FOR IMMEDIATE RELEASE
22 February 2007
Retec Digital Plc
Interim results for the six month period to 31 December 2006
Retec Digital Plc ("Retec", the "Company" or the "Group"), the in-store digital
marketing company, is pleased to announce its interim results for the 6 months
to 31 December 2006. The half-year has been one of significant development for
the Group following the offer for subscription in September 2006 which raised �
1.58 million, the acquisition of Retec Interface Limited at the same time, and
the acquisition of Media 4 UK Limited in December 2006.
The Group has made significant progress in securing new contracts and
developing its business during the period.
Operational and Financial Highlights:
* Acquisition of Retec Interface Limited for �2.18m and readmission to
trading on AIM on 14 September 2006;
* Increase in turnover of 57% for Retec Interface Limited for the 6 months to
31 December 2006;
* Delivery of Entertainment Xtra product installed in 125 Sainsbury's stores
and 32 Tesco stores around the UK;
* 400 units in total have been installed in Argos and Woolworths stores
across the UK;
* Acquisition of Media 4 UK Limited for �0.2m on 1 December 2006,
strengthening the Group's end-to-end solution offer for its clients.
Financial Highlights:
�'000 Six months Six months
ended ended
31 December 31 December
2006 2005
(Unaudited) (Unaudited)
Turnover 1,332 10
Loss before tax (299) (174)
Net assets 3,766 2,017
Earnings per share (0.29)p (0.43)p
CHAIRMAN'S STATEMENT
I am pleased to be able to report to you on the first interim report of Retec
Digital Plc on a consolidated basis since the acquisition of Retec Interface
Limited in September 2006, and Media 4 UK Limited in December 2006. The Group
has made significant progress in securing new contracts and developing its
business during the period.
Financial review
The results for the period reflect the consolidated numbers of the Group
incorporating Retec Interface and Media 4 UK since their acquisitions in
September and December respectively. Prior to the acquisition of Retec
Interface, the Group operated as an investment holding company and therefore
the results for the prior year period do not include the operating results of
Retec Interface.
�'000 Six months ended Six months ended
31 December 2006 31 December 2005
(Unaudited) (Unaudited)
Turnover 1,332 10
Gross profit 268 10
Operating loss (317) (200)
Loss before tax (299) (174)
Net assets 3,766 2,017
Earnings per share
- Basic and fully diluted (0.29)p (0.43)p
Turnover for the Group was �1,332,000, which reflects 3� months trading of
Retec Interface since it was acquired in September 2006. Gross profit for the
Group was �268,000 and the loss before taxation was �299,000.
The basic loss per share was 0.29 pence.
As regards operating cash flow, the rate of "burn" is slowing in line with
expectations. Since raising �1,023,000 net of expenses through the offer for
subscription in September 2006, trading has produced a positive operating cash
flow of �77,000 and the Group has invested �288,000 in acquisitions, giving a
balance of cash at period end of �820,000.
Tangible assets mostly represent the equipment deployed to stores in
Sainsbury's and are matched by finance lease arrangements stretching over the
next 2-3 years.
For the 6 months to 31 December 2006, Retec Interface's turnover grew to �
1,822,000 (2005: �1,163,000) an increase of 57% when compared with the prior
year interim period as a result of a number of contract wins. Retec Interface's
loss before taxation was �351,000 (2005: loss of �393,000), a reduction of 11%
on the prior year. Since the acquisition of Retec Interface, the Group has
invested in sales and marketing activities given the increase in demand for its
products and services with staff numbers increasing by 39% to 25 employees.
The directors are not recommending the payment of an interim dividend at this
stage.
Operational review
Acquisition of Retec Interface
On 11 September 2006, Retec Interface Limited was acquired by the Company
through a reverse takeover, and gross proceeds of �1,584,250 were raised
through an offer for subscription. As part of this process the Company was
readmitted to trading on AIM, and subsequently changed its name from Elite
Strategies Plc to Retec Digital Plc on 19 September 2006.
The Group has enjoyed a busy trading period since this acquisition with a
number of large retailers extending their contracts or securing new contracts
with the Group, either directly or through IBM UK Limited, Retec's business
partner. Today, the Group's clients include blue-chip national and
international retailers such as Sainsbury's, Tesco, Argos and Woolworths.
The Board has been pleased by the uptake of its Entertainment Xtra product,
particularly in relation to the Sainsbury's contract. The units have been
installed in 125 of Sainsbury's largest stores and these installations have
taken place ahead of schedule and within budget. This roll-out is being
extended and the Company will install units across a further 75 Sainsbury's
stores, taking the total number of Sainsbury's stores using Retec's
Entertainment Xtra product to 200 by the end of 2007.
During the six months, 400 units in total have been installed across Argos and
Woolworths stores. It has also successfully deployed its Entertainment Xtra
product to 32 Tesco stores.
Of particular importance has been the growth in third party advertising on the
Entertainment Xtra units, notably with the Sainsbury's contract. This new
offering provides an important additional revenue stream to the business and
early indications are encouraging.
Acquisition of Media 4 UK Limited
On 1 December 2006, Media 4 UK Limited was acquired for �192,500 before costs
in cash. This business provides the installation and maintenance services to
those retailers adopting Retec's product suite Given the anticipation of future
earnings in Retec's business from customers such as Sainsbury's and Tesco, the
addition of this engineering expertise to the Group is invaluable as it enables
the Group to offer its customers a complete end-to-end digital solution. In
particular, where multiple applications and devices are provided to the same
customer, it is anticipated that the economies of scale will provide
significant cost reductions whilst at the same time improving margins for
Retec.
The integration of this business, which has already contributed to the
financial performance of the Group, has gone smoothly and ahead of schedule.
Employees
As part of the acquisition of Retec Interface Limited, I became Chairman on 19
October 2006, Charles McKay joined as Finance Director, stepping up from the
Retec Interface Board, and more recently Ian Deste has joined as a
non-executive director. Harvey Lipsith and Stuart Guyton resigned from the
board during the period as part of the reverse takeover.
The past six months have been exceptionally busy for the Group, which would not
have been possible without the dedication and hard work of our staff. I would
like to thank all our employees for their contribution to these record half
year results.
Current trading and prospects
Your Board continues to focus on end-to-end digital communications solutions
both through organic growth and via acquisition. Our focus remains on
developing this offer in the retail sector, both with the retailers themselves
and with the manufacturers. The Group continues to expand upon the contracts
already in place, and work with its business partner, IBM UK Limited, in
developing new prospects.
As a result of the progress made in the first six months of the financial year,
and the opportunities for the Group, the Board looks to the future with
confidence.
Sir Brian Ivory
Chairman
22 February 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR SIX MONTHS ENDED 31 DECEMBER 2006
Restated
Six months Six months Restated
ended ended Year ended
31 December 31 December 30 June
2006 2005 2006
Note (Unaudited) (Unaudited) (Audited)
�'000 �'000 �'000
Turnover - Continuing 2 10 44
- Acquisitions 1,330 - -
------------ --------- -----------
1,332 10 44
Cost of sales (1,064) - -
------------ --------- -----------
Gross Profit 268 10 44
Administrative expenses (520) (80) (173)
Share based payments (6) (130) (130)
Goodwill (59) - -
----------- --------- ----------
Operating loss - Continuing (190) (200) (259)
- Acquisitions (127) - -
Net interest receivable 18 26 57
----------- -------- -------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (299) (174) (202)
Taxation on ordinary activities - - -
----------- -------- ----------
LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION 2 (299) (174) (202)
====== ===== =====
Earnings per share - basic and (0.29)p (0.43)p (0.43)p
diluted
======= ======== ========
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2006
Restated
Six months Six months Restated
ended ended Year ended
31 December 31 December 30 June
2006 2005 2006
(Unaudited) (Unaudited) (Audited)
�'000 �'000 �'000
FIXED ASSETS
Investments - 1,659 1,659
Intangible assets 3,738 - -
Tangible assets 1,685 - -
------------ ----------- -----------
5,423 1,659 1,659
CURRENT ASSETS
Stock 184 - -
Debtors
- falling due within one year 1,236 226 294
- falling due after one year - - 320
Cash at bank and in hand 820 201 105
------------ ----------- -----------
2,240 427 719
CREDITORS: amounts falling due
within one
year (2,409) (69) (117)
------------ ----------- -----------
NET CURRENT (LIABILITIES)/ASSETS (169) 358 602
------------ ----------- -----------
TOTAL ASSETS LESS CURRENT LIABILITIES 5,254 2,017 2,261
CREDITORS: amounts falling due
after one year
(1,488) - -
------------- ------------ ------------
NET ASSETS 3,766 2,017 2,261
====== ====== ======
CAPITAL AND RESERVES
Called up share capital 1,801 1,438 1,499
Share premium account 3,191 1,632 1,843
Profit and loss account (1,226) (1,053) (1,081)
------------ ------------ ------------
EQUITY SHAREHOLDERS' FUNDS 3,766 2,017 2,261
====== ====== ======
CONSOLIDATED CASH FLOW STATEMENT
AT 31 DECEMBER 2006
Restated
Six months Six months Restated
ended ended Year ended
31 December 31 December 30 June
2006 2005 2006
Note (Unaudited) (Unaudited) (Audited)
�'000 �'000 �'000
NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES 3 77 (235) (138)
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE 18 26 55
TAXATION
UK Corporation tax paid - - -
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of tangible fixed assets (24) - -
Proceeds from disposal of 40 - -
tangible fixed assets
------------- ------------- -------------
Net cash inflow from capital 16 - -
expenditure
ACQUISITIONS
Purchase of subsidiary 4 (206) - -
undertakings
Net overdrafts acquired with (82) - -
subsidiaries
Purchase of investments - (217) (217)
------------- ------------- -------------
Net cash outflow from (288) (217) (217)
acquisitions
FINANCING
Issue of shares (net of issue 1,023 459 237
costs)
Capital element of hire purchase (131) - -
contracts
------------ ------------- -------------
Net cash inflow from financing 892 459 237
------------ ------------- ------------
INCREASE/(DECREASE) IN CASH 715 33 (63)
====== ====== =======
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR SIX MONTHS ENDED 31 DECEMBER 2006
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The interim financial information has been prepared on the basis of the
accounting policies set out in the Company's 2006 statutory accounts to 30 June
2006. The interim figures have not been audited. The interim financial
statement does not constitute statutory accounts within the meaning of Section
240 of the Companies Act 1985 (The "Act"). The interim statements were approved
by a duly appointed and authorised committee of the Board of Directors on 22
February 2007 and are unaudited. The auditors have carried out a review and
their report is set out on page 9.
Comparative financial information for the 12 months ended 30 June 2006 has been
extracted from the statutory accounts for the period which have been delivered
to the Registrar of Companies and upon which the auditors gave an unqualified
report, with no statement under Section 237(2) or (3) of the Act.
Basis of consolidation
The Group interim financial information consolidates the financial results of
Retec Digital Plc and its subsidiary undertakings for the period ended 31
December 2006 using the acquisition method of accounting.
Goodwill
Goodwill on acquisitions is capitalised and amortised over 20 years on a
straight line basis.
Share based payments
The adoption of FRS 20 constitutes a change in accounting policy and the impact
has been reflected as a prior year adjustment. The standard requires that where
shares or rights to shares are granted to third parties, including employees, a
charge should be recognised in the profit and loss account, or the share
premium account if related to a share issue, based on the fair value of the
shares at the date of grant of shares or right to shares is made.
The impact of the prior year adjustment is to increase the loss for the period
by �6,000 (December 2005 and June 2006: �130,000) and to change brought forward
reserves by �Nil (2005: �Nil).
2. LOSS ON ORDINARY ACTIVITIES AFTER TAXATION
The calculation of earnings per share is based on the loss on ordinary
activities after taxation and 104,033,058 (2005: 39,670,988) 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 2006 was 47,054,984.
Although there are options and warrants in existence, they are not dilutive and
therefore the fully diluted earnings per share is unaffected.
3. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW/ (
OUTFLOW) FROM OPERATING ACTIVITIES
Six months Six months Restated
ended ended Year ended
31 December 31 December 30 June
2006 2005 2006
(Unaudited) (Unaudited) (Audited)
�'000 �'000 �'000
Operating loss (317) (200) (129)
Depreciation 200 - -
Amortisation of intangible 59 - -
fixed assets
Profit from disposal of (11) - -
tangible fixed assets
Share based payments 6 130 130
Increase in stock (86) - -
Decrease/(increase) in 771 (197) (30)
debtors
Decrease in creditors (545) 32 22
---------------- ------------- -------------
Net cash inflow/ (outflow) 77 (235) (138)
from operating activities
========= ======= ======
4. ACQUISITIONS
In September 2006, the Company increased its holding in the Ordinary
share capital of Retec Interface Limited to 100%, for a total
consideration of �2,175,000, satisfied by the issue of 17,997,250
Ordinary shares issued at 3.75p and conversion of loan stock in issue,
totalling �1,500,000.
Goodwill on acquisition of �3,600,000 has been capitalised and is being
amortised over 20 years.
On 1 December 2006, the Company purchase 100% of the issued Ordinary
share capital of Media 4 UK Limited for a total consideration of �
206,000 satisfied by cash. Goodwill on acquisition of �177,000 has been
capitalised and is being amortised over 20 years.
Availability of interims
A copy of this interim statement is being sent to shareholders and copies are
available from the Company's Registered Office at The Cellars, Works Road,
Letchworth, Herts SG6 1FR.
INDEPENDENT REVIEW REPORT TO RETEC DIGITAL PLC
We have been instructed by the Company to review the financial information for
the six months ended 31 December 2006, which comprise the Consolidated Profit
and Loss Account, the Consolidated Balance Sheet, the Consolidated Cash Flow
statement and the 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 financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 `Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Respective responsibilities of directors
The interim report, including the financial statements contained therein, 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 of the London Stock Exchange which require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes,
and the reasons for them are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4 issued by the Auditing Practices Board. A review consists principally of
making enquiries of management and applying analytical procedures to the
financial information and underlying financial data and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied and adequately disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on the
financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2006.
haysmacintyre Fairfax House
Chartered Accountants 15 Fulwood Place
Registered Auditors London
22 February 2007 WC1V 6AY
END
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