25 February 2008
RETEC DIGITAL PLC
("Retec" or "the Company")
Interim results for the six month period to 31 December 2007
Retec Digital Plc ("Retec" or the "Company"), the Guided Selling specialist, is
pleased to announce its interim results for the 6 months to 31 December 2007.
Retec has made significant progress in developing its business during the
period, with strong revenue growth based on demonstrated success with both new
and existing customers and products.
Highlights:
* Turnover up 166% to �3.5m (2007: �1.3m)
* Trading losses after tax more than halved to �322,000 (2007: �699,000).
* Loss per share reduced by 61% to 0.26p (2007: 0.67p).
* The number of Entertainment Xtra stores has increased to 187 Sainsbury's
stores and 49 Tesco stores around the UK, and a new trial is under way with
ASDA.
* Delivered over 2,500 Retec units to stores during the period, including for
Alliance Boots Advantage Card and Argos.
* New trials are under way for Retec's Electrical product selector in Tesco.
Chairman, Sir Brian Ivory stated:
"The Board continues to look to develop the business substantially both through
organic growth and via acquisition. Our focus remains on developing our
offering in the retail sector, both with the retailers themselves and with
manufacturers. Retec intends to continue expanding upon the contracts already
in place, and to work closely with its business partners, in developing new
prospects.
As a result of the progress made in the first six months of the financial year,
and the clear opportunities which now exist for Retec, the Board looks to the
future with confidence."
For further information please contact:
Retec Digital PLC 01455 222260
John Cole, Chief Executive
Charles McKay, Finance Director
Hogarth Partnership Ltd 020 7357 9477
Fiona Noblet / Ian Payne
Charles Stanley Securities (Nominated
Adviser)
Mark Taylor / Henry Fitzgerald O'Connor 020 7149 6000
CHAIRMAN'S STATEMENT
I am pleased to be able to report on a record half year result for Retec. Retec
has made further significant progress in developing its business during the
period and is approaching profitability before the effects of amortisation are
taken into account.
Financial review
The results for the period are shown in summary below.
Restated
�'000 Six months ended Six months ended
31 December 2007 31 December 2006
(Unaudited) (Unaudited) Change
Turnover 3,544 1,332 +166%
Gross profit 814 139 +485%
Operating loss (292) (461) -37%
Loss after tax (322) (699) -54%
Earnings per share
- Basic and fully (0.26)p (0.67)p -61%
diluted
Turnover was �3,544,000 which compares with three and a half months trading in
the prior year following the acquisition of Retec Interface Limited in
September 2006. Gross profit was �814,000 (2006: �139,000) and the loss after
taxation was �322,000 (2006: �699,000). This growth is mainly due to the
continued roll-out of Entertainment Xtra and, via IBM UK Limited, work from
Alliance Boots and Argos.
The basic loss per share per share was 0.26 pence (2006: 0.67 pence).
Cash flow has been maintained whilst this rapid growth has taken place with
cash generated from operating activities of �597,000 (2006: �122,000). At 31
December 2007, Retec had cash balances of �1.04 million (2006: �0.82 million).
Our balance sheet remains strong and we have been able to invest in new product
development, and in sales and marketing efforts targeted towards our key
accounts, the fruits of which we should begin to see in 2008.
The Directors are not recommending the payment of an interim dividend at this
stage.
Operational review
We continue to make strides in enlarging our unique offering to the large
retail groups within the UK. Customers won during the period include ASDA and
Porto Media, and we built significantly on our relationships with existing blue
chip customers such as Tesco, Sainsbury's, and in conjunction with IBM UK
Limited, Alliance Boots and Argos. In total, we delivered over 2,500 Retec
units to stores during the period.
Our Entertainment Xtra offering has been enhanced, with an upgrade of our
software platform that allows us greater flexibility in managing our estates
and we will shortly be deploying a new selector (Entertainment II) giving the
consumer more choice at the point of sale. Through our work with Porto Media we
are developing a methodology to download entertainment in-store.
The development of two new products, our Wine Selector and Electrical Goods
Selector, made further excellent progress during the period. These two
products, both of which incorporate Retec's guided selling proposition, are
either in trial or coming to trial in a number of key customers' stores,
including Tesco and ASDA. We believe this is just the beginning of the range of
Product Selectors that we will soon be able to offer retailers to engage
customers and increase sales.
We received a further substantial order from Argos during the period, to
increase the roll out of self-service terminals across 400 of its stores. These
kiosks allow customers to select and pay for products, saving time and negating
the need to queue, and thereby enhancing the in-store experience for Argos
customers.
The work for Alliance Boots was completed in the period taking the total number
of units to 1,340 which are deployed across 500 stores. We expect further
changes to be made to this unit as more features are brought into the
application.
We are now in a position to capitalise on the hard work of the last two years,
during which time we have gained significant traction with a number of the
largest retailers in the UK. These customers' demand for our products and
services is increasing as they see the value of them, and we are also seeing a
notable increase in demand from our partners with the addition of NCR
Corporation since the end of June 2007.
I would like to thank all our employees for their contribution to these record
half year results.
Current trading and prospects
The Board continues to look to develop the business substantially both through
organic growth and via acquisition. Our focus remains on developing our
offering in the retail sector, both with the retailers themselves and with
manufacturers. Retec intends to continue expanding upon the contracts already
in place, and to work closely with its business partners, in developing new
prospects.
As a result of the progress made in the first six months of the financial year,
and the clear opportunities which now exist for Retec, the Board looks to the
future with confidence.
Sir Brian Ivory
Chairman
25 February 2008
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Restated
Six months Six months Year ended
ended ended
31 December 31 December 30 June 2007
2007 2006
(Unaudited) (Unaudited) (Audited)
�'000 �'000 �'000
Turnover 3,544 1,332 4,069
Cost of sales (2,617) (1,064) (2,820)
Amortisation of intangibles (113) (129) (258)
------------ ------------ ------------
Gross profit 814 139 991
Administrative expenses (1,040) (520) (1,673)
Amortisation of intangibles (47) (74) (148)
Share based payments (19) (6) (23)
------------ ----------- ------------
Operating loss (292) (461) (853)
Net interest receivable - 18 10
------------ ----------- ------------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (292) (443) (843)
Taxation on ordinary activities (30) (256) (153)
------------ ----------- ------------
LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION (322) (699) (996)
====== ====== ======
Basic loss per share (0.26p) (0.67p) (0.87p)
====== ======= ======
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2007
Restated
As at As at As at
31 December 31 December 30 June 2007
2007 2006
Note (Unaudited) (Unaudited) (Audited)
�'000 �'000 �'000
ASSETS
Non- current assets
Intangible assets 2,789 2,957 2,816
Tangible assets 2,019 1,685 1,963
Deferred tax 508 443 524
------------ ------------ ------------
5,316 5,085 5,303
------------ ------------ ------------
Current assets
Inventories 190 184 130
Trade and other receivables 777 1,236 959
Current tax assets 10 - 50
Cash at bank and in hand 1,037 820 1,044
------------ ------------ ------------
2,014 2,240 2,183
------------ ------------ ------------
Total assets 7,330 7,325 7,486
====== ====== ======
EQUITY
Capital and reserves attributable
to the Company's equity
shareholders
Called up share capital 5 1,801 1,801 1,801
Share premium account 3,230 3,230 3,230
Retained earnings (2,210) (1,603) (1,907)
------------ ------------ ------------
Total equity 2,821 3,428 3,124
------------ ------------ ------------
LIABILITIES
Non-current liabilities
Borrowings 1,060 1,111 1,174
Current liabilities
Financial liabilities 150 150 150
Trade and other payables 3,299 2,636 3,038
------------ ------------ ------------
3,449 2,786 3,188
------------ ------------ ------------
Total liabilities 4,509 3,897 4,362
------------ ------------ ------------
Total equity and liabilities 7,330 7,325 7,486
====== ====== ======
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Share Capital Share Premium Retained Earnings Total
�'000 �'000 �'000 �'000
Balance at 31 December
2006 as
previously stated 1,801 3,191 (1,226) 3,766
Prior year adjustment - 39 (377) (338)
- adoption of IFRS
-------------- ----------------- ----------------- ---------------
At 31 December 2006 as 1,801 3,230 (1,603) 3,428
restated
Loss for the six - - (327) (327)
months to 30 June 2007
Share based payments - - 23 23
-------------- ----------------- ----------------- -----------------
Balance at 30 June 1,801 3,230 (1,907) 3,124
2007
Loss for the period - - (322) (322)
Share based payments - - 19 19
-------------- ----------------- ----------------- -----------------
Balance at 31 December 1,801 3,230 (2,210) 2,821
2007
====== ====== ====== ======
CONSOLIDATED CASH FLOW STATEMENT
AT 31 DECEMBER 2007
Restated
Six months Six months Year ended
ended ended
31 December 31 December 30 June 2007
2007 2006
(Unaudited) (Unaudited) (Audited)
�'000 �'000 �'000
Cash generated from operations
Loss for the period (322) (699) (996)
Adjustments for:
Tax charge 30 256 153
Net interest receivable - (18) (10)
Depreciation and amortisation 680 403 954
Share option charge 19 6 23
Increase in stock (60) (86) (32)
Decrease in trade and other 245 771 964
receivables
Decrease in trade and other payables (23) (511) (357)
------------- ------------- -------------
Cash inflow from operations 569 122 699
Tax refunded 28 - 9
------------- ------------- -------------
Net cash inflow from operating 597 122 708
activities
------------- ------------- -------------
Cash flows from investing activities
Acquisition of subsidiary - (206) (206)
Net overdrafts acquired with - (82) (82)
subsidiaries
Purchases of property, plant and (15) (24) (48)
equipment
Purchases of intangible assets (133) - (62)
Interest received - 18 15
Interest paid - - (5)
------------ ------------- -------------
Net cash used in investing (148) (294) (388)
activities
------------ ------------- ------------
Cash flows from financing activities
Issue of shares (net of issue costs) - 1,018 1,018
Finance lease repayments (456) (131) (399)
------------ ------------- -------------
Net cash used in financing (456) 887 619
activities
------------ ------------- -------------
Net (decrease)/increase in cash and (7) 715 939
cash equivalents
Cash and cash equivalents at 1,044 105 105
beginning of period
------------- ------------- -------------
Cash and cash equivalents at end of 1,037 820 1,044
period
====== ====== =======
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
1. ACCOUNTING POLICIES
Basis of preparation
The interim consolidated financial statements are for the six months ended 31
December 2007.
These interim financial statements have been prepared in accordance with IAS
34, Interim Financial Reporting and are covered by IFRS 1, First-time Adoption
of IFRS, as these are the first interim financial statements prepared by the
Group under IFRS. These interim financial statements have been prepared in
accordance with those IFRS standards and IFRIC interpretations issued and
effective as at the time of preparing these statements. The IFRS standards and
IFRIC interpretations that will be applicable at 30 June 2008, including those
that will be available on an optional basis, are not known with certainty at
the time of preparing these interim financial statements. The policies set out
below have been consistently applied to all the years presented.
The Retec Digital Plc interim financial statements were prepared in accordance
with UK Generally Accepted Accounting Principles (UK GAAP) until 31 December
2006. UK GAAP differs in some areas from IFRS. In preparing the financial
statements, the directors have amended certain accounting methods applied in
the UK GAAP financial statements to comply with IFRS.
Reconciliations and descriptions of the effect of the transition from UK GAAP
to IFRS on the Group's equity and its net income and cash flows are provided in
note 4.
The Group's transition date is 1 July 2005 and it prepared its opening IFRS
balance sheet at that date. The Group's IFRS adoption date is 1 July 2006. The
interim financial statements have been prepared under the historical cost
convention.
The information set out in this interim for the six months to 31 December 2007
does not comprise statutory accounts within the meaning of Section 240 of The
Companies Act 1985. The statutory accounts for the year ended 30 June 2007
incorporating an unqualified auditors' report have been filed with the
Registrar of Companies.
Inventories
Inventories are stated at the lower of cost incurred in bringing each product
to its present location and condition and net realisable value.
Net realisable value is based on estimated selling price less any further costs
expected to be incurred to completion and disposal.
Consolidated accounts
The consolidated accounts of the Group incorporate the assets and liabilities
of the Company and its subsidiary undertakings and the results for the period
when they were part of the Group. Results of the subsidiary companies acquired
during the period are included from the date of acquisition.
2. LOSS ON ORDINARY ACTIVITIES AFTER TAXATION
The calculation of earnings per share is based on the loss on ordinary
activities after taxation and 125,709,141 (2006: 104,033,058) ordinary shares
being the weighted average number of shares in issue during the half year. The
weighted average number of shares in issue during the twelve months ended 30
June 2007 was 114,824,974.
Although there are options and warrants in existence, they are not dilutive and
therefore the fully diluted earnings per share is unaffected.
3. DIVIDENDS
The Directors are unable to declare an interim dividend for the period due to
the deficit on the parent Company's profit and loss reserve.
4. IFRS ADJUSTMENTS
As stated in note 1, the Directors have identified the following adjustments to
the financial statements that are required to comply with IFRS.
Adjustments to the income statements
Six months to
31 December
2006
�'000
Loss for the period as previously (299)
stated in the interim report
Amortisation of separately identifiable
intangibles
recognised on the acquisition of (203)
subsidiaries
Deferred tax on intangibles recognised (256)
Goodwill amortisation under UK GAAP 59
previously recognised
---------------
Restated loss for the year (699)
=======
Adjustments to Retained Earnings
At
31 December
2006
�'000
As previously stated in the interim (1,226)
report
Amortisation of intangibles (203)
Deferred tax (256)
Goodwill amortised 59
Fair value adjustment 23
--------------------
Restated retained earnings (1,603)
========
There are no differences in the results and retained earnings of the group on
its transition date of 1 July 2005.
5. CALLED UP SHARE CAPITAL
Six months ended Six months ended Year ended
31 December 2007 31 December 2006 30 June 2007
(Unaudited) (Unaudited) (Audited)
� � �
Authorised:
Number: Class:
400,000,000 Ordinary 0.5p 2,000,000 2,000,000 2,000,000
100,000 Deferred 1p 1,000 1,000 1,000
90,000,000,000 B Deferred 4,500,000 4,500,000 4,500,000
0.005p
------------------------ --------------------------- -----------------------
6,501,000 6,501,000 6,501,000
=========== =========== ==========
Allotted, issued and fully
paid:
Number: Class:
125,709,141 Ordinary 0.5p 628,546 628,546 628,546
36,520 Deferred 1p 365 365 365
23,440,062,357 B Deferred 1,172,003 1,172,003 1,172,003
0.005p
----------------------- --------------------- ------------------------
1,800,914 1,800,914 1,800,914
========== ========== ==========
6. RELATED PARTY TRANSACTIONS
During the period the Group purchased services amounting to �163,757 from
Benchmark Limited, of which the son of J Cole is a director and shareholder. At
the period end, an amount of �2,071 was owing to the company. This amount has
been included in trade creditors.
During the period the Company was charged �9,500 by The Waybury Partnership, of
which B Ellis is a partner, for the services of B Ellis. At the period end, an
amount of �1,981 was owing to the partnership. This amount has been included in
trade creditors.
The Company was charged �4,500 by RH & Associates, of which R Hayim is a
partner, for the services of R Hayim. Included within trade creditors is �Nil
owed to RH & Associates.
During the period the Company was charged �9,000 by Enitar Limited, a company
of which Sir Brian Ivory is a director, for the services of Sir Brian Ivory. At
the period end, an amount of �5,288 was owing to Enitar Limited. This amount
has been included in trade creditors.
The Company was charged �4,500 by CSS Capital Managers, of which RH &
Associates is a member, for the services of R Hayim. Included within trade
creditors is �Nil owed to CSS Capital Managers.
7. AVAILABILITY OF INTERIM REPORT
Copies of the interim report for the six months ended 31 December 2007 will be
posted to shareholders on 25 February 2008 and will be available free of charge
from the Company's registered office at Alma Park, Woodway Lane, Claybrook
Parva, Lutterworth, Leicester, LE17 5BH and from the Company's website at
www.retecdigital.com.
We have been engaged by the Company to review the condensed set of financial
statements in the interim report for the six months ended 31 December 2007
which comprises the consolidated income statement, consolidated interim balance
sheet, consolidated interim statement of changes in shareholders' equity,
consolidated interim cash flow statement, and related notes. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' Responsibilities
The interim report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the interim report in
accordance with the AIM rules. As disclosed in note 1, the annual financial
statements of Retec Digital Plc are prepared in accordance with IFRSs as
adopted by the European Union. The condensed set of financial statements
included in this interim report has been prepared in accordance with
International Accounting Standard 34, ``Interim Financial Reporting,'' as
adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the interim report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ``Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim report
for the six months ended 31 December 2007 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union.
haysmacintyre
Chartered Accountants Fairfax House
Registered Auditors 15 Fulwood Place
London
WC1V 6AY
25 February 2008
END
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