K3 Business Technology Group Regulatory News (KBT)

AIM: KBT

25 July 2011

K3 BUSINESS TECHNOLOGY GROUP PLC

("K3" or "the Group")

Acquisition

K3, which supplies enterprise resource planning ("ERP") software, hosting and managed services to the supply chain industry, is pleased to announce the acquisition of FD Systems Ltd ("FDS"), the Sage and e-commerce provider. The consideration for the acquisition is £2.23 million payable in cash on completion, together with repayment of FDS loans of £0.41 million. Further cash consideration of £0.4 million will be payable following completion dependent on certain conditions being met. An earn-out of up to £1m in cash may also be payable after 12 months, based on specific performance criteria. The acquisition follows K3's purchase of FDS' Sage 200 business unit in December 2010.

Following the acquisition, the business is expected to contribute an underlying profit of c.£750,000 on revenues of approximately £7.0m on an annualised basis. Some 41% of annual revenues are contracted recurring revenues.

Based in Cardiff, FDS delivers Sage and e-commerce solutions to over 300 customers in the UK and Ireland, including United Utilities Group PLC, the major UK water supplier, Ideal Shopping Direct Plc, the television shopping group, and Chubb, the security and fire safety solutions provider. In addition to providing K3 with additional skills across the full range of Sage products, FDS has developed its own e-commerce solution, Gravit-e, which integrates fully with Sage and Microsoft products. Gravit-e provides websites and web services to customers including the University of Oxford and Ladders Online, the UK's leading online access equipment retailer.

Following the acquisition, FDS will be integrated into K3's existing Sage division, making K3 one of the largest Sage partners in the UK with over 750 customers.

Andy Makeham, CEO of K3, commented,

"I am delighted to have completed the acquisition of FDS. The combination of its Sage expertise and e-commerce solution offers an attractive extension to our current Sage product range.

The deal also represents further progress in our strategy to acquire customer bases with strong recurring revenues, bringing over 300 customers where we see excellent opportunities to sell additional software services and solutions, including hosting."

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