Could Torex Retail be acquired?
Could Torex Retail be acquired?
Torex Retail lies in a quagmire of confusion, mis-reporting and poor representation. The announcement that two non-executive directors will leave the company has done nothing to help the myriad of problems continuing to unfold from this nightmare either.
By Henrietta Lacey
Indeed, with such gloomy prospects, it is highly probable that the only outcome for the company is to be acquired.
With a customer base of 50 blue-chip companies operating across more than 15 different countries, Torex Retail has some strong selling points. Yet, no IT supplier would touch this company - the debt and severely damaged reputation would suck any benefits away. This only leaves it to the private equity houses, hungry on the acquisition trail at present but would even they want a company so heavy laden with debt and potential loss of £5m a month from delayed customer payments. Just a few months ago, the story was so different. Torex Retail stood as one of the UK's leading retail software suppliers and was promising high returns for investors. With sales of £80m in new contracts and renewals, its future prospects looked bright.
However, this proved to be merely a sticking plaster to problems that were already gaining momentum. During the first half of the year, Torex Retail announced a pre-tax loss of £3.7m against the previous year's profit of £2.1m due to its string of acquisitions and attached restructuring costs.
Even it's auditors, BDO Stoy Hayward, had already written to the company following its interim results expressing concerns and re- emphasising its continual revision of its role as group auditors for the company. The second half of last year was promised to make up for any first half loss, however, it later emerged that many of the deals signed during this period would not be delivered until early 2007, rather than late 2006 as initially expected. This diluted the £80m second half revenue being touted. Added to this, was the company's rising debt through its ever-expanding acquisition list.Since floating on the AIM in 2004, the company spent £400m acquiring 12 companies, mainly across the UK and US markets. These included the acquisitions of Anker for £98.5m, Retail-J for £50m and Savista Corporation. At one stage, there were even talks of Torex Retail being acquired itself but negotiations broke down and the potential investor remained anonymous. So for now, there seems little hope for future prosperity. A £15m recovery package from the banks has given it a chance to at least find out what went wrong but its future prospects look uncertain and a debt of £203m will do nothing to help. Whilst the replacement board will help to keep Torex Retail afloat, only a bid from the private equity companies could now save the company from going into administration.