Torex retail warns of contract twist

Software group Torex Retail suspended its shares today just a week after issuing an update boasting of “significant” new business wins.

The Oxfordshire-based group warned investors that deferrals in certain contracts from 2006 to 2007 would see its annual results fall “significantly below market expectations”.

On January 18, the group announced “significant new business” wins in the final quarter of 2006. It detailed contract wins worth more than £100m (€151.8m) over the second half of the year, including “major” contracts with Wyevale Garden Centres, Argos owner Home Retail Group and Swarovski.

The company provides clients, including Tesco and Woolworths, with software for checkouts, tills and support systems.

It said the deferral of certain contracts from 2006 to 2007 would impact its revenues, leading it to request the temporary suspension of its shares “pending further clarification” as it finalised its yearly accounts.

The company did not specify which contracts had been delayed. However, it said last week that some new and incremental business in the hospitality sector was now, based on revised customer timescales, expected in early 2007.

Torex said today that the contract delays had left borrowings some £23m (€34.9m) higher than previously expected. It had predicted a year end net debt of £180m (€237.3m), but this in now likely to rise to more than £200m (€303.6m), resulting in increased interest charges.

In a review published in November Torex Retail said it was in “robust health” with “each operating division having a detailed delivery plan for both profit and cash through to the 2006 year end”.

Seymour Pierce analyst Derek Brown said: “Clearly, our optimism that Torex Retail would do enough to meet expectations for the year has been misplaced.”

A spokeswoman for Torex said the suspension was exercised out of a “duty of care” to shareholders while it prepared its full report. The decision to suspend its shares came after boardroom discussions last night.

Torex Retail serves more than 50 blue-chip customers across 15 countries and has a market capitalisation of around £175m (265.7m).