2006 is at record levels. North America In North America, the positive news on consumer spending and retail salesfigures is driving new business levels beyond those experienced previously.With the EPoS replenishment cycle gaining momentum in 2006, Torex is well placedas an operator of growing scale with a broadening product platform. In 2005, we secured significant new contracts with Syms, Stein Mart and Marukai,as well as new customer wins with Mervyns and KTA. Additionally, we secured newrevenues from the North American roll-out for Mont Blanc, and increased businessfrom long term customer BJ's Wholesale Club. Our strategic acquisitions of Retail Store Systems and Systech have provided uswith a solid platform from which to launch the Torex Retail brands, solution setand capability into this key marketplace. Having already achieved significantorganic growth from both our existing and acquired customer bases, we will belooking at appropriate targeted acquisitions to broaden our geographic footprintand market penetration in this territory; as remaining subscale in the world'slargest market for retail systems would represent a lost opportunity. Looking at 2006, we are delighted by the broad and increasing opportunity forour lead products. Our Lucas Java product was adopted by our North Americanbusiness upon its acquisition, and already has a healthy new prospect pipelinefor 2006. With new pilots being arranged and North American installations forEuropean based retailers, we expect to demonstrate increasing reference sites asthe product gains traction. We are receiving strong interest from food and grocery retailers for ourMicrosoft .NET EPoS application, ISIS. This industry leading product wasacquired from Systech in September 2005. Following the success of our relationship with Ann Taylor, our Lucas Planningproduct is attracting very strong interest from a large number of Tier 1retailers in the US. We were delighted to see this product win the "Best SupplyChain Solution" category at the recent prestigious Microsoft Retail ApplicationDeveloper Awards. Management 2005 has seen a significant strengthening of our senior management. We have aproven reputation for delivering results organically and by acquisition . As wegrow , particularly into new territories and customer segments, we will belooking to make further additions to the board in the year ahead. I originally joined the business as Chief Executive and, following RobLoosemore's decision to step down from the Board, also assumed the role ofChairman. As a publicly quoted company on AIM we recognise the need for thehighest levels of transparency and corporate governance and to ensure thiscontinuing commitment is fulfilled, we are currently looking to appoint anindependent Non-Executive Chairman, allowing me to focus entirely on theresponsibilities of the Chief Executive. At the present time our Finance Function is in the highly capable hands of MarkPearman following the departure of Michael Meade earlier this year. With Mark'splc finance background and having been involved in the business for almost 10years, he is very well positioned to oversee the company's finances. The newChairman will be instrumental in undertaking the process of appointing a newFinance Director. Additions to the senior management team include Doug Hargrove, previously UKManaging Director of Anker, who is now responsible for the whole of our UKbusiness as Chief Operating Officer. Doug brings high levels of professionalism,energy and pragmatism to the operational board resulting in significant benefitsbeing achieved. Elsewhere, Brendan Kavanagh, previously the owner of RPS, not only looks afterour operations in Ireland but also is a driving force in our rapidly growingPetroleum Retailing activities. Finally, Ed Dayan was appointed in July as ChiefTechnology Officer. He combines this role with his immense experience inHospitality and has also joined the Board. Product Development Strategy One of the cornerstones of our business plan is the delivery of an integratedsolution set to our customers and during 2005 we have invested some £12 millionin research and development. We are committed to maintaining and enhancing ourtechnology lead in the market place and the Group will continue to investapproximately 10% of annual revenue in the area of product development. We are totally committed to a strategy of technological leadership allied to thecreation of business enhancing products and I am pleased to be able to reportthat 2005 saw us confirm our product strategy for customers. We have committedto support customers with our existing systems whilst providing them with a roadmap to migrate to more contemporary solutions at their own pace. We believe thisapproach will allow customers to replace their current solutions with the latesttechnology in a smooth and timely manner and derive the business benefitsarising from our investment in product development. Over the medium term, our product set is being brought together under a commonbusiness platform called the "Torex Enterprise Portal", which will providecustomers with the benefits of a single and familiar view of all theirapplications and data. Group Acquisition Strategy In a consolidating market, which is experiencing buoyant trading conditions,growth through acquisition is an important part of our strategy to build aninternational group with superior critical mass and substantial marketpositions. We were extremely active in making acquisitions in 2005 but, lookingahead, we anticipate a much reduced acquisition programme designed to provideincreased penetration of selected geographical territories (in particular NorthAmerica) and vertical market segments as well as enabling us to further broadenour product offering in certain niche areas. Appointment of new Financial Advisers and Joint Brokers We have also established considerable interest in the North American investorcommunity and we now have a number of American based institutional shareholders.Reflecting the increasing US investor base we have today appointed Jefferies, aleading international investment bank as our joint brokers and financialadvisers. Jefferies has one of the largest banking teams globally dedicated tothe technology industry and in 2005 was the No. 3 trader by volume of NASDAQstocks. This appointment will strengthen our representation, particularly in the US, andincrease our access to international capital markets. Appointment of Auditors Reflecting the increased size of the business in 2005 the Board has appointedBDO Stoy Hayward LLP ("BDO") as auditors to the Group. As the fifth largestaccountancy network worldwide, BDO have the necessary expertise and resources toservice our international and growing business. Broadening Partnerships As we have grown over the past twelve months we have aligned ourselves moreclosely with strategic partners that will enable us to deliver solutions tocustomers globally. These partnerships span hardware, solutions, services andconsultancy with key alliances now in operation with IBM, Hewlett Packard,Microsoft, SAP, Oracle and service delivery and distribution partners such asFujitsu in Asia. Outlook 2005 was the first full year in our five year plan to make Torex Retail theglobal leading provider of application software and services to our chosenmarket sectors. Moving ahead we expect to continue to deliver sustainable andprofitable growth. We have already made a strong start for 2006 and our order intake for Januaryand February is especially pleasing, and our new business pipeline is at itsstrongest in the Company's history. The integration of the acquired businesses is well advanced and this, coupledwith our broader solution set and exceptional customer service, means we arewell placed to deliver enhanced shareholder value. The next 12 to 24 months are set to be an immensely exciting period within theretail sector and I believe we are ideally positioned to capitalise on thesignificant opportunities which present themselves to Torex Retail. Chris Moore Chairman and Chief Executive 16 March 2006 Financial Review Accounting policies and presentation The financial statements have been prepared on the basis of accounting policieswhich are consistent with those used in the previous financial year with theexception that Financial Reporting Standards 17, 21, 22 and 25 have beenadopted. Financial Reporting Standard 21 requires that dividends which areproposed by the Company are recognised in the period in which they are approvedrather than declared. The previous period's financial statements have beenrestated to reflect this change. The profit and loss account bears large non-cash charges for goodwillamortisation due to the acquisitive nature of the Group, and the notional costof share option schemes. The Group has incurred or is committed to incursignificant one-off restructuring costs in order to derive the maximum immediatebenefit from acquired businesses. To aid understanding of the financialstatements, Adjusted Operating Profit and Adjusted Profit Before Tax are shownbefore these charges on the face of the profit and loss account. For the samereason Adjusted EPS has also been presented. Torex Retail Plc was formed following the acquisition of the Torex Retail Groupcompanies from iSOFT Group in February 2004. Its shares were first admitted andtraded on AiM on 2 March 2004. In order to provide a better understanding of ourtrading results we have produced comparative pro forma information for the yearended31 December 2004, shown below. This information shows the results for the Groupas if it had been trading for a full twelve month period in 2004. The 2004 proforma information has been prepared on the basis set out in the notes to theaccounts. Results review 12 months Pro forma 12 months ended ended 31 December 2005 31 December 2004 £'000 £'000 Turnover 167,366 71,760 Cost of Sales (62,200) (23,321)Gross Profit 105,166 48,439 Gross margin 62.8% 67.5% Overheads (77,312) (35,931)Adjusted Operating Profit* 27,854 12,508 Adjusted return on sales 16.6% 17.4% Interest (5,785) (1,253)Adjusted Profit on ordinary activities before tax* 22,069 11,255 Exceptional restructuring costs (19,995) (242) Share scheme costs (5,663) (545) Goodwill amortisation ( 10,031) (2,938)(Loss)/Profit on ordinary activities before tax (13,620) 7,530 Pro forma earnings per share Adjusted EPS 7.9p 5.0p Basic EPS (5.4p) 3.0p * Stated before exceptional items, share scheme costs and goodwill amortisation Overall group revenues increased 133% over the pro forma period in 2004 whilstAdjusted Operating Profit improved by an equally pleasing 123%. Revenue from continuing activities increased by 23% to £88.0 million reflectingstrong underlying organic growth of 13% in the core business together with thefull year impact of 2004 acquisitions. The growth in continuing revenues wouldhave been even higher but for the planned downsizing of the Alphameric Retailbusiness which was acquired in November 2004. On acquisition this business wasstill loss making and required substantial restructuring work during 2005. As aresult of this exercise a significant amount of low margin hardware andmaintenance revenue (including the closure of Channel Connect, AlphamericRetail's Tier 3 & 4 hardware distribution business) was deliberately notpursued, and this in combination with a 40% reduction in the cost base gave riseto a satisfactory operating profit for the business in 2005 on significantlyreduced revenues. Adjusted operating margins from the Group's continuing business increased to animpressive 19% from a combination of an improved sales mix and the economies ofscale realised as a result of the Alphameric Retail and KPOS acquisitions. Theimprovement in sales mix benefited from the Group's strategy to focus on highermargin software and services with hardware sales decreasing as a proportion oftotal revenues from 33% in 2004 to 30% in 2005. Revenue from businesses acquired during 2005 amounted to £79.4 million. Adjustedoperating margins from acquired operations were 14.0%, lower than those achievedwithin the Group's continuing operations reflecting the higher hardware contentin the sales mix of Retail Store Systems and Anker. The underlying growth in 2005 pro forma revenues over the prior period (assumingall the acquisitions the Group has made in both in 2004 and 2005 are included inrevenue from 1 January 2004) was a very pleasing 15%. Exceptional Items, Share Scheme Charges and Goodwill Amortisation Exceptional charges of £20 million have been included in the Profit and LossAccount in 2005. These charges in the main relate to one-off restructuring costsfollowing the acquisitions of Alphameric Retail and Anker. These costsprincipally comprise termination and notice payments to staff who have been orwill be made redundant following these acquisitions. Of the total exceptional charge some £14.5 million relates to the restructuringof the Anker business in the UK and Continental Europe. The charge is higherthan was initially expected at the time of the acquisition as additional savingshave been identified which has increased the level of potential redundancieswithin the business. The restructuring process has been largely completed withinthe UK operation but is still in progress in Continental Europe where locallegislation requires the agreement of a detailed Social Plan and court approval. Once complete, it is anticipated that the total savings arising on an annualbasis will be some £12 million representing a payback period of some 20 months. A non-cash charge of £5.7 million has been incurred in the period in respect ofthe various share schemes operated by the Group to retain and motivatemanagement and staff. Of this £5.3 million represents a charge required underUITF Abstract 17 to reflect the intrinsic value of share options issued at 1p asdetailed in the Company's AiM Admission Document. A £10 million charge for the amortisation of goodwill has been made during theperiod in accordance with the Group policy of amortising goodwill over a periodof twenty years. Tax The overall tax credit on ordinary activities of £1.3 million was 9% of the Losson Ordinary Activities. This is less than the UK standard rate of taxation of30% mainly as a result of goodwill amortisation, which is not allowed for UK taxpurposes. It is anticipated that the expected tax rate going forward will be in the regionof 28% to 30% on profit on ordinary activities before goodwill amortisation. Earnings per share ("EPS") Adjusted EPS increased by 58% over 2004 pro forma to 7.9 pence. EPS growth isone of the Group's main objectives as the Board believes that this is the bestpractical measure of shareholder value so this significant increase isparticularly pleasing. Basic EPS per Financial Reporting Standard 22 was a loss of 5.4 pence reflectingthe significant one-off restructuring costs and the non-cash share scheme andamortisation of goodwill charges. Balance sheet The balance sheet as at 31 December 2005 shows net assets of £223.5 million,including goodwill of £361.8 million, after the current period's charge foramortisation. Goodwill increased during the period by a total of £283.6 million primarily as aresult of the following acquisitions in 2005: • Retail Store Systems was acquired in May 2005 for a total consideration of £14.9million, which comprised of £9.2million in cash and £5.7million in shares • XN Checkout was acquired in July 2005 for a total consideration of £84.4million, all in shares • Anker was acquired in August, for a total consideration of £99.3million, which comprised £31.1million in cash and £68.2million in shares • Systech was acquired in November for a total consideration of £5.7million, which comprised £3.3 million in cash and £2..4 million in shares • The Group made other smaller acquisitions during the year for a total consideration of £16.1million, comprising £10.2million in cash, £3.1million in shares and £2.8m deferred consideration. The deferred consideration in respect of the acquisition of Alphameric Retail inNovember 2004 has been crystallised at £2 million, which resulted in a £1million reduction in goodwill .This was offset against additional goodwillarising out of the final review of the closing balance sheet at the date ofacquisition. The Directors have carried out a goodwill impairment review on the2004 acquisitions and are satisfied that the carrying value of goodwill inrespect of these acquisitions is fully justified by the current profitabilityand future prospects of those businesses. The balance sheet as at 31 December 2005 includes a provision of £3.5 million,net of deferred tax in respect of pension fund liabilities. The Group operates or contributes to a number of pension schemes worldwide allof which are of the defined contribution type with the exception of the definedbenefit schemes that were in operation within parts of the Anker group that wasacquired in August 2005. All of these defined benefit schemes are now closedand in the largest UK, scheme benefits ceased to accrue a number of years ago. Under FRS 17, the scheme's assets were £20.6 million at 31 December 2005 with adeficit of £4.9 million equivalent to a £3.6 million deficit after tax. Currentfunding levels which were set in September 2005 are planned to recover thedeficit over a five year period by way of additional annual contributions of£0.9 million. Cash Flow During the 12 months to December 2005, the Group has experienced strong cashinflows from operating activities before exceptional items, generating £18.1million of cash (101% of Adjusted Operating Profit ignoring goodwillamortisation). This represents a particularly strong second half performance where the Groupgenerated £13.6 million of cash on Adjusted Operating Profit of £12.2 million. Included within other creditors is an amount of £9.3 million in respect ofdeferred consideration and included within trade creditors is an amount of £1.3million in respect of costs relating to 2005 acquisitions. These items togetherwith the provision for restructuring costs of £14.1 million will affect the 2006cash flow. Net debt at 31 December was £130.1 million, of which bank debt was £126.9million compared to available facilities with the Group's bank syndicate of £140million. International Financial Reporting Standards ("IFRS") The Group intends to publish its first set of results under IFRS for the yearended 31 December 2007 in accordance with the requirements of AiM, withcomparatives for the year ended 31 December 2006. An IFRS transition project isunderway and is being steered by the Board as this change has potentially farreaching implications. The adoption timetable for AiM companies is behind thatfor the full market and Torex Retail Plc is expecting the areas of impact to bepensions and other employee benefits including share based payments, businesscombinations, intangible assets including capitalisation of qualifyingdevelopment expenditure and treatment of goodwill, and financial instruments. Mark Pearman Group Finance Director 16 March 2006 Group profit and loss account Year 11 months ended ended 31 December 31 December 2005 2004 Note £'000 £'000Turnover Existing operations 87,994 67,935Acquisitions 79,372 -Total turnover 4 167,366 67,935 Cost of sales (62,200) (22,022) Gross profit 105,166 45,913 Total administrative expenses 4 (113,001) (36,949) Operating (loss)/profit Existing operations before exceptional items, employee share schemes andgoodwill amortisation 16,753 12,689 Acquisitions before exceptional items, employee share schemes and goodwillamortisation 11,101 - 27,854 12,689 Exceptional items 3 (19,995) (242)Charge in respect of employee share schemes (5,663) (545)Goodwill amortisation (10,031) (2,938) Operating (loss)/profit Existing operations 1,393 8,964Acquisitions (9,228) - (7,835) 8,964 Net interest payable 5 (5,785) (1,253) (Loss)/Profit on ordinary activities before taxation (13,620) 7,711 Taxation on ordinary activities 6 1,272 (2,813) (Loss)/Profit on ordinary activities after taxation (12,348) 4,898 Minority interest (184) (226) (Loss)/Profit for the financial period (12,532) 4,672 Basic (loss)/earnings per 1p ordinary share (5.4)p 3.0p Diluted (loss)/earnings per 1p ordinary share (5.4)p 2.9p Group balance sheet 31 December 31 December 2005 2004 (Restated) £'000 £'000 Note Fixed assets Intangible assets 361,814 78,218Tangible assets 9,385 2,944Investment in associate 140 - 371,339 81,162Current assets Stocks 23,974 8,728Debtors 9 76,517 31,785Cash at bank and in hand 13,442 9,235 113,933 49,748 Creditors: amounts falling due within one year 10 (102,494) (34,589) Net current assets 11,439 15,159 Total assets less current liabilities 382,778 96,321 Creditors: amounts falling due after more than one year 11 (134,432) (27,684) Provisions for liabilities and charges (21,302) - Net assets excluding pension liabilities 227,044 68,637 Pension liabilities (3,556) - Net assets 223,488 68,637 Capital and reserves Called up share capital 3,265 1,824Share premium account 61,733 61,586Merger reserve 164,357 -Other reserve 5,603 545Profit and loss account (11,823) 4,721Employee benefit trust (39) (39) Shareholders' funds 223,096 68,637 Minority interest 392 - 223,488 68,637 Consolidated cashflow statement 11 months Year ended ended 31 31 December December 2005 2004 £'000 £'000 Net cash inflow from operating activities 12,192 11,475 Return on investments and servicing of finance Interest paid (4,570) (1,141)Issue costs of new bank loan (1,608) -Interest paid on finance leases (577) (38)Interest received 111 91Net cash outflow from returns on investments and servicing of finance (6,644) (1,088) Taxation (619) (1,281) Capital expenditure and financial investment Purchase of tangible fixed assets (1,943) (477)Proceeds from sale of tangible fixed assets 78 -Net cash outflow from capital expenditure and financial investment (1,865) (477) Acquisitions and Disposals Purchase of subsidiary undertakings (60,835) (80,403)Disposal of investments 92 -(Overdraft)/Cash acquired with subsidiary undertakings (4,737) 4,374Deferred consideration payments (3,200) (724)Net cash outflow from acquisitions and disposals (68,680) (76,753) Equity dividends paid (1,474) (167) Net cash outflow before financing (67,090) (68,291) Financing Issue of ordinary share capital - 52,553Exercise of share options 151 -Expenses of share issues - (2,890)Loan advances 111,312 30,100Loan repayments (39,499) (2,100)Capital element of finance lease payments (612) (267)Net cash inflow from financing 71,352 77,396 Increase in cash 4,262 9,105 Reconciliation of net cash flow to movement in net debt Increase in cash in the period 4,262 9,105Cash inflow from increase in debt (71,201) (27,733)Changes in net debt resulting from cash flow (66,939) (18,628) Debt acquired with acquisitions (41,930) (615)New finance leases incepted in the period (1,981) (243)Other non cash movements 1,354 -Exchange movement (1,206) 130Movement in net debt in the period (110,702) (19,356) Net debt at the beginning of the period (19,356) -Net debt at 31 December (130,058) (18,765) Analysis of change in net debt At 1 January At 31 December 2005 2005 On acquisition Cash flows Non cash Exchange movements movement £'000 £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 9,235 4,262 - (55) 13,442 9,235 4,262 - (55) 13,442 Short term loans (3,600) - (5,422) - - (9,022)Long term loans (24,400) (40,723) (66,391) 1,354 (1,149) (131,309)Finance leases (591) (1,207) 612 (1,981) (2) (3,169) (19,356) (41,930) (66,939) (627) (1,206) (130,058) Net cash inflow from operating activities 11 months Year ended ended 31 31 December December 2005 2004 £'000 £'000 Operating (loss)/profit (7,835) 8,964Depreciation charge 2,249 732Goodwill amortisation 10,031 2,938Translation differences 210 -Loss on sale of tangible fixed assets 64 -Non-cash share scheme charges 5,058 545Increase in stocks (2,661) (1,121)Increase in debtors (7,882) (2,282)Increase in creditors 4,869 1,699Increase in provisions 8,089 -Net cash inflow from operating activities 12,192 11,475 Statement of group total recognised gains and losses 11 months Year ended ended 31 31 December December 2005 2004 (Restated) £'000 £'000 (Loss)/Profit for the financial period (12,532) 4,672Actuarial adjustments to defined benefit pension liabilities (406) -Exchange difference on retranslation of net assets of subsidiary undertakings (2,132) 216Total recognised (losses)/gains for the financial period (15,070) 4,888 Notes to the financial statements 1. The preliminary results for the year ended 31 December 2005 havebeen extracted from the audited financial statements for the year ended 31December 2005 which have not been delivered to the Registrar of Companies. Thefinancial information set out in this statement does not constitute the Group'sstatutory financial statements for the periods ended 31 December 2005 and 31December 2004. The Group's independent auditors' have reported on the 2005 and2004 financial statements; their reports were unqualified under section 237(2)or (3) of the Companies Act 1985. The statutory financial statements for theperiod ended 31 December 2004 have been delivered to the Registrar of Companies,whilst the financial statements for the year ended 31 December 2005 will bedelivered to the Registrar following the Company's Annual General Meeting. Thisfinancial information has been prepared in accordance with the accountingpolicies adopted in the 2005 financial statements. 2. Changes in accounting policy FRS 21 has been adopted from 1 January 2005. This standard requires thatliabilities for dividends are recognised if the dividends are appropriatelyauthorised and if they are no longer at the discretion of the Company. Theaccounting practice pre FRS 21 as applied to last year's annual report andaccounts was to recognise the liability associated with the performance periodand therefore the 2004 final dividend as recommended by the directors to theannual general meeting was recognised as a liability as at 31 December 2004.Accounting in accordance with FRS 21 would not have recognised this liability of£1.0 million and it would not have appeared as a deduction from retainedreserves and therefore the comparative balance sheets have been restated. Thededuction from retained reserves for the final 2004 dividend appears in the yearended 31 December 2005. FRS 25 has similarly been adopted and requires, in certain circumstances, thatequity based financial instruments be treated as liabilities rather than equityreserves. The Group had in place equity reserves at 31 December 2004 in respectof contingent consideration amounting to £5.0 million. FRS 25 requires thatthese be disclosed as creditors and therefore the comparative balance sheet hasbeen restated to include additional creditors due within one year of £2.0million and creditors due after more than one year increased by £3.0 million. 3. Exceptional items Restructuring costs comprise redundancy costs from rationalising andreorganising the companies acquired during the current and previous period. 4. Profit and Loss Account Acquisitions Year £'000 ended 31 December 2005 Existing £'000 Operations £'000 Turnover 87,994 79,372 167,366Cost of Sales (27,758) (34,442) (62,200)Gross profit 60,236 44,930 105,166 Administrative expenses- exceptional items (4,935) (15,060) (19,995)- charge in respect of employee share schemes (5,663) - (5,663)- goodwill amortisation (4,762) (5,269) (10,031)- other administrative expenses (43,483) (33,829) (77,312)Total administrative expenses (58,843) (54,158) (113,001)Operating (loss)/profit 1,393 (9,228) (7,835) 5. Interest Year 11 months ended ended 31 31 December December 2005 2004 £'000 £'000 Bank loans and overdraft interest (5,318) (1,223)Other interest payable (577) (121)Interest payable and similar charges (5,895) (1,344) Interest receivable 110 91 (5,785) (1,253) 6. Tax on (loss)/profit on ordinary activities Year 11 months ended ended 31 31 December December 2005 2004 £'000 £'000 United Kingdom corporation tax - 2,503Overseas tax 661 1,665 661 4,168Adjustment in respect of prior years 40 -Current taxation 701 4,168 Deferred tax current period credit (2,222) (1,355)Deferred taxation charge in respect of prior years 249 -United Kingdom deferred tax (1,973) (1,355) (1,272) 2,813 7. Dividends 11 months Year ended ended 31 31 December December 2005 2004 (Restated) £'000 £'000 Ordinary shares of 1p eachFinal 2004 (0.58p per ordinary share) 1,059 -Interim (0.125p per ordinary share, 2004:0.1p) 415 167 1,474 167 8. (Loss)/Earnings per share Loss per share for the year ended 31 December 2005 is based on a loss aftertaxation and minority interests of £12.5 million divided by the weighted averagenumber of shares during the year. Underlying earnings per share excludes theeffect of goodwill amortisation, exceptional items and charges in respect ofemployee share schemes and is provided because the directors consider that itgives a better indication of the underlying performance. Adjusted EPS of 7.9pcompares to 5.3p for 2004. FRS 22 does not consider shares and securities to bedilutive where they serve to reduce a loss per share and therefore the dilutiveloss per share is equivalent to the basic loss per share in 2005. 2005 2005 weighted Pence per average share 2005 number of Earnings shares £'000 '000 Basic loss per share (12,533) 232,698 (5.4)Goodwill amortisation 10,031 - 4.3Exceptional items and employee share schemes (after tax) 20,939 - 9.0Underlying earnings per share 18,437 232,698 7.9 9. Debtors 2005 2004 £'000 £'000 Trade debtors 54,781 19,611Other debtors 11,003 -Prepayments 4,320 8,897Deferred tax 6,413 3,277 76,517 31,785 10. Creditors: amounts falling due within one year 2005 2004 (Restated) £'000 £'000 Trade creditors 23,853 10,183Bank loans 9,022 3,600Finance leases 1,345 307Deferred income 26,030 7,994Corporation tax 3,131 980Other taxes and social security 10,194 3,458Other creditors and accruals 28,919 8,067 102,494 34,589 11. Creditors: amounts falling due after more than one year 2005 2004 £'000 £'000 Bank loans 131,309 24,400Finance leases 1,421 284Other creditors 1,645 3,000Deferred income 57 - 134,432 27,684 This information is provided by RNS The company news service from the London Stock Exchange