Interim Results
Announcement of proposed C$38.5m acquisition of Systech
Retail Systems Corp. (“Openfield”)
Management Structure
Product Strategy
September 2005
Contents
Page
2
3
6
7
8
Highlights
Market Position
Management Structure
Integration Update
Financial Highlights
•
•
•
12
13
15
17
Profit & Loss
Balance Sheet
Cash Flow
Hospitality and Leisure
Product Strategy
LUCAS and UK Review
The USA:
•
•
Market Opportunity
Systech Retail Systems Corp
19
20
Strategy recap
Outlook
21
Appendix – Business Overview
Page 1
Highlights
Financial

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




81% increase in sales to £52.5m (2004 pro forma*: £28.9m)
Underlying organic sales growth of 9%
95% increase in adjusted operating profit to £8.0m (2004 pro forma*: £4.1m)
50% increase in adjusted basic EPS
Completed integration of major new businesses Alphameric and Retail Store Systems Inc
Integration of XN Checkout and Anker well underway
Sales and Profits ahead of expectations
Business




Proposed acquisition of Systech Retail Systems Corp for up to C$38.5m provides further
springboard into the US$1.5bn US retail management systems market
Management restructured to provide bandwidth for global business
Software and service revenues increased to 41% of total sales
Focused product strategy
*Pro forma information reflects results for the Group as if it had been trading in its current form for the full six month period ended 30 June 2004.
Page 2
Market Position – World Retail Systems Market
Hardware Vendors
Technology Vendors
Application Software
and Services Provider
No 1
Page 3
Market Position (contd)
EPoS Solutions Used By 191 Mid-Tier UK Retailers
4.0%
4.0%
Itim
K3 Landsteinar Island Pacific**
3.5%
4.5%
Retail Java
5.6%
Retail Business Solutions
3.5%
Partech
11.1%
Eurostop
3.5%
VME Retail Systems
13.6%
BT Expedite
10.3%
Nine Others
36.4%
Torex Retail
(Source: Nemea) **Includes Retail Technologies International
Page 4
Market Position (contd)
Top 5 European EPoS Software Providers
Real
Software, 12%
Wincor
Nixdorf, 7%
IBM, 10%
Torex Retail, 26%
(Source: Clarendon Reports)
Page 5
Management Structure

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Chris Moore, Executive Chairman
Ed Dayan appointed to the main board as Chief Technology Officer
Mark Sprigg, Chief Commercial Officer
Martin Hogarty, Chief Operating Officer UK
Steve Tilley, President USA
Jeroen Boon, CEO Central Europe
Chris D’hondt, CEO Western Europe

Philip Cox joins as Group Chief Treasury Officer from Royal Bank of Scotland

Rob Loosemore continues in a strategic executive position
Page 6
Integration Update
Status
Savings
Alphameric
100%
£6 million
Anker (UK) Phase I
100%
£4.8 million
Commenced
€5 million
Anker Europe
Page 7
Financial Highlights – Profit and Loss
Six months
ended 30 June
2005
(unaudited)
£’000
Pro forma six
months ended
30 June 2004
(unaudited)
£’000
Turnover
Cost of Sales
52,466
(16,156)
28,940
(8,713)
81.3
Gross Profit
36,310
20,227
79.5
(28,351)
(16,154)
Operating Profit*
7,959
4,073
Return on sales
15.2%
14.1%
Profit on ordinary
activities before
tax
2,086
1,962
6.3
Adjusted basic
earnings
per share *
2.4p
1.6p
50.0
Overheads
* Before exceptional items and amortisation of goodwill
Increase
%
95.4
Underlying organic
growth of 9% in
sales
Tight control of
overheads drives
improvement in
operating margin
50% improvement
in adjusted basic
EPS.
Page 8
Financial Highlights - Analysis of First-Half Revenues
Other
2.1%
Software
23.3%
Hardware
27.9%
Other
2.3%
Software
21.0%
Hardware
27.9%
Services
17.8%
Maintenance
28.9%
Services
16.2%
Maintenance
32.6%
2005
2004
Page 9
Financial Highlights – Balance Sheet
£’000
As at 30 June 2005 (unaudited)
Fixed assets
Intangible assets
Tangible assets
105,202
3,425
108,627
Current assets
Stocks
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Net assets
11,913
38,536
3,321
Additional Goodwill
arises from acquisitions
of Flexiline, RSS,
Hoffmann and CTN
Capex of £262k
Average trade debtor
days 35
(49,061)
4,709
113,336
(33,860)
79,476
Continuing focus on cash
Net debt £40m
Gearing 50%
Interest cover 4.6x
Page 10
Financial Highlights – Cashflow
17 months
ended 30/6/05
11 months
ended 31 Dec 2004
6 months
ended 30 June 2005
Net cash inflow from operations
Returns on investments and servicing of Finance
Taxation
Capital expenditure
Acquisitions
Dividends
13,899
(4,303)
(1,633)
(739)
(95,383)
(1,225)
11,475
(1,088)
(1,281)
(477)
(76,753)
(167)
2,424
(3,215)
(352)
(262)
(18,630)
(1,058)
Net cash flow before financing
Issue of ordinary shares
Movement in loans
(89,384)
49,710
40,969
(68,291)
49,663
27,733
(21,093)
47
13,236
Increase/(Decrease) in cash in the period
1,295
9,105
(7,810)
Net cash inflow from operations as a percentage of
actual operating profit
109%
128%
64%
Page 11
Review of Operations – Hospitality and Leisure

£72.2m acquisition of XN Checkout completed

Market leader in UK hospitality sector

Blue chip customer base: Over 4,000 systems installed

Integration process underway – sales benefits already evident

New contract wins since acquisition:

–
Café Nero: £3 million
–
National Union of Students: £5 million over 3 years
–
Punch: next phase of rollout to 500 outlets (£5m over 3 years)
–
Bella Italia: 64 restaurants
–
Herald Inns: commitment for entire estate by end of 2005 (41 outlets)
–
Ladhar Leisure: roll out to 70 late night venues (£1m)
Strategy: To expand reach into hospitality, gaming and retail
Real synergies in hospitality/leisure technology base
Page 12
Product Strategy
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Customer requirements driven

Value add through innovation
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Wide best of breed product portfolio
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Technology choice – IBM & Microsoft
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2005 – commitment to customers + migration

2006 – cross selling (LUCAS, LORD, MTS net, EDICT)

2007 – LUCAS JAVA, LUCAS.NET, iBOB

Global solutions for a global market

New .net product launched for leisure market-LUCAS dimension
Page 13
Product Strategy (contd)
Warehousing
WMS
Merchandising &
Head Office Financials
Systems
Data mining
Java
Windows
.NET
LORD
Suite
Business
Intelligence
Torex
Retail
Galaxy
Enterprise
Store
Specialist
Markets
Assortment Smartdecision
Planning
SmartVM
Visual
Merchandising
EPOS
Performance
Management
Petroleum retailing
Specialist
Markets
Hospitality & Leisure
Page 14
LUCAS & UK Review

Strong organic sales performance, particularly UK and Germany

New wins for LUCAS:
UK
–
–
–
–
–
Co-op Home Stores
Bargain Crazy
Reiss
Mitsukoshi
Slaters Menswear
Europe
– Deichmann
– Espirit

LUCAS now installed in 11,200 lanes across Europe and USA (>500 lanes in UK)

Cross selling opportunities growing fast
–
–
–
–
Co-op Home Stores – Retail Star
Bargain Crazy – Nova, WMS
Slaters – merchandising planning
Espirit – Hoffmann MTS net labour scheduling
Page 15
LUCAS & UK Review (contd)
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Merchandise planning
–
–
–
–
–
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Strong UK, European and US performance
Further $800,000 order from Ann Taylor
Littlewoods/Primark
Oldrids
Modelo Continente
Sales outlook
–
–
–
–
–
–
–
Increased drive for retailer flexibility = new systems
Focus – no need to chase every deal
Integration driving real sales benefits
Pipeline building
Enquiries up 74%
Partner referrals strong
Major partner bids in T1 retailers

Major bid shortlist of £25 million margin due 2005/06 (£40 million sales revenue)

Brand portfolio gaining real traction in customer base and new opportunities
Page 16
USA: Market Opportunity

Size
–
–
–
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Opportunity
–
–
–
–
–
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License Software and Services $4bn - $5bn, Hardware and Infra $20bn+/32% To Purchase POS next 12 months, 21% in 18 Months (53%)
20%+ To purchase Supporting Solutions next 12 months, 20%+ 18 Months (40%+)
Aging POS Solutions – Software and Hardware
Install base – RSS, OFS, IBM – New Targets
SOLUTIONS = Best of Breed (LUCAS, COMPASS, ISIS, Etc.)
Enterprise and other Hardware (Networking, Handheld, Scanning, etc)
Installation and related services
Competition
–
–
CRS, Triversity, Datavantage, NSB, 360 Commerce, JDA, Tomax
Consolidation of solution providers in process
Page 17
USA: Acquisition of Systech Retail Systems Corp for C$38.5m
Consideration up to a maximum of C38.5m dependant on post completion results
Expected completion date 1 November 2005
Rationale behind acquisition:Improved penetration of US $1.2bn US Retail IT Services market:
Entry into Grocery Segment
Cross selling opportunities : LUCAS, COMPASS
Economies of scale
Earnings enhancing in first year
About Openfield Systems
Existing user base of over 3,000 ISIS licences. Customers: Safeway, Food Lion, BJ’s
Wholesale Club, Sedano’s and Magruders
Revenue C$ 20.2 million, circa 55 staff
Geographic penetration
Integration:
Sales Channels: – Software Licenses Via a Second Tier Business Partner
Access to significant opportunity in Tier 3 and Tier 4 – ISIS and LUCAS
Page 18
Strategy Recap

Integration of acquisitions to accelerate growth

Focused product strategy to exploit organic growth

Cross fertilisation and cross selling

Continued building of critical mass and geographical reach

Target: No 1 Global Retail Systems Provider
Page 19
Outlook

Established Number one position in Europe
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Increased presence in US market place

Benefit from economies of scale to evolve

Established management team to provide bandwidth for growth plans

Tight management controls

Focus on profitability

Management confident of continued delivery of expectations and
shareholder value
Page 20
Appendix – Business Overview

Leading supplier of in-store management solutions to major European
Retailers

Core product set EPoS (electronic point of sale) and performance
management solutions

Operating in three principal markets
–
–
–
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High Street Retail – Tier 1,2 and 3
Petroleum Retailing and Convenience Store
Hospitality and Leisure
Strong profit margins and cash flow – proven management team
Page 21