Torex Retail

Torex Retail, which supplies IT solutions to retailers ranging from Punch Taverns to British behemoth Tesco, has finished with its acquisitive gold rush for scale, having snared a swathe of blue chip clients and gained global reach.

Figures for the half to June reflected the pain of its aggressive recent acquisition strategy, with restructuring, goodwill and interest charges causing a swing from profits of £2.1m to a £3.7m loss.

However, those same acquisitions helped to drive sales 151% higher to £132m and operating profits with goodwill and exceptional items added back powered ahead by 130% to £18.2m. Long-term, the prognosis looks good, with Torex Retail having acquisitively moved into ‘all of the major markets’ around the world – there was strong first half growth across Europe and the US – and its products now spanning high street and out-of-town retailers, as well as the hospitality and petroleum sectors. Furthermore, its 6,000 plus customer relationships include global giants like McDonalds and Shell, as well as the likes of Argos and Selfridges.

Significantly, the company says that its acquisitive growth phase is now complete and it will now focus 100% on driving organic growth and superior returns from its massive customer base and impressive global reach.

The shares gave up 6.5% at 57.5p – below the 59.5p level at which Growth Company investor first recommended them – as the market took fright at the losses and the bank borrowings racked up by acquisitions. However, we still think there’s plenty of upside here on the strength of blue chip clients, gross margins of 60% plus and with organic growth now the focus. If you did not sell at stop-loss levels, then hold, as the shares look compelling fare over the long haul.