I hope you have been following the Torex story as closely as I have – it really is quite fascinating.
Torex has been thrown a lifeline – but the question that needs to be answered is, would it be worth investing in the second time around? That’s if it manages to sort out the mess first.
If it does work out the company could be a fantastic winner, the brave may be able to get involved at a rock bottom price – on the other hand it could all go horribly wrong – but hey that’s a gamble you take with penny shares.
The bank is the one that has thrown Torex the rubber ring, after deciding to lend the ailing software company £15m. The group really is in dire straits – who knows what might be left after all the questions are answered.
Analysts believe the funding may only give Torex three to six month’s space. Keith Taylor, the new acting chief executive said “the amount was exactly what he asked for. It will give us the time needed to bang together a proposal to present to the banks”.
Torex stated at the end of January that net debt levels had ballooned to about £203m. Investors want to know how the end of year net debt figure had continued to rise when the company had been predicting that the figure would fall.
They also want to know why the company suggested that its full-year figures would be materially different to market expectations.
Making sense of Torex’s financial position is impossible at the moment. The Serious Fraud Office is looking at possible false accounting of about £6.5m of cash in the group’s interim figures.
Torex’s aim from the outset was to reduce its reliance on any particular type of technology. There is a long running battle between two American software platforms Sun’s Java technology and Microsoft’s .net platform – so Torex cleverly acquired Anker Software in 2005, which is based on .net technology, and in 2006 Retail-J which is based on Java.
This strategy allowed it to move into merchandising, leisure, hotel and gambling, convenience stores, petrol stations and fast food chains.
It’s list of clients are equally impressive including Selfridges, B&Q, French Connection, BHS, Tesco, Monsoon, Harrods, Nokia, McDonald’s, Swarovski and Vodafone.
Following on from this, you can see that a key strength of the business is the high visibility of revenues.
Store roll-outs and refits are arranged a long time in advance, so IT orders follow suit – and the retailers tend to stick with suppliers they know.
So the long and the short of Torex is that it was a great business – despite all the fishy accounting. With new management, and the problems all rectified – Torex could make for a great turnaround story.
Until next time,
Melissa Carroll
for The Penny Sleuth
