1
Acquisition of Retail-J Limited
July 2006
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Retail-J Completes Platform for Growth
Retail-J Limited (“Retail-J”) completes a world-class POS portfolio creating substantial opportunity for both direct and channel sales
– General retail – Lucas and Retail-J– Food retail – ISIS– Hospitality – NewPOS
Opportunity to consolidate a leading position in UK POS sector and benefit from buoyant market environment
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Retail-J At A Glance
Retail-J is a privately-owned UK software house established in 2000 – product formally launched in 2002
Founder & CEO was ex-CTO at both Real Time Control PLC and NSB Retail PLC
Company is based in Hertford with 20 employees
(1) Bridgewell Securities research note, 15 February 2006(2) Unaudited accounts for year ended 31st December 2005
CorporateCorporateIdentityIdentity
OfferingOffering Developed a market-leading integrated POS and Back Office software
solution
Customers Customers & Target & Target MarketsMarkets
Product suite currently installed on over 7,000 tills in 2,300 stores with a further 14,000 tills committed for roll out
Indirect sales model: distribution through channel partners Significant momentum in UK market with 11 new POS wins in 2005 (1)
FinancialsFinancials 2005 revenue of £4.6m and EBIT £3.2m(2)
Business is rapidly growing and highly profitable
Acquisition Acquisition TermsTerms
Retail-J to be 100% acquired for total of £50m £40m in cash, funded by Bond issue £10m in Torex Retail shares
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Retail-J’s Business Model Is Highly Profitable And Can Be Rapidly Scaled
Revenue
Revenue Growth
Gross Profit
Gross Profit Margin
Overheads
Profit before Tax
PBT Margin
Profit after Tax
EBITDA
Staff costs
EBITDA Margin
EBIT
Depreciation
Exceptional costs
Financial expenses
FY2004 FY2005
3,057 4,570
49%
3,057 4,570
100% 100%
147 167
749 1,639
25% 36%
672 1,134
1,582 3,209
52% 70%
Figures are in £000
1,328 1,194
1,551 3,151
31 58
822 1,594
20 82
NA
Year Ended 31/12 Revenue generated from software sales (plus associated development
and 4th line support services) through distribution partners
Revenue growth of 49% in 2005 due to increased product awareness and good management of sales partners
Strong level of operating leverage as no direct costs associated with sales, fixed cost base only
– Enjoys a low cost base due to highly flexible architecture and modern product design
– Revenue mix means that annual overheads are covered by software maintenance revenue alone
Highly cash-generative business
Historic Profit & Loss Statement Comments
Note: As of 31st December 2005, the company had £2.4m in cash
Audited Unaudited
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The Acquisition Of Retail-J Is Likely To Generate Strong Revenue And Profitability Upside For Torex
Acquisition of a highly profitable and cash generative company
Opportunity to bring the outsourced portions of Retail-J deals in-house (i.e. hardware, services, other software)
With Retail-J product, Torex Retail intends to increase revenue by accelerating penetration of UK market
Retail-J product will accelerate product rationalisation in the UK and give rise to savings in product development and support costs
Retail-J’s solution has been designed as a product to be sold by third parties and Torex Retail intends to accelerate worldwide distribution
Earnings enhancing in first 12-18 months