Turnaround strategy bearing fruit for software specialist

Adalsteinn Valdimarsson

Manchester-based software specialist K3 Business Technology Group is in a strong trading position following a transformation strategy that was launched by a new management team two years ago.

Announcing full year results to November 30, 2018, the business revealed it has returned to underlying profitability, and broke even on a reported pre-tax basis.

Net debt at the year end also decreased by 86% to £600,000 from £4.3m.

Today’s figures show revenues of £83.3m for the 12 months, compared with £118.2m, which covered a 17 month period the previous year.

Pre-tax profits of £0.02m were in contrast to a pre-tax loss of £16.1m last time, while adjusted pre-tax profits of £4m compared with a £3m loss in the previous accounts.

Net cash generated from operating activities stood at £7.8m, against £5.1m last time.

Shareholders will receive an improved dividend of 1.54p per share, up from 1.4p.

During the year the business, whose customers include IKEA, the British Heart Foundation and English Heritage, said its own IP gross margin increased to 73.6%, compared with 64.1% in the 17 months to 2017.

It has also launched its ‘K3 I Imagine’ platform which is a cornerstone product in the group’s own IP strategy.

The board also reveals that post-year end sales are encouraging.

Its enterprise-focused product, ‘K3 I fashion’ has delivered a very strong performance, with 11 major deals won compared with seven over the 17 months period in 2017.

The business also opened an office in Malaysia to support demand in the Far East.

Chief executive Adalsteinn Valdimarsson said: “I am pleased to report that K3 has moved from losses into profit at the operating level, with the transformation strategy initiated two years ago now bearing fruit.

“Its positive effects are also evident in improved cash generation and significantly reduced net debt at the year end.

“A key part of our growth strategy is increasing sales of products that contain our own IP, and the formal launch of the ‘K3 I Imagine’ platform was a significant milestone in this plan.

“It has the potential to be a major driver of profits and recurring revenues for the group.”

He added: “K3 now has a firm platform for ongoing growth and we remain positive about future prospects across the group.

“Trading since the end of the financial year has been encouraging, and we expect to see continued momentum over the new financial year.”

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