REG - K3 Bus Tech Grp PLC - Interim Results
17/07/2024 07:00
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RNS Number : 6638W K3 Business Technology Group PLC 17 July 2024
AIM: KBT
K3 BUSINESS TECHNOLOGY GROUP PLC
("K3" or "the Group" or "the Company")
Provider of business-critical software solutions focused on fashion and
apparel brands.
Interim results for the six months to 31 May 2024
Key Points
H1 2024 H1 2023
Revenue from continuing operations £15.5m £20.3m
Gross profit £9.9m £12.4m
― gross margin 64% 61%
Adjusted operating loss (£1.2m) (£1.8m)
Loss before tax from continuing operations (£2.7m) (£2.9m)
Net cash £2.0m £2.9m
Reported loss per share (6.6p) (6.5p)
Adjusted loss per share from continuing operations (4.3p) (5.4p)
Financial
· Revenue decrease mainly reflected the sharply lower levels of
activity at Global Accounts, as anticipated;
o mitigating actions have supported gross profit margin at the unit.
· Adjusted operating loss improved significantly to £1.2m (2023:
loss of £1.8m), reflecting cost reduction measures implemented in prior
period and continued cost discipline to improve gross margin.
· Total annual recurring revenue ("ARR") was £24.9m (2023: £24.7m).
· Net cash at half-year end was strong at £2.0m despite exceptional
reorganisation costs of £1.2m (2023: £0.4m).
Operational
· K3 Products division - growth from fashion and apparel offering
("Fashion portfolio") offset by expected revenue decline at Retail Solutions:
o revenue of £6.4m (2023: £6.4m); gross profit of £5.1m (2023: £5.0m).
o gross profit margin increased to 80% (2023: 78%), helped by Fashion
portfolio growth
· Third-party Solutions division - performance significantly impacted
by drop in activity at Global Accounts, with NexSys business unit performing
robustly:
o revenue of £9.1m (2023: £13.9m) and gross profit of £4.8m (2023:
£7.4m),
o gross profit margin of 52% (2022: 53%) - helped by cost actions.
Board Appointment
· Oliver Scott appointed as Chairman, with effect from today, with
Tom Crawford, previously Executive Chairman, remaining as a Non-executive
Director, as announced on 4 July 2024, together with the appointments of Eric
Dodd as Chief Executive Officer and Lavinia Alderson as Chief Financial
Officer.
Prospects
· Group's performance is typically weighted to H2, with significant
earnings and cash inflows from:
o annual software licence fee and maintenance and support contract renewals
in Q4.
· Despite challenges, the Group remains on track to generate an
improved adjusted operating performance in the current financial year and to
perform in line with the Board's expectations for the current financial year.
Eric Dodd, Chief Executive Officer of K3 Business Technology Group plc, said:
"Interim results mainly reflect the anticipated reduction in activity at
Global Accounts. This has been managed as effectively as possible and, despite
the unit's performance, the Group's gross profit margin has been improved,
cash generation increased, and the overall loss reduced. Net cash at the
half-year end remained very healthy.
"The second half of the financial year is typically our stronger half, with
significant cash inflows from software licence and maintenance and support
contract renewals. Our priority is to deliver shareholder value while
maintaining strong financial discipline. The Group remains on track to perform
in line with our expectations for the current financial year."
Enquiries:
K3 Business Technology Group plc Eric Dodd, Chief Executive Officer T: c/o 020 3178 6378
www.k3btg.com Lavinia Alderson, Chief Financial Officer
finnCap Limited Julian Blunt/ Dan Hodkinson T: 020 7220 0500
(NOMAD & Broker) (Corporate Finance)
Sunila De Silva (Corporate Broking)
KTZ Communications Katie Tzouliadis/ Robert Morton T: 020 3178 6378
CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
The new business unit structure established in the prior period, with
responsibility and accountability decisively devolved to business unit heads,
has further simplified the business and created the most appropriate platform
for the Group, as the Board continues to focus on driving value for
shareholders.
Strong financial discipline remained a major priority and we have further
strengthened K3's financial position with actions to address overheads and to
realign costs appropriately. Net cash at the period end stood at £2.0m
despite exceptional reorganisation costs of £1.2m (2023: £0.4m).
Overall, the Group's performance was in line with management expectations at
the start of the financial year. As expected, a much lower level of activity
at Global Accounts significantly impacted the performance of the Third-party
Solutions division and the Group. Nonetheless management actions taken in the
second half of the last financial year and in this half were successful in
mitigating some of the impact. The NexSys operation, which makes up the large
majority of the Division's annual revenues performed robustly. It typically
makes a substantial contribution in the second half of the year, and
specifically in the final quarter of the financial year, when annual software
licences and support and maintenance contracts are renewed across its large
installed customer base. We are seeing encouraging demand for the product and
the sales pipeline is very healthy.
The performance of the K3 Products division benefited from our decision not to
maintain the nascent K3 Viji product as a standalone offering but to
incorporate its functionality into existing products for the fashion and
apparel market ("Fashion portfolio"). The Fashion portfolio expanded software
licences within its existing customer base. Recurring revenues have continued
to grow, although deal closure has been slower than expected. The Retail
Solutions unit saw some expected additional revenue decline, which affected
its high-margin contribution.
K3's performance is significantly weighted to the second half of the year and
we expect this to continue. The focus remains on gross margin and the cost
base is now more appropriately positioned.
Financial Results
The Group's revenue for the six months ended 31 May 2023 decreased to £15.5m
(2023: £20.3m). This was predominantly driven by a significantly lower
revenue contribution from the Global Accounts operation. Gross profit was
£9.9m (2023: £12.4m), reflecting the decrease in revenues. However, gross
margin increased to 64% (2023: 61%), helped by measures to adjust the cost
base to the new level of revenues and by improved chargeability across teams,
especially at Global Accounts.
Adjusted administrative expenses decreased to £11.1m (2023: £14.1m), as we
continued to concentrate on delivering value from development expenditure.
This included depreciation and amortisation of £0.8m, which was significantly
lower than in the prior period (2023: £2.1m) and reflected disciplined
development expenditure and related impairments reported at 30 November 2023.
Adjusted operating profit/(loss)(1), which replaced adjusted EBITDA as a key
performance measure last year as a better indicator for understanding
underlying profitability and cash requirements, showed an improvement, with
the loss reducing to £1.2m (2023: £1.8m).
The loss from operations was £2.5m (2023: loss of £2.7m). This was after
£1.2m of reorganisation costs, £0.1m of smaller other one-off costs, and no
share based payment charges (2023: £0.4m of reorganisation costs, and £0.5m
of share-based payment charges.
The reported loss before tax from continuing operations was £2.8m (2023: loss
of £2.9m). This was after net finance expenses of £0.2m (2023: £0.3m).
The adjusted loss per share from continuing operations was 4.3p (2023: loss of
5.4p) and excludes amortisation of development costs, capitalised development
costs, exceptional reorganisation costs, acquisition costs and share based
charges and is net of the related tax charge of £0.2m (2023: credit £0.2m).
The reported loss per share, which includes profit from discontinued
activities, was 6.6p (2023: 7.2p).
Balance sheet and cash flows
The Group balance sheet remains strong, with cash and cash equivalents of
£3.2m (2023: £4.7m) and net cash of £2.0m (2023: £2.9m). K3 has banking
facilities with Barclays, its long-standing banking relationship, which
comprise a total facility of up to £3.0m, including an overdraft facility to
support seasonal cash movements. This facility agreement was extended in March
2024 on standard terms for a further two years until March 2026, with optional
future renewals. At 31 May 2024, £1.25m was drawn (2023: £1.8m).
Group cash flow is weighted towards the second half of the financial year.
This reflects the significant cash inflows that fall due in this period from
annual software licence and maintenance and support contract renewals.
Cash outflow from operations was £5.8m (2023: £2.8m). Net cash used in
investing activities decreased to £0.4m (2023: £0.8m) as a result of our
continued disciplined approach to development expenditure as well as our
actions to simplify the business. Spend on property, plant and equipment was
minimal in the period (2023: £0.4m), and capitalised development expenditure
was £0.4m (2023: £0.4m).
Business Strategy
The Board is focused on cash generation and shareholder value. This has driven
our actions to simplify the Group and to concentrate on those software
products and solutions that are differentiated in their markets and that
provide a compelling return on investment for customers.
The K3 Products division provides the opportunity of higher-margin growth,
which reflects the fact that its solutions are based on K3 intellectual
property ("IP"). Our fashion and apparel products, particularly K3 Fashion,
address a global opportunity and the route-to-market for these products is
mainly via our business partner network. We are also working with Microsoft,
which endorses K3 Fashion. The Retail Solutions unit, which generates a high
gross profit margin, has a wide customer base of mainly
smaller-to-medium-sized enterprises, and we are focused on providing effective
customer support.
The NexSys operation generates a high-level of recurring revenue and strong
cash flows. It is a well-established value-added reseller and systems
integrator of SYSPRO enterprise resource planning ("ERP") software, enriched
with integrated modules and K3 IP, and backed by specialist support services.
We are now targeting larger, higher-value projects in our existing UK markets
of manufacturing and distribution. The Global Accounts business, which
together with NexSys make up the Third-party Solutions division, provides
specialist services to the overseas franchisees of the Inter IKEA Concept.
While the expansion of IKEA stores by franchisees has slowed significantly
over the last year, Global Accounts, continues to be a key support and
services partner to franchisees.
Operational Review
The Group's results for the six months ended 31 May 2024 together with
comparatives for 2023 are summarised in the tables below.
Six months ended 31 May Revenue (£m) Gross profit (£m) Gross margin
2024 2023 2024 2023 2024 2023
restated restated restated
K3 Products 6.4 6.4 5.1 5.0 80% 78%
Third-party Solutions 9.1 13.9 4.8 7.4 52% 53%
Total 15.5 20.3 9.9 12.4 64% 61%
K3 Products
The division provides software products and solutions that are powered by our
own IP. They comprise:
• strategic products focused on fashion and apparel markets (the "Fashion
portfolio");
• solutions for the visitor attraction market; and other stand-alone
point-of-sale retail solutions and apps ("Retail Solutions").
£m 2024 2023
restated
Revenue 6.4 6.4
Gross profit 5.1 5.0
Gross profit margin (%) 80% 78%
Adjusted operating loss 1.3 3.5
The division's revenue was steady at £6.4m year-on-year (2023: £6.4m). The
Fashion portfolio increased its contribution, however, this was offset by some
further expected revenue decline at Retail Solutions, which provides software
solutions for the visitor attraction market and point-of-sale retail products
and apps.
Recurring revenue increased by 23% to £5.8m from £4.7m in the comparative
period in the prior year. This uplift was driven by growth in revenues from
the Fashion portfolio, and the increase also helped to drive the improvement
in gross profit margin to 80% (2023: 78%). Gross profit for the period
increased slightly to £5.1m (2023: £5.0m), and the adjusted operating loss
reduced significantly to £1.3m (2023: loss of £3.5m).
As previously reported, we withdrew further investment in our standalone
sustainability product for fashion retailers, K3 ViJi, after assessing our
commercial priorities. Instead, we are integrating K3 ViJi's capabilities
within K3 Fashion's existing corporate social responsibility functionalities.
This decision has helped to result in meaningful savings and, along with other
cost control actions, a more appropriate cost base.
Our Fashion portfolio, which includes K3 Fashion and K3 Pebblestone, increased
annualised recurring revenue by 3% over the period to £5.9m. This included a
software licence expansion with an existing customer secured last year, which
is broadening its global footprint in the jewellery/watches retail sector. Net
revenue retention was good, although deal closure has been somewhat slower
than expected in our business partner network, which is the key route to
market for our Fashion portfolio products. We believe that this reflects
customer purchase phasing, with departmental solutions sometimes being bought
at a later stage after the implementation of the initial core ERP.
The new team at Retail Solutions managed the revenue decline experienced in
the period well, and Retail Solutions continues to contribute valuable
high-margin income and strong net revenue retention of 105%.
Third-party Solutions
Third-party Solutions comprises two units:
• NexSys, a high-margin, value-added reseller and systems integrator of SYSPRO
ERP enriched with K3 IP and partner modules. Its solutions address the needs
of manufacturers and distributors, and have been typically 'on-premise'.
Revenues are generated from implementations, software licence sales (including
renewals), and maintenance and support contracts. With a long history of
providing innovative ERP solutions for its chosen markets, NexSys has a large
installed base of UK customers.
• Global Accounts, which provides specialist services and support, predominantly
to the Inter IKEA Concept overseas franchisee network.
£m 2024 2023
Revenue 9.1 13.9
Gross profit 4.8 7.4
Gross margin % 52% 53%
Adjusted operating profit 1.0 3.0
The Division's revenue and profit performance were significantly affected by
the sharply lower activity at Global Accounts. This unit provides specialist
services to the overseas franchisees of the Inter IKEA Concept. The downturn
in activity was anticipated, and continued the pattern experienced over the
past year as overseas franchisees opened fewer stores and reduced investment.
Total revenue was down to £9.1m (2023: £13.9m) and gross profit was £4.8m
(2023: £7.4m), with adjusted operating profit at £1.0m (2023: £3.0m). Gross
margin was broadly maintained at 52% (2023: 53.%), helped by the actions taken
to adjust Global Accounts' resource base.
The lower-level of activity at Global Accounts is expected to continue in the
short to medium term, and the current consulting resource reflects this.
However, we remain highly committed to assisting franchisees with their
support needs and responding to any new requirements.
The NexSys business, which delivers and supports business-critical ERP
solutions for manufacturers and distributors in the UK, performed robustly,
with four new logos signed in the first half. The team trialled an annual
licence fee model, which was received well, and has potential to contribute to
future sales. The sales pipeline is very healthy and we expect further deal
closures in the second half. NexSys will also benefit from software licence
and maintenance and support contract renewal that fall due in the fourth
quarter of the financial year. Renewals are expected to remain at their
traditional high levels.
Central Costs
Our decision in the prior period to devolve more responsibility and
accountability over resource allocation to our Business Unit heads, has helped
to reduce overall costs. The unallocated Central Support costs, which include
our PLC costs, were £1.0m (2023: £1.2m).
The Board and Staff
Today, we are pleased to announce the appointment of Oliver Scott as Chairman.
This follows Tom Crawford's need to step down from his role as Executive
Chairman given the current health condition of a close family member. Tom will
remain on the K3 Board as a Non-executive Director and will continue to be
closely involved with strategic initiatives. Oliver joined the Board in 2020
as a Non-executive Director and representative of Kestrel Partners LLP
("Kestrel"), which is a major shareholder in the Company.
As previously announced, Eric Dodd, formerly Chief Financial Officer, has been
appointed as Chief Executive Officer while Lavinia Alderson, Group Corporate
Finance Director has been appointed as Chief Financial Officer. Lavinia joined
K3 in December 2020 and has significant commercial and financial experience.
She was previously Finance Director of Concept Life Sciences, a leading
scientific services group, and before that Head of Finance UK Support &
Governance at Cape plc, the energy services company.
I would like to thank all our staff for their continuing hard work and
dedication over the period.
Summary and Outlook
The Board has established a firm financial platform for the Group and the
leadership teams across the units have clear objectives. While the trading
environment remains challenging, in particular at Global Accounts, where we
expect trading to remain subdued, we will continue to focus on the opportunity
to drive higher-margin, recurring revenues and maintain good cash generation.
The second half of the financial year is typically our stronger half, with
significant cash inflows from software licence and support and maintenance
contract renewals. Our priority is shareholder value and the Group remains on
track to perform in line with our expectations for the current financial year.
Eric Dodd
Chief Executive Officer
K3 Business Technology Group plc
Consolidated Income Statement
for the period ended 31 May 2024
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 May 31 May 30 November
2024 2023 2023
£'000 £'000 £'000
Revenue 15,468 20,267 43,779
Cost of sales (5,612) (7,917) (16,639)
Gross profit 9,856 12,350 27,140
Adjusted administrative expenses (11,046) (14,011) (25,523)
Impairment losses on financial assets (45) (107) (354)
Adjusted operating (loss)/ profit (1,235) (1,768) 1,263
Exceptional impairment - - (2,070)
Exceptional reorganization (1,248) (374) (2,129)
Exceptional acquisition/disposal related credit/(costs) (30) - 406
Share-based payment credit/(charge) - (532) 1,126
Loss from operations (2,513) (2,674) (1,404)
Finance expense (245) (266) (417)
Loss before taxation from continuing operations (2,758) (2,940) (1,821)
Tax expense (163) (245) (564)
Loss after taxation from continuing operations (2,921) (3,185) (2,385)
Profit after taxation from discontinued operations - 317 -
Loss for the period/year (2,921) (2,868) (2,385)
All the (loss)/profit for the year is attributable to equity shareholders of
the parent.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 May 31 May 30 November
2024 2023 2023
£'000 £'000 £'000
Loss per share
Basic and diluted (6.6)p (6.5)p (5.4)p
Basic and undiluted from Continuing operations (6.6)p (7.2)p (5.4)p
Consolidated Statement of
Comprehensive Income
for the period ended 31 May 2024
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 May 31 May 30 November
2024 2023 2023
£'000 £'000 £'000
Loss for the year (2,921) (2,868) (2,385)
Other comprehensive income
Exchange differences on translation of foreign operations (72) 212 76
Other comprehensive income (72) 212 76
Total comprehensive expense for the year (2,993) (2,656) (2,309)
Total comprehensive expense is attributable to equity holders of the parent.
All the other comprehensive income will be reclassified subsequently to profit
or loss when specific conditions are met. None of the items within other
comprehensive income/(expense) had a tax impact.
Consolidated Statement of Financial Position
as at 31 May 2024
Unaudited Unaudited Audited
as at as at as at 30 November
31 May 31 May
2024 2023 2023
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 1,125 1,866 1,323
Right-of-use assets 817 738 1,025
Goodwill 24,784 25,000 24,911
Other intangible assets 1,478 2,422 1,533
Deferred tax assets 169 890 77
Total non-current assets 28,373 30,916 28,869
Current assets
Stock 259 489 276
Trade and other receivables 6,804 11,136 7,555
Forward currency contracts - 110 -
Cash and short-term deposits 3,233 4,672 8,304
Total current assets 10,296 16,407 16,135
Total assets 38,669 47,323 45,004
LIABILITIES
Non-current liabilities
Lease liabilities 45 33 37
Provisions 197 - 105
Deferred tax liabilities 169 1,079 91
Total non-current liabilities 411 1,112 233
Current liabilities
Trade and other payables 11,500 12,143 15,946
Current tax liabilities 423 300 285
Lease liabilities 797 769 947
Borrowings 1,255 1,768 12
Provisions - 798 305
Total current liabilities 13,975 15,778 17,495
Total liabilities 14,386 16,890 17,728
EQUITY
Share capital 11,183 11,183 11,183
Share premium account 31,451 31,451 31,451
Other reserves 11,151 11,151 11,151
Translation reserve 1,611 1,819 1,683
Accumulated losses (31,113) (25,171) (28,192)
Total equity attributable to equity holders of the parent 24,283 30,433 27,276
Total equity and liabilities 38,669 47,323 45,004
Consolidated Statement of Cash Flows
for the period ended 31 May 2024
Unaudited Unaudited Audited
as at 31 May as at 31 May as at 30 November
2024 2023 2023
£'000 £'000 £'000
Cash flows from operating activities
Loss for the period (2,921) (2,868) (2,385)
Adjustments for:
Finance expense 245 266 417
Tax expense 163 245 564
Depreciation of property, plant and equipment 179 344 552
Impairment of property, plant and equipment - - 464
Depreciation of right-of-use assets 174 440 591
Amortisation of intangible assets and development expenditure 442 1,331 1,091
Impairment of intangible assets (including goodwill) - - 1,606
Loss on sale of property, plant and equipment - - 11
Share-based payments (credit)/charge - 446 (969)
Net cash flow from provisions (218) (359) (740)
Net cash flow from stock 17 - 208
Net cash flow from trade and other receivables 751 (1,669) 3,319
Net cash flow from trade and other payables (4,597) (843) (1,104)
Cash generated from operations (5,765) (2,667) 3,625
Income taxes paid (50) (150) (82)
Net cash from operating activities (5,815) (2,817) 3,543
Cash flows from investing activities
Development expenditure capitalised (348) (352) (734)
Acquisition of a subsidiary, net of cash acquired - - (86)
Purchase of property, plant and equipment (2) (445) (588)
Net cash from investing activities (350) (797) (1,408)
Cash flows from financing activities
Proceeds from loans and borrowings 1,243 1,783 3,500
Repayment of loans and borrowings - - (3,536)
Repayment of lease liabilities (137) (541) (708)
Interest paid on lease liabilities (45) (84) (126)
Finance expense paid (23) (30) (163)
Net cash from financing activities 1,038 1,128 (1,033)
Net change in cash and cash equivalents (5,127) (2,486) 1,102
Cash and cash equivalents at start of year 8,304 7,000 7,113
Exchange gain/(losses) on cash and cash equivalents 56 158 89
Cash and cash equivalents at end of year 3,233 4,672 8,304
Consolidated Statement of Changes in Equity
for the period ended 31 May 2024
Share capital Share premium Other reserves Translation
reserve Accumulated Total equity
losses
£'000 £'000 £'000 £'000 £'000 £'000
At 30 November 2021 11,183 31,451 11,151 1,538 (19,522) 35,801
Prior period restatement - - - - (1,879) (1,879)
At 30 November 2021 - Restated 11,183 31,451 11,151 1,538 (21,401) 33,922
Changes in equity for year ended 30 November 2022
Loss for the year
- - - - (4,188) (4,188)
Other comprehensive income for the year - - - 69 - 69
Total comprehensive income/(expense) - - - 69 (4,188) (4,119)
Share-based payment - - - - 751 751
At 30 November 2022 - Restated 11,183 31,451 11,151 1,607 (24,838) 30,554
Changes in equity for year ended 30 November 2023
Loss for the year
- - - - (2,385) (2,385)
Other comprehensive income for the year - - - 76 - 76
Total comprehensive income/(expense) - - - 76 (2,385) (2,309)
Share-based payment - - - - (969) (969)
At 30 November 2023 11,183 31,451 11,151 1,683 (28,192) 27,276
Changes in equity for year ended 30 November 2023
Loss for the year
- - - - (2,921) (2,921)
Other comprehensive income for the year - - - (72) - (72)
Total comprehensive income/(expense) - - - (72) (2,921) (2,993)
At 31 May 2024 11,183 31,451 11,151 1,611 (31,113) 24,283
1 Segment information
Six months ended 31 May 2024 (unaudited)
K3 Products Third-party Solutions Central Costs Total
£'000 £'000 £'000 £'000
External revenue 6,391 9,077 - 15,468
Cost of sales (1,286) (4,326) - (5,612)
Gross profit 5,105 4,751 - 9,856
Gross margin 80% 52% - 64%
Adjusted administrative expenses (6,369) (3,717) (1,005) (11,091)
Adjusted operating profit/(loss) (1,264) 1,034 (1,005) (1,235)
Exceptional impairment - - - -
Exceptional reorganisation costs - - (1,248) (1,248)
Acquisition/disposal credit/(costs) - - (30) (30)
Share-based payment credit/(charge) - - - -
(Loss)/profit from operations (1,264) 1,034 (2,283) (2,513)
Finance expense (245) (245)
(Loss)/profit before tax and discontinued operations (1,264) 1,034 (2,528) (2,758)
Tax expense - - (163) (163)
Profit/(loss) from discontinued operations - - - -
Loss for the year (1,264) 1,034 (2,691) (2,921)
Six months ended 31 May 2023 (Restated) (unaudited)
K3 Products Third-party Solutions Central Costs Total
£'000 £'000 £'000 £'000
External revenue 6,379 13,888 - 20,267
Cost of sales (1,391) (6,526) - (7,917)
Gross profit 4,988 7,362 - 12,350
Gross margin 78% 53% - 61%
Adjusted administrative expenses (8,462) (4,406) (1,250) (14,118)
Adjusted operating profit/(loss) (3,474) 2,956 (1,250) (1,768)
Exceptional impairment - - - -
Exceptional reorganisation costs - - (374) (374)
Acquisition/disposal credit/(costs) - - - -
Share-based payment credit/(charge) - - (532) (532)
(Loss)/profit from operations (3,474) 2,956 (2,156) (2,674)
Finance expense - - (266) (266)
(Loss)/profit before tax and discontinued operations (3,474) 2,956 (2,422) (2,940)
Tax expense - - (245) (245)
Profit from discontinued operations - - 317 317
(Loss)/profit for the year (3,474) 2,956 (2,350) (2,868)
1 Segment information (continued)
Year ended 30 November 2023 (audited)
K3 Products Third-party Solutions Central Costs Total
£'000 £'000 £'000 £'000
External revenue 13,085 30,694 - 43,779
Cost of sales (2,728) (13,911) - (16,639)
Gross profit 10,357 16,783 - 27,140
Gross margin 79.15% 54.68% - 61.99%
Adjusted administrative expenses (15,187) (8,475) (2,215) (25,877)
Adjusted operating profit/(loss) (4,830) 8,308 (2,215) 1,263
Exceptional impairment - - (2,070) (2,070)
Exceptional reorganisation costs - - (2,129) (2,129)
Acquisition/disposal credit/(costs) - - 406 406
Share-based payment credit/(charge) - - 1,126 1,126
(Loss)/profit from operations (4,830) 8,308 (4,882) (1,404)
Finance expense - - (417) (417)
(Loss)/profit before tax and discontinued operations (4,830) 8,308 (5,299) (1,821)
Tax expense - - (564) (564)
Profit/(loss) from discontinued operations - - - -
(Loss)/profit for the year (4,830) 8,308 (5,863) (2,385)
2 General information
K3 Business Technology Group Plc is incorporated in England and Wales under
the Companies Act (listed on AIM, a market operated by the London Stock
Exchange Plc) with the registered number 2641001. The address of the
registered office is Baltimore House, 50 Kansas Avenue, Manchester M50 2GL.
The interim condensed consolidated financial statements comprise the company
and its subsidiaries, "the Group".
Basis of preparation and Going Concern
The financial information set out in this Interim Report does not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006. The
Group's statutory financial statements for the year ended 30 November 2023,
prepared in accordance with the international accounting standards in
conformity with the requirements of the Companies Act 2006, have been filed
with the Registrar of Companies. The auditor's report on those financial
statements was unqualified and did not contain a statement under Section 498
(2) or (3) of the Companies Act 2006. The interim financial information has
been prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards ("IFRS") and on the same basis and
using the same accounting policies as used in the financial statements for the
year ended 30 November 2023.
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 Interim Report has not been audited or reviewed in accordance with the
International Standard on Review Engagement 2410 issued by the Auditing
Practices Board.
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. For
these reasons, they continue to adopt the going concern basis of accounting in
preparing this financial information.
3 Significant events
As disclosed in our Annual Report and Accounts for FY2023, in March 2024, the
Group agreed an extension to its Current Revolving Credit Facility with
Barclays for £2.75m until 31 March 2026.
4 (Loss)/earnings per share
The calculations of (loss)/earnings per share (EPS) are based on the
profit/(loss) for the period and the following numbers of shares:
Unaudited Unaudited Audited
as at 31 May as at 31 May as at 30 November
2024 2023 2023
£'000 £'000 £'000
Denominator
Weighted average number of shares used in basic and diluted EPS 44,090,074 44,090,074 44,090,074
Certain employee options and warrants have not been included in the
calculation of diluted EPS because their exercise is contingent on the
satisfaction of certain criteria that had not been met at the end of the
period/year.
Unaudited Unaudited Audited
as at 31 May as at 31 May as at 30 November
2024 2023 2023
£'000 £'000 £'000
Loss after tax from continuing operations (2,921) (3,185) (2,385)
Profit after tax from discontinued operations - 317 -
(Loss)/profit attributable to ordinary equity holders of the parent for basic (2,921) (2,868) (2,385)
and diluted earnings per share
The alternative 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/(losses) and the above number of shares.
Unaudited Unaudited Audited
as at 31 May as at 31 May as at 30 November
2024 2023 2023
£'000 £'000 £'000
Loss after tax from continuing operations (2,921) (3,185) (2,385)
Add back Other Items:
Exceptional reorganisation costs 1,248 374 2,129
Exceptional impairment costs - - 2,070
Acquisition/disposal related (credit)/costs 30 - (406)
Shared-based payment charge - 532 (1,126)
Tax (credit)/charge related to Other Items (243) (112) 175
(Loss)/profit attributable to ordinary equity holders of the parent for basic (1,886) (2,391) 457
and diluted earnings per share from continuing operations before other items
Unaudited Unaudited Audited
as at 31 May as at 31 May as at 30 November
2024 2023 2023
£'000 £'000 £'000
Loss per share
Basic and diluted loss per share (6.6) (6.5) (5.4)
Basic and diluted (loss)/profit per share from continuing operations (6.6) (7.2) (5.4)
Adjusted loss per share
Basic and diluted loss per share from continuing operations before other items (4.3) (5.4) 1.0
5 Loans and borrowings
Unaudited Unaudited Audited
as at as at as at 30 November
31 May 31 May
2024 2023 2023
£'000 £'000 £'000
Current
Bank overdrafts (secured) - - -
Bank loans (secured) 1,255 1,768 12
1,255 1,768 12
6 Non-statutory information
The Group uses a variety of alternative performance measures, which are
non-IFRS, to assess the performance of its operations. The Group considers
these performance measures to provide useful historical financial information
to help investors evaluate the underlying performance of the business.
These measures, as described below, are used to improve the comparability of
information between reporting periods and geographical units, to adjust for
exceptional items or to adjust for businesses identified as discontinued to
provide information on the ongoing activities of the Group. This also reflects
how the business is managed and measured on a day-to-day basis.
1 Adjusted operating profit/(loss) - is the profit/(loss) from continuing
activities adjusted to exclude exceptional impairment costs, exceptional
re-organisation cost and exceptional acquisition costs/(income) and
share-based payment charges/(credit).
2 Recurring revenue - contracted support, maintenance and annual
licences.
3 Adjusted loss/earnings per share - basic profit /(loss) per share from
continuing operations adjusted to exclude exceptional impairment costs,
exceptional re-organisation costs and exceptional acquisition costs/(income)
and share-based payment charges/
(credit), net of the related tax charge.
4 Cash outflow - calculated as the change in cash and cash equivalents
balances between two balance sheet dates.
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