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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| K3 Business Technology Group Plc | LSE:KBT | London | Ordinary Share | GB00B00P6061 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 103.50 | 102.00 | 105.00 | 103.50 | 103.50 | 103.50 | 0.00 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Fabricated Rubber Pds, Nec | 47.48M | -3.98M | -0.0902 | -11.47 | 45.63M |
From Apr 2019 to Apr 2024
TIDMKBT
RNS Number : 8963R
K3 Business Technology Group PLC
27 September 2017
27 September 2017
AIM: KBT
K3 BUSINESS TECHNOLOGY GROUP PLC
("K3" or "the Group" or "the Company")
Provider of mission-critical software (owned and third party), hosted solutions and managed services to the retail, manufacturing and distribution sectors
Second interim results - 6 months to 30 June 2017
&
12 months to 30 June 2017
KEY POINTS
Summary
-- Strong progress in reshaping K3 for a return to profitability and sustainable growth - focus is on SME marketplace, increasing sales of own IP, and driving recurring income - review of K3's resources is progressing well, with results expected before end of 2017 - core SME business performing well
- reorganisation programme continues - to create more unified, streamlined operations and reduced cost base
- annualised savings of c. GBP3.7m achieved to date
-- Accounting reference date and year end changed to 30 November to reflect the Group's strong seasonal trading patterns
Financial
-- As previously reported, financial performance was significantly impacted by certain high value contract tenders in Enterprise activities not closing as expected
-- Revenues of GBP84.6m for the 12 months to 30 June 2017 (2016: GBP89.2m) - recurring revenues remained high at GBP40.8m (2016: GBP41.6m) - c.48.2% of total
- K3 own IP and related revenues rose by 27% to GBP27.1m (2016: GBP21.3m) - 32.0% of total (2016: 23.8%)
-- Gross margin decreased to 50.4% (2016: 54.4%) - affected by weakness in Enterprise activities
- margin on recurring revenues increased to 69.0% (2016: 67.4%)
-- Adjusted loss from operations(1) of GBP1.81m for the 12 months to 30 June 2017 (2016: adjusted profit from operations(1) of GBP9.50m) / Reported loss from operations of GBP9.75m (2016: profit of GBP5.23m)
-- Adjusted loss before tax(1) for the 12 months to 30 June 2017 of GBP2.63m (2016: adjusted profit before tax(1) of GBP8.80m) / Reported loss before tax of GBP10.56m (2016: profit before tax of GBP4.53m)
-- Adjusted loss per share(2) for the 12 months to 30 June 2017 of 7.4p (2016: adjusted earnings per share(2) of 23.5p). Basic loss per share of 24.5p (2016: basic earnings per share(*4) of 12.6p)
-- Pro-forma net debt(3) of GBP6.6m at 30 June 2017
- taking into account the equity placing and warrants exercised (yielding a total of GBP8.4m together), and debt-to-equity conversion (of GBP0.6m) completed on 5 July 2017
Operational
-- Good level of contract wins from SME-related activities across all supply chain verticals -- NextGen, the new, in-house developed multi-platform solution, seeing first successes
- pilot project with major European retailer, Hunkemoller, has resulted in roll-out of NextGen across its stores
- a number of other customers are engaged in the pre-sales process for the solution -- Global Accounts activities set to benefit from ongoing expansion of IKEA franchisee network -- New business pipeline has been refined and is encouraging at GBP70.3m -- Board views prospects positively
Stuart Darling, Chairman, said:
"As previously reported, the Group's financial performance for the 12 months to 30 June 2017 was adversely affected by the difficulties experienced in the Group's Enterprise activities. In particular, a number of high value contract tenders did not close as expected. However, we have also made strong progress in reshaping the business over the last twelve months to create a more unified and streamlined Group, refocused on our core SME marketplace, which generates the majority of K3's recurring revenues.
"We are now reviewing the Group's resources - having completed our fund raising in July, and have the full flexibility to consider all strategic options. We have a core of profitable, cash generative businesses, and we look forward to providing a further update on our plans before the end of the year.
"Our business reorganisation programme, which has been a major focus, has already achieved GBP3.7m in sustainable annualised cost savings, and we are continuing to look for further efficiencies, and believe we can achieve additional material savings.
"In the SME marketplace, we signed a good level of new contracts in the six months to June across all our supply chain verticals. We have also been successful in growing revenues from our own IP products, with sales rising by 27% to GBP27.1m over the 12 months.
"Increasing own IP revenues remains a key part of our growth strategy and it is therefore especially pleasing to report that our NextGen platform is gaining traction. It readily integrates agnostically with existing IT architecture and simplifies the implementation of our software.
"As we look forward, we are encouraged by the substantial work completed to position the Group for a return to profitability and growth. Net debt has been significantly reduced and we expect underlying cash generation to benefit from our ongoing initiatives. The Group's new business pipeline is healthy and, while our review of K3's resources is still ongoing, we believe that the Group is now in better shape for recovery and remain confident of K3's prospects."
Enquiries:
Hot Features
Premium
K3 Business Technology Adalsteinn Valdimarsson T: 020 3178 6378 (today)
Group plc (CEO)
www.k3btg.com Robert Price (CFO) Thereafter 0161 876
4498
finnCap Limited Julian Blunt, James Thompson T: 020 7220 0500
(Nominated Adviser and Emily Morris (Corporate
Broker) broking)
KTZ Communications Katie Tzouliadis, Irene T: 020 3178 6378
Bermont-Penn, Emma Pearson
Notes:
Note Calculated before amortisation of acquired intangibles
1 of GBP2.93m (2016: GBP2.73m), exceptional reorganisation
costs and write-downs of GBP5.36m (2016: GBP1.05m), acquisition
costs of GBP0.05m (2016: GBP0.49m) and exceptional income
of GBP0.41m (2016: nil).
Note Calculated before amortisation of acquired intangibles
2 (net of tax) of GBP2.23m (2016: GBP2.19m), exceptional
reorganisation costs (net of tax) of GBP4.29m (2016:
GBP0.84m), acquisition costs (net of tax) of GBP0.05m
(2016: GBP0.49m) and exceptional income (net of tax)
of GBP0.41m (2016: nil).
Note Pro-forma net debt (which is gross debt net of cash and
3 cash equivalents) at 30 June 2017 calculated after Placing
and Warrants exercised of GBP8.4m and Debt to Equity
conversion of GBP0.6m both on 5 July 2017.
JOINT REPORT OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Introduction
This is my first statement as Chairman since assuming the role in early July 2017, and we are pleased to report on the progress being made to reshape the Company and position it for sustainable growth and a return to profitability.
Background
As we have previously reported, K3's recent financial performance in Enterprise-related activities has been disappointing and, in mid-May, the new management team commenced a review of K3's resources, with the intention of refocusing the Group's growth strategy around the existing profitable, cash generative business units and our large SME customer base.
In early July, we completed an equity placing to support this process, and to enable us to operate with full flexibility as we make and implement strategic decisions to benefit the Company's future.
Resources Review and Refocused Operations
Our review of K3's resources is progressing well. Our objectives are to increase focus on the development and sale of the Group's own intellectual property, and develop multiple "niche" software solutions capable of deployment in an agnostic way across a wide range of Enterprise Resource Planning ("ERP") solutions. This will improve the quality of the Group's earnings and will help to drive contracted, recurring revenues. The industry's increasing shift towards the subscription/consumption-based model, and away from 'on-premise' solutions with large, upfront licence payments, will help to increase the visibility of the Group's revenues.
We expect our review process to be completed before the end of the year, and will provide a further update in due course.
Together with our initiatives to refocus the Group's activities, we commenced a programme to simplify and more closely integrate the Group's operations. This centralisation strategy will promote better cross-selling of products and improve operational efficiencies. Over the past 12 months, we have materially reduced our cost base, delivering cost savings of approximately GBP3.7m on an annualised basis. This programme is ongoing and we anticipate making further cost savings as we complete the streamlining of the Group's operations.
Focus on Cash Generation
We continue to focus on cash generation and are making good progress in improving working capital, primarily by reducing debtor days and accrued income.
Pro-forma net debt as at 30 June 2017 was GBP6.6m. This takes into account the equity placing and open offer of shares completed in early July 2017, which raised a net of GBP7.76m, as well as an exercise of warrants of GBP0.66m and debt-to-equity conversion of GBP0.64m. Excluding this, reported net debt at 30 June 2017 was GBP15.6m (30 June 2016: GBP8.9m; 31 December 2016: GBP12.51m).
Performance
As previously reported, financial results for both the six and 12 month periods were significantly impacted by a number of high value contract tenders not closing as expected. This deterioration in large contract wins in the Enterprise space was due to softening end-markets, particularly for large retailers, as well as lengthening decision-making process for large deals, driven by the shift towards cloud delivery and away from 'on-premise' solutions. As a result, there was a marked year-on-year reduction in software licence revenues, with gross margin also affected by excess resource capacity in services and implementation.
By contrast, the Group's SME-related activities performed well across all of our supply chain verticals, and we secured a continuing good level of contract wins in the six months to 30 June 2017. The SME-focused Retail business performed very strongly, with RSG, Merac and DdD all contributing to the growth.
In addition, we achieved very encouraging sales of our own IP, with new customers including Jack Wolfskin, the Royal Horticultural Society and F-Engel. Sales of Pebblestone in particular were strong. K3 Product and Product-related revenues represented approximately 32.0% of the Group's total in the 12 months to 30 June 2017 (2016: 23.8%) and 35.0% in the six months to 30 June 2017 (six months to 30 June 2016: 25.0%).
The development of NextGen, our 'next generation', multi-platform solution, has been an important step for us as we drive own IP sales. The platform will deploy a range of products, including our high value applications such as mobile Retail solutions. Importantly, it gives us the ability to easily integrate our solutions with a wide range of ERP systems. Our pilot project, for a mobile Retail solution with a large European fashion retailer, Hunkemoller, has progressed very well, and Hunkemoller is now committed to rolling out NextGen across its business over the coming months. A number of other potential customers are engaged in a pre-sales process for NextGen.
Our Global Accounts business, which includes our relationship with Inter IKEA Systems B.V. (the owner and franchisor of the IKEA concept, and the largest customer in the Group) and the Inter IKEA Concept franchisees, continued to perform well. We are supporting the ongoing expansion of the IKEA franchisee network and expect to see a substantial increase in their service delivery requirements.
The SYSPRO business also delivered good results and remains a strong contributor to the Group's cash flows. SYSPRO customer renewals continue to be high, at 98% for the 12 month period (2016: 98%). The Sage business gained traction in the higher end X3 product offering and won some notable deals. Business Solutions restructured its cost base to focus on the Microsoft Dynamics/Navision SME space and is now seeing an improvement in its profitability.
The performance of our hosting and managed services operation, Starcom, was affected by the softness in the Enterprise activities, as well as the loss of MyLocal in June 2016. Going forward, it will benefit from the Group's simplified organisational structure and tighter focus on driving cross-selling across its various products.
As we have previously reported, the move towards cloud-based consumption licensing will drive a change in the rate of reported revenue growth and have a beneficial long-term impact. Income from contracts will be recognised over longer periods, rather than upfront as with the traditional model of perpetual software licences. The lifetime value of customer relationships under this new model has the potential to be significantly higher than before. The pace of uptake of consumption-based ERP has increased this year, with K3 successfully completing first sales of Microsoft Dynamics and "ax I is Fashion" on this basis. As the rate of growth of consumption-based agreements increases, the Group will start to monitor and report on new KPI's to quantify their importance.
Dividend
The Board intends to maintain a progressive dividend policy and expects to propose a dividend for the 17 month period to 30 November 2017, subject to trading.
Board Changes
A number of Board changes took place in the twelve months to 30 June 2017. David Bolton, previously Chairman, and Lars-Olof Norell, previously Non-Executive Director, both retired from the Company.
In October 2016, Adalsteinn Valdimarsson assumed the role of Chief Executive Officer, having joined K3 as a Non-Executive Director in July 2016. Robert Price, who joined K3 as Chief Financial Officer in October 2016 (in a non-board capacity), was appointed to the Board as Finance Director in July 2017.
Outlook
We believe that the changes and initiatives from the new management team over the last year have put K3 on a sustainable track for improvement in the quality of its earnings and cash flow generation.
Our investment in the NextGen 'born-in-the-cloud' platform is an important step forward. It opens up further opportunities for the Group to sell its own IP as the platform readily integrates with a wide range of ERP systems. NextGen also makes us more flexible and fleet of foot in addressing customers' changing needs, and corresponds with customers' increasing interest in consumption-based products and services. This cloud-based approach promotes closer customer relationships and supports our objective of further increasing our large recurring income streams.
We have materially reduced the cost base of the business and created a more streamlined structure that supports cross-selling opportunities. We will be continuing with our cost efficiency programme and our strategic review should be substantially completed before the end of 2017, at which point we will provide a further update.
Looking ahead, we are encouraged by our new business pipeline. We have taken the opportunity to refine our reporting of new business prospects, and while this has meant removing certain prospects from the pipeline, it makes for an overall stronger picture of the potential order book. Currently, the pipeline stands at GBP70.3m.
We remain confident of K3's prospects.
Stuart Darling Adalsteinn Valdimarsson Chairman Chief Executive Officer
27 September 2017
FINANCIAL RESULTS FOR THE 12 MONTHS TO 30 JUNE 2017
Change of Accounting Reference Date and Financial Year End
Following the Board's decision to change the Company's accounting reference date and financial year end to 30 November, from 30 June, this report covers both the six month period to 30 June 2017 and the twelve month period to the same date.
The change in the accounting reference date has been made, as previously highlighted, in order to place shareholders in a better position to assess the Company's trading prospects when full year and interim results are published, given the Company's strong seasonal trading patterns, with December and June both historically key selling months.
We have also taken the decision to change the way we report on the Group's activities to better reflect the operational structure of the business. We have therefore moved away from an analysis by industry vertical to reporting the financial performance of the Group as a whole. We will continue to highlight certain key performance indicators, including revenue generated by K3's own intellectual property.
Overview
Revenue (GBPm) Adjusted Profit
(GBPm)
2017 2016 2017 2016
Sales Divisions 84.61 89.18 (0.56) 10.33
Head office - - (1.25) (0.83)
-------- ------- -------- --------
Total 84.61 89.18 (1.81) 9.50
-------- ------- -------- --------
Revenue (GBPm) Gross profit Gross margin
(GBPm)
2017 2016 2017 2016 2017 2016
Software licences 10.65 16.23 6.67 11.01 62.6% 67.8%
Services 26.08 25.74 5.55 8.12 21.3% 31.5%
Recurring * 40.76 41.62 28.11 28.04 69.0% 67.4%
Hardware and
other 7.12 5.59 2.29 1.37 32.2% 24.5%
-------- ------- ------- ------ ------ --------------
54.
Total 84.61 89.18 42.62 48.54 50.4% 4%
-------- ------- ------- ------ ------ --------------
*Recurring revenues comprise software maintenance renewals,
support contracts, and hosting & managed services.
2017 2016
Adjusted profit from operations(*1)
(GBPm) (1.81) 9.50
Recurring revenue as % of total
revenues 48.2% 46.7%
Customer adds (like-for-like) 339 198
K3 Intellectual Property
We highlight the revenues generated by K3's own IP below. They are included in the figures above.
The percentage of K3 product-related revenues over the 12 months to 30 June 2017 has increased significantly to 32.0% (2016: 23.8%). This largely reflected the benefit of the acquisitions of DdD and Merac, in April and July 2016 respectively.
Revenue (GBPm)
2017 2016
K3 Product Licence(1) 8.41 10.76
K3 Product Related(2) 18.67 10.51
------------ -----------
Total K3 Product 27.08 21.27
------------ -----------
Gross profit (GBPm) 16.26 14.08
Gross margin (%) 60.1% 66.2%
K3 product Revenue % of Total Revenue 32.0% 23.8%
(1) K3 Product Licence includes initial and annual software licences.
(2) K3 Product Related represents the additional identifiable revenues which flow directly from our K3 Product sales.
Group revenues for the 12 months to 30 June 2017 totalled GBP84.6m (2016: GBP89.2m). The year-on-year decrease was mainly accounted for by reduced software licence sales in the Enterprise space. Software licence gross margins were also lower at 62.7% (2016: 67.8%), driven by lower "ax I is" sales in the Enterprise space.
We currently recognise revenues from all multi-year deals on a traditional licence basis, where the majority of revenues are recognised upfront. Going forward revenue will be recognised over the licence period as dictated by contracts and as deployment becomes mostly consumption. For illustrative purposes, the table below shows previously reported revenues and what those revenues would have been had the revenue been recognised on a consumption basis over the licence period rather than upfront.
12 months to June
2017 2016
Revenue - reported GBPm 84.6 89.2
Revenue - restated excluding multi-year
deals GBPm 85.5 85.3
Recurring Revenue % - reported 48.2% 46.7%
Recurring Revenue % - restated excluding
multi-year deals 49.1% 47.0%
Reported recurring revenues remain high as a proportion of the Group's total, comprising almost half of all income. Gross margins on recurring revenues increased to 69.0% (67.4%), reflecting the growth in income generated by K3 Product sales, including DdD and Merac.
Services revenues increased, helped by greater activity within Global Accounts. However, the gross margin percentage contracted significantly. This was due to margin pressures in the six months to December 2016, when we experienced an increase in the number of contractors needed to deliver the high level of contract wins from June 2016, followed by excess contractor capacity in the six months to June 2017 as a result of reduced deal flow, especially in the Enterprise space.
Revenues, gross profit and gross margin generated by Hardware and other activity all showed positive gains. This largely reflected buoyant sales of DdD's own point-of-sale hardware, sold alongside cloud-based software.
Adjusted loss from operations(*1) for the 12 months to 30 June 2017 was GBP1.8m (2016: adjusted profit from operations(*1) of GBP9.5m), with the adjusted loss from operations(*2) in the six months to 30 June 2017 being GBP2.2m (2016: adjusted profit from operations(*2) of GBP4.4m).
We incurred GBP5.4m (2016: GBP1.0m) of exceptional costs over the year. These related to our re-organisation programme and included a GBP2.0m non-cash write-off of capitalised development costs.
The amortisation charge for acquired intangibles was GBP2.93m (2016: GBP2.73m). Finance expenses were GBP0.82m (2016: GBP0.70m).
Adjusted loss before tax(*3) for the 12 months to 30 June 2017 was GBP2.63m (2016: adjusted profit before tax(*3) GBP8.80m) and reported loss before tax was GBP10.56m (2016: profit before tax GBP4.53m).
Adjusted loss per share(*4) was 7.4p (2016: adjusted earnings per share(*4) 23.5p). Basic loss per share was 24.5p (2016: adjusted earnings per share(*4) 12.6p). There was a net tax credit for the year of GBP1.77m (2016: net tax expense GBP0.43m), after the benefit of a GBP1.46m deferred tax credit (2016: GBP0.42m).
Cash flow and banking
Net debt at 30 June 2017 was GBP15.6m (30 June 2016: GBP8.9m; 31 December 2016: GBP12.51m) and, taking into account the equity placing, warrants exercised and debt-to-equity conversion completed on 5 July 2017, pro forma net debt on that date is calculated at GBP6.6m.
Cashflow from operating activities was GBP0.9m for the 12 months (2016: GBP4.0m), following exceptional restructuring costs of GBP3.4m (2016: GBP1.0m). There was a material inflow of GBP2.2m (2016: GBP5.8m outflow) into working capital, a reflection of a tighter approach to working capital management that we intend to build on in the future.
Depreciation was similar to the prior 12 months at GBP1.0m (2016: GBP1.0m) and amortisation increased to GBP8.2m (2016: GBP5.1m), following a GBP2.0m exceptional write-off of previously capitalised development costs.
Software development costs in the 12 months to 30 June 2017 increased marginally to GBP4.9m (2016: GBP4.6m) and capital expenditure reduced to GBP0.8m (2016: GBP0.9m). Over the 12 month period, we made one acquisition, purchasing Merac in July 2016, and received a refund of deferred consideration of GBP0.4m for DdD, which had been paid into escrow in April 2016, in the 6 months to 30 June 2017.
CENTRAL COSTS
Head office costs include directors' costs, human resources, accounting and legal personnel, and costs associated with the Plc. Costs are stated net of recovery of elements recharged to the operating units. Costs for the year*(5) increased to GBP1.25m (2016: GBP0.83m), which primarily reflected the centralisation of functions.
(*1) Group adjusted loss from operations for the 12 months to 30 June
2017 is calculated before amortisation of acquired intangibles
of GBP2.93m (2016: GBP2.73m), exceptional reorganisation costs
of GBP5.36m (2016: GBP1.05m), acquisition costs of GBP0.05m (2016:
GBP0.49m) and exceptional income of GBP0.41m (2016: nil).
(*2) Group adjusted profit from operations for the 6 months to 30 June
2017 is calculated before amortisation of acquired intangibles
of GBP1.44m (2016: GBP1.14m), exceptional reorganisation costs
of GBP2.62m (2016: GBP0.20m), acquisition costs of GBP0.01m (2016:
GBP0.49m) and exceptional income of GBP0.41m (2016: nil).
(*3) Group adjusted loss before tax is calculated before amortisation
of acquired intangibles of GBP2.93m (2016: GBP2.73m), exceptional
reorganisation costs of GBP5.36m (2016: GBP1.05m), acquisition
costs of GBP0.05m (2016: GBP0.49m) and exceptional income of GBP0.41m
(2016: nil).
(*4) Group adjusted loss per share is calculated before amortisation
of acquired intangibles (net of tax) of GBP2.23m (2016: GBP2.19m),
exceptional reorganisation costs (net of tax) of GBP4.29m (2016:
GBP0.84m), acquisition costs (net of tax) of GBP0.05m (2016: GBP0.49m)
and exceptional income (net of tax) of GBP0.41m (2016: nil).
(*5) Head office costs are calculated before exceptional reorganisation
costs of GBP1.19m (2016: GBP0.11m), and acquisition costs of GBP0.05m
(2016: GBP0.20m).
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED INCOME STATEMENT For the
six and twelve months ended 30 June 2017
Unaudited Unaudited Unaudited Audited
Six months Six months Year to Year to
to 30 to 30 June 30 June to 30 June
Notes June 2016 2017 2016
2017
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 41,634 46,884 84,608 89,175
------------------------ ------- ------------ ------------ ----------- ------------
Adjusted (loss)/profit
from operations (2,257) 4,394 (1,811) 9,501
Amortisation of
acquired
intangibles (1,440) (1,139) (2,926) (2,734)
Acquisition costs (9) (492) (51) (492)
Exceptional
reorganisation
costs 2 (2,620) (199) (5,363) (1,046)
Exceptional income 2 406 - 406 -
------------------------ ------- ------------ ------------ ----------- ------------
(Loss)/profit from
operations (5,920) 2,564 (9,745) 5,229
Finance expense (400) (314) (817) (701)
(Loss)/profit before
taxation (6,320) 2,250 (10,562) 4,528
Tax expense 3 954 (19) 1,767 (425)
(Loss)/profit for the
period (5,366) 2,231 (8,795) 4,103
------------------------ ------- ------------ ------------ ----------- ------------
All of the (loss)/profit for the period is attributable to equity holders
of the parent.
(Loss)/earnings per share 4
Basic (14.9)p 6.7p (24.5)p 12.6p
Diluted (14.8)p 6.6p (24.2)p 12.3p
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME For the six and twelve months ended 30 June 2017
Unaudited Unaudited Unaudited Audited
Six months Six months Year to Year to
to 30 June to 30 June 30 June 30 June
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/profit for the period (5,366) 2,231 (8,795) 4,103
------------------------------------ ------------ ------------ ----------- ---------
Other comprehensive income
Exchange differences on translation
of foreign operations 543 2,370 1,018 3,073
Other comprehensive income,
net of tax 543 2,370 1,018 3,073
Total comprehensive
(expense)/income
for the period (4,823) 4,601 (7,777) 7,176
------------------------------------ ------------ ------------ ----------- ---------
All of the total comprehensive (expense)/income for the period is attributable
to equity holders of the parent. All of the other comprehensive (expense)/income
will be reclassified subsequently to profit or loss when specific conditions
are met. None of the items within other comprehensive (expense)/income
had a tax impact.
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017 Notes Unaudited Audited
As at 30 As at 30
June 2017 June 2016
GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 2,328 2,389
Goodwill 51,018 48,793
Other intangible assets 24,302 26,369
Deferred tax assets 1,388 423
Available-for-sale investments 98 98
Total non-current assets 79,134 78,072
--------------------------------------------- ------ ----------- -----------
Current assets
Trade and other receivables 34,433 40,923
Cash and cash equivalents 2,821 2,772
Total current assets 37,254 43,695
--------------------------------------------- ------ ----------- -----------
Total assets 116,388 121,767
--------------------------------------------- ------ ----------- -----------
LIABILITIES
Non-current liabilities
Long-term borrowings 5 17,761 8,272
Deferred tax liabilities 3,267 3,753
Total non-current liabilities 21, 028 12,025
--------------------------------------------- ------ ----------- -----------
Current liabilities
Trade and other payables 6 29,615 32,824
Current tax liabilities - 132
Short-term borrowings 5 697 3,376
--------------------------------------------- ------ ----------- -----------
Total current liabilities 30,312 36,332
--------------------------------------------- ------ ----------- -----------
Total liabilities 51,340 48,357
--------------------------------------------- ------ ----------- -----------
EQUITY
Share capital 9,000 9,000
Share premium account 21,586 21,586
Other reserves 10,448 10,448
Translation reserve 2,094 1,076
Retained earnings 21,920 31,300
--------------------------------------------- ------ ----------- -----------
Total equity attributable to equity holders
of the parent 65,048 73,410
--------------------------------------------- ------ ----------- -----------
Total equity and liabilities 116,388 121,767
--------------------------------------------- ------ ----------- -----------
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOWS
For the six and twelve months ended 30 June 2017
Unaudited Unaudited Unaudited Audited
Six months Six months Year to Year to
to 30 June to 30 June 30 June 30 June
Notes 2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
(Loss)/profit for the
period (5,366) 2,231 (8,795) 4,103
Adjustments for:
Share based payments charge 24 24 47 28
Depreciation of property,
plant and equipment 482 478 1,001 971
Amortisation of intangible
assets and development
expenditure 5,240 2,314 8,188 5,077
Loss on sale of property,
plant and equipment - 4 - 4
Finance income - 14 (2) (4)
Finance expense 400 300 819 705
Tax expense (954) 19 (1,767) 425
Decrease (increase) in
trade and other
receivables 3,378 (5,446) 6,085 (5,977)
(Decrease) increase in
trade and other payables (2,688) 591 (3,851) 170
---------------------------- ------- ------------ ------------ ---------- ---------
Cash generated from
operations 7 517 529 1,726 5,502
Finance expense paid (243) (397) (944) (789)
Income taxes
received/(paid) 6 (476) 102 (688)
---------------------------- ------- ------------ ------------ ---------- ---------
Net cash generated
from/(utilised
in) operating activities 280 (344) 884 4,025
---------------------------- ------- ------------ ------------ ---------- ---------
Cash flows from investing
activities
Acquisition of
subsidiaries,
net of cash acquired 7 232 (7,376) (975) (7,401)
Development expenditure
capitalised (2,178) (2,473) (4,859) (4,642)
Purchase of property, plant
and equipment (495) (358) (781) (931)
Proceeds from sale of
property,
plant and equipment - 15 - 15
Finance income received - 6 2 6
---------------------------- ------- ------------ ------------ ---------- ---------
Net cash absorbed by
investing
activities (2,441) (10,186) (6,613) (12,953)
---------------------------- ------- ------------ ------------ ---------- ---------
Cash flows from financing
activities
Net proceeds from issue
of share capital - 13,097 - 13,175
Proceeds from long-term
borrowings 1,182 - 17,315 -
Payment of long-term
borrowings - (1,464) (10,885) (2,928)
Payment of finance lease
liabilities (26) (8) (51) (12)
Dividends paid (630) (477) (630) (477)
---------------------------- ------- ------------ ------------ ---------- ---------
Net cash generated from
financing activities 526 11,148 5,749 9,758
---------------------------- ------- ------------ ------------ ---------- ---------
Net change in cash and
cash equivalents (1,635) 618 20 830
Cash and cash equivalents
at start of period 4,462 2,118 2,772 1,895
Exchange gains on cash
and cash equivalents (6) 36 29 47
---------------------------- ------- ------------ ------------ ---------- ---------
Cash and cash equivalents
at end of period 2,821 2,772 2,821 2,772
---------------------------- ------- ------------ ------------ ---------- ---------
K3 BUSINESS TECHNOLOGY GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30
June 2017
Share Share Other Translation Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2016 7,965 9,524 10,448 (1,294) 29,522 56,165
------------------- --------- --------- --------- ------------ ---------- --------
Changes in equity
for six months
ended
30 June 2016
Profit for the
period - - - - 2,231 2,231
Other
comprehensive
income for the
period - - - 2,370 - 2,370
------------------- --------- --------- --------- ------------ ---------- --------
Total
comprehensive
income - - - 2,370 2,231 4,601
Share-based
payment
credit - - - - 24 24
Options exercised 12 45 - - - 57
Issue of new
shares 1,023 12,017 - - - 13,040
Movement in own
shares
held - - - - - -
Dividends to
equity
holders - - - - (477) (477)
------------------- --------- --------- --------- ------------ ---------- --------
At 30 June 2016 9,000 21,586 10,448 1,076 31,300 73,410
------------------- --------- --------- --------- ------------ ---------- --------
Changes in equity
for six months
ended
31 December 2016
Loss for the
period - - - - (3,429) (3,429)
Other
comprehensive
income for the
period - - - 475 - 475
------------------- --------- --------- --------- ------------ ---------- --------
Total
comprehensive
income - - - 475 (3,429) (2,954)
Share-based
payment
credit - - - - 23 23
Movement in own
shares
held - - - - (8) (8)
At 31 December
2016 9,000 21,586 10,448 1,551 27,886 70,471
------------------- --------- --------- --------- ------------ ---------- --------
Changes in equity
for six months
ended
30 June 2017
Loss for the
period - - - - (5,366) (5,366)
Other
comprehensive
income for the
period - - - 543 - 543
------------------- --------- --------- --------- ------------ ---------- --------
Total
comprehensive
income - - - 543 (5,366) (4,823)
Share-based
payment
credit - - - - 24 24
Movement in own
shares
held - - - - 6 6
Dividends to
equity
holders - - - - (630) (630)
------------------- --------- --------- --------- ------------ ---------- --------
At 30 June 2017 9,000 21,586 10,448 2,094 21,920 65,048
------------------- --------- --------- --------- ------------ ---------- --------
K3 BUSINESS TECHNOLOGY GROUP PLC
NOTES TO THE UNAUDITED INTERIM STATEMENT
1. Basis of preparation
As announced in May 2017, the Company has changed of its accounting reference
date and financial year-end from 30 June to 30 November.
The consolidated interim financial information has been prepared in accordance
with the accounting policies that are expected to be adopted in the Group's
full financial statements for the 17 month period ending 30 November 2017
which are not expected to be significantly different to those set out in
Note 1 of the Group's audited financial statements for the year ended 30
June 2016. These are based on the recognition and measurement principles
of IFRS in issue as adopted by the European Union (EU) and are effective
at 30 November 2017 or are expected to be adopted and effective at 30 November
2017. The financial information has not been prepared (and is not required
to be prepared) in accordance with IAS 34. The accounting policies have
been applied consistently throughout the Group for the purposes of preparation
of this financial information.
The financial information in this statement relating to the six months
ended 30 June 2017, the 12 months ended 30 June 2017 and the six months
ended 30 June 2016 has neither been audited nor reviewed pursuant to guidance
issued by the Auditing Practices Board. The financial information for the
year ended 30 June 2016 does not constitute the full statutory accounts
for that period. The Annual Report and Financial Statements for the year
ended 30 June 2016 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the Annual Report and Financial Statement
for the year ended 30 June 2016 was unqualified, did not draw attention
to any matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
As mentioned previously, the Group will be adopting IFRS 15, 'Revenue from
contracts with customers' which replaces IAS 18 'Revenue' and IAS 11 'Construction
contracts' and related interpretations, with effect from 1 December 2017.
The standard establishes principles for reporting useful information to
users of financial statements about the nature, amount, timing and uncertainty
of revenue and cash flows arising from an entity's contracts with customers.
Revenue is recognised when a customer obtains control of a good or service
and thus has the ability to direct the use and obtain the benefits from
the good or service. The Group is currently undertaking a review of the
full impact of IFRS 15 and consider that there may be a significant impact
on the revenue recognition policies currently adopted by the Group. Detailed
quantitative analysis of the impact of adopting this new standard will
be provided in the financial statements for the period ending 30 November
2017.
Going concern
The consolidated interim financial information has been prepared on a going
concern basis.
The Directors have prepared cash flow forecasts for the Group, including
sensitivity analysis on key assumptions. These forecasts show that the
Group expects to meet its liabilities from cash resources, taking into
account all risks and uncertainties. At the period end the Group had cash
and cash equivalents of GBP2.8m.
In July 2017, the Company raised a net GBP7.76m from a placing and open
offer of 5,790,322 shares. In addition, Mr PJ Claesson, a Director of the
Company, exercised 700,000 warrants raising GBP0.66m and converted a loan
of GBP0.64m into 457,142 shares.
As a result, the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the foreseeable
future. For this reason, the Directors consider that the adoption of the
going concern basis is appropriate.
2. Profit from operations
During the 12 month period to 30 June 2017, reorganisation costs have been
incurred relating to the reorganisation programme to create more unified,
streamlined operations and reduced cost base. This was at a cost of GBP5.4m
(2016: GBP1.0m) including a GBP2m non cash write off of capitalised development
costs.
During the six-month period to 30 June 2017, contingent consideration not
required to be paid of GBP0.4m was released and is included as exceptional
income (six months 30 June 2016 and year ended 30 June 2016: GBPnil).
3. Tax expense
Unaudited Unaudited Unaudited Audited
Six months Six months Year to Year to
to 30 June to 30 June 30 June 30 June
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Current tax expense/(income)
UK corporation tax and income
tax of overseas operations
on profits for the period 426 299 (181) 866
Adjustment in respect of
prior periods (125) - (125) (25)
------------------------------- ------------ ------------ ---------- ---------
Total current tax expense 301 299 (306) 841
------------------------------- ------------ ------------ ---------- ---------
Deferred tax (income)/charge
Origination and reversal
of temporary differences (1,126) (280) (1,332) (94)
Effect of change in rate
of deferred tax (129) - (129) (322)
------------------------------- ------------ ------------ ---------- ---------
Total deferred tax income (1,255) (280) (1,461) (416)
------------------------------- ------------ ------------ ---------- ---------
Total tax expense (954) 19 (1,767) 425
------------------------------- ------------ ------------ ---------- ---------
4. (Loss)/earnings per share
The calculations of (loss)/earnings per share are based on the (loss)/profit
for the financial period and the following numbers of shares:
Unaudited Unaudited Unaudited Audited
Six months Six months Year to Year to
to 30 June to 30 June 30 June 30 June
2017 2016 2017 2016
Number Number Number Number
of of of of
Shares Shares Shares Shares
Weighted average number of
shares:
For basic earnings per share 35,905,881 33,211,866 35,905,881 32,439,624
Effects of employee share
options and warrants 361,371 500,188 424,148 798,049
------------------------------ ------------ ------------ ----------- -----------
For diluted earnings per
share 36,267,252 33,712,054 36,330,029 33,237,673
------------------------------ ------------ ------------ ----------- -----------
Adjusted earnings per share calculations have been computed because the
directors consider that they are useful to shareholders and investors.
These are based on the following profits and the above number of shares:
Unaudited six months Unaudited six months
to 30 June 2017 to 30 June 2016
Earnings Per share Per share Earnings Per share Per
amount amount amount share
Basic Diluted Basic amount
Diluted
GBP'000 p P GBP'000 p P
(Loss)/earnings
per
share (eps) (5,366) (14.9) (14.8) 2,231 6.7 6.6
Amortisation of
intangibles
(net of tax) 1,169 3.3 3.2 915 2.8 2.7
Acquisition costs
(net
of tax) 9 - - 492 1.5 1.5
Exceptional
reorganisation
costs (net of
tax) 2,122 5.9 5.9 161 0.5 0.5
Exceptional income
(net
of tax) (406) (1.1) (1.1) - - -
------------------- --------- ---------- ---------- --------- ---------- ---------
Adjusted eps (2,472) (6.8) (6.8) 3,799 11.5 11.3
------------------- --------- ---------- ---------- --------- ---------- ---------
Unaudited year Unaudited year
to 30 June 2017 to 30 June 2016
Earnings Per share Per share Earnings Per share Per
amount amount amount share
Basic Diluted Basic amount
Diluted
GBP'000 p P GBP'000 p P
Earnings per
shares
(eps) (8,795) (24.5) (24.2) 4,103 12.6 12.3
Amortisation of
intangibles
(net of tax) 2,230 6.2 6.1 2,190 6.8 6.6
Acquisition costs
(net
of tax) 51 0.1 0.1 492 1.5 1.5
Exceptional
reorganisation
costs (net of
tax) 4,290 11.9 11.8 837 2.6 2.5
Exceptional income
(net
of tax) (406) (1.1) (1.1) - - -
------------------- --------- ---------- ---------- --------- ---------- ---------
Adjusted eps (2,630) (7.4) (7.3) 7,622 23.5 22.9
------------------- --------- ---------- ---------- --------- ---------- ---------
5. Loans and borrowings Unaudited Audited
As at 30 As at 30
June 2017 June 2016
GBP'000 GBP'000
Non-current
Bank loans (secured) 17,687 8,234
Finance lease creditors 74 38
17,761 8,272
---------------------------- ----------- -----------
Current
Bank loans (secured) - 2,718
Finance lease creditors 57 18
Loans from related parties 640 640
---------------------------- ----------- -----------
697 3,376
---------------------------- ----------- -----------
Total borrowings 18,458 11,648
---------------------------- ----------- -----------
6. Trade and other payables Unaudited Audited
As at 30 As at 30
June 2017 June 2016
GBP'000 GBP'000
Trade payables 6,749 8,192
Other payables 430 713
Accruals 9,060 9,548
------------------------------------------------ ----------- -----------
Total financial liabilities, excluding
loans and borrowings, classified as financial
liabilities measured at amortised cost 16,239 18,453
Contingent consideration - 912
Deferred consideration - 25
Other tax and social security taxes 3,628 4,266
Deferred revenue 9,748 9,168
------------------------------------------------ ----------- -----------
29,615 32,824
------------------------------------------------ ----------- -----------
7. Notes to the cash flow statement
Cash generated from operations is stated after exceptional reorganisation
costs and acquisition costs. The adjusted cash generated from operations
has been computed because the directors consider it more useful to shareholders
and investors in assessing the underlying operating cash flow of the Group.
The adjusted cash generated from operations is calculated as follows:
Unaudited Unaudited Unaudited Audited
Six months Six months Year Year
ended ended ended ended
30 June 30 June 30 June 30 June
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Cash generated from operating
activities 517 529 1,726 5,502
Add:
Exceptional reorganisation
costs 620 199 3,363 1,046
Acquisition costs 9 300 51 300
Adjusted cash generated from
operations 1,146 1,028 5,140 6,848
------------ ------------ ---------- ---------
Acquisition of subsidiaries and other business units, net of cash acquired
comprises:
Unaudited Unaudited Unaudited Audited
Six months Six months Year Year
ended ended ended ended
30 June 30 June 30 June 30 June
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
Initial consideration - (6,802) (1,506) (6,802)
Cash balances acquired - 345 324 345
Contingent consideration
(paid into)/ repaid from
escrow 232 (863) 232 (863)
Contingent and deferred
consideration
paid - (56) (25) (81)
------------ ------------ ---------- ---------
232 (7,376) (975) (7,401)
------------ ------------ ---------- ---------
8. Events after the reporting date
In July 2017, the Company raised a net GBP7.76m from a placing and open
offer of 5,790,322 shares. In addition, Mr PJ Claesson, a Director of the
Company, exercised 700,000 warrants raising GBP0.66m and converted a loan
of GBP0.64m into 457,142 shares. The Company now has issued 42,946,665
Ordinary shares.
9. The above information is being sent to shareholders and is available
from the Company's website, www.k3btg.com, and from its registered office:
Baltimore House, 50 Kansas Avenue, Manchester M50 2GL.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UNABRBNAKUAR
(END) Dow Jones Newswires
September 27, 2017 02:00 ET (06:00 GMT)
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