K3 Business Technology Group Regulatory News (KBT)

AIM: KBT

K3 BUSINESS TECHNOLOGY GROUP PLC

("K3" or "the Group" or "the Company")

IT solutions supplier to retail, manufacturing and distribution sectors

Final results for the 12 months to 30 June 2014

KEY POINTS

· Very encouraging results - reflecting growing sales of new Microsoft-based flagship solution, "ax|is" and improving sales in established software products

· Major contracts wins more than doubled to £25.3m (2013: £11.80m and 2012: £12.94m):

- £12.63m of "ax|is" contracts signed (50% of total), including high profile retailers

· SYSPRO and Sage Division continued to generate high levels of recurring income (46% of Group's total recurring income base) and good cash flows

· Managed Services Division delivered improved performance - including return to profitability

· Next steps for "ax|is" solution include:

- capitalising on deepening Microsoft relationship

- increased investment to broaden international channel to market

- further software product releases tailored to specific market segments

· Board expects business recovery to continue and views growth prospects very positively - pipeline of opportunity is significant

Tom Milne, Chairman, said,

"Today's results show an encouraging improvement in the business which is expected to continue into 2014/15. Having restructured the business and invested heavily in intellectual property over the last two years, especially in retail, we have opened up new opportunities. It is particularly pleasing to record that our new flagship Microsoft-based solution, "ax|is", is now seeing encouraging traction, having moved into commercial marketing during the year. With a strong pipeline of opportunities ahead, supported by a stable and profitable underlying business, the outlook for K3 is particularly encouraging."

Enquiries:

Notes:

K3 BUSINESS TECHNOLOGY GROUP PLC

CHAIRMAN'S STATEMENT

Overview

In my final results statement as Chairman I am delighted to report on the very encouraging progress K3 has made across the business. Most importantly, we have commercially launched our new flagship Microsoft-based software product, "ax|is", which has been developed for the retail sector. Results for the year to 30 June 2014 reflect this progress with revenues up 13% year-on-year to £71.95m and adjusted profit before tax*1  up 51% to £6.6m.

Very encouragingly, the total value of major orders won in the year at £25.3m was more than double the level of last year (2013: £11.8m). All our software products achieved year-on-year increases, assisted by a general improvement in trading conditions in the UK. The strongest growth came from our "ax|is" solutions which accounted for approximately £12.63m of our new business wins, some 50% of K3's total. This included two important pilot "ax|is" projects which are currently underway and should lead to further large orders. The financial benefits of these major new wins will continue to come through in the new financial year.

We are pleased with the traction we are gaining with our "ax|is" solution. The significant development work we have invested in tailoring Microsoft's generic Dynamics AX product for the retail sector and initial market reaction has led to a closer relationship with Microsoft. This is extremely helpful in supporting our plans to expand our channel to other markets around the world.

As we previously reported, the expansion of our existing international partner channel is a major strategic focus and we have invested significantly in this over the year. We have already entered into agreements with a number of new key partners and are engaging with global system integrators. The development of this indirect sales channel will fuel high margin growth and will be a key area of investment over the new financial year and beyond. We are now co-ordinating our plans with Microsoft.

We stepped up our recruitment and training of AX resource over the year. As we have commented before, Microsoft Dynamics AX skills are currently in short supply and this has had the effect of increasing our costs. However, our Dynamics AX in-house training and use of Dynamics AX resources which we have established in near-shore locations will help to mitigate this.

Our SYSPRO and Sage Division continued to generate high levels of recurring income and cash and the Division also saw strong software sales. New sales of our SYSPRO software also benefit our Managed Services Division as we are now delivering most of our new SYSPRO systems as part of a hosted cloud offering. Our Managed Services activities recorded a profit of £0.43m for the year compared to a loss of £0.56m last year. This reflected both the reorganisation and managerial changes we made in the Division and increasing sales of our products. The potential to develop significant recurring revenues from this activity, especially as we add new "ax|is" customers, remains exciting.

K3 continues to generate high levels of recurring revenues, principally from software licence renewals and support contracts, and as we grow our software product sales, this income stream will incrementally increase. Recurring revenues for the year amounted to £35.42m, accounting for 49% of K3's total revenues (2013: £34.54m, 54%). Net debt at the year end was £13.63m, only marginally lower than at the same period last year. We anticipate that it will reduce in the new financial year as a result of significantly decreased exceptional costs and a further improvement in profitability.

FINANCIAL RESULTS

Revenues for the year ended 30 June 2014 increased by 13% to £71.95m (2013: £63.51m), with revenues in the second half 17% ahead year-on-year at £37.48m (2013: £31.96m). Growth was largely driven by the improving performance of our Microsoft-based activities, including our traditional Microsoft Dynamics NAV business but most especially from our newer Microsoft Dynamics AX-based solution, "ax|is".

Adjusted profit from operations*2 over the year increased by 43% to £7.30m (2013: £5.09m). Adjusted profit from operations*3 in the second half year was up 72% year-on-year to £3.69m (2013: £2.15m). The performance in the second half was especially notable in a business which historically has been H1 weighted due to the profit arising on SYSPRO annual licence fee renewals.

Adjusted profit before tax*1 for the year ended 30 June 2014 increased by 51% to £6.60m (2013: £4.37m). Adjusted earnings per share*4 increased by 33% to 18.6p (2013: 14.0p).

This recovery came off the back of the significant software product development investment that the Group has been making which totalled £3.99m over the year (2013: £3.56m). The largest element, approximately £2.06m (2013: £1.45m), was related to our "ax|is" solution but we made further investment in our other products, including Dynamics NAV and SYSPRO, and in our sales channel products.

We incurred exceptional costs of £1.72m (2013: £0.73m). This principally related to: our decision to restructure our Microsoft UK Division and Managed Services Division to accelerate the return of these businesses to profitability; senior management changes and some restructuring of prior acquisitions. We do not expect major exceptional costs in the coming year.

Finance expenses were broadly flat at£0.70m (2013: £0.73m) as working capital requirements increased for the enlarged business.

We have recognised a deferred tax credit of £0.89m (2013: £0.65m) largely in respect of intangibles and together with the impact of lower profits and research and development credits (that are recognised only as claims are agreed with tax authorities), there is an overall tax credit of £0.68m in the year (2013: £0.78m).

Taking into account amortisation of intangibles of £2.99m (2013: £3.18m) and exceptional reorganisation costs of £1.72m (2013: £0.73m), profit from operations for the year more than doubled to £2.59m (2013: £1.19m). Profit before taxation rose 3.1x to £1.89m (2013: £0.46m). Basic earnings per share increased by 91% to 8.2p (2013: 4.3p).

Cash flows and banking

K3 has traditionally generated good cash flows, with a seasonal weighting to October-December. This has continued to be the case, although a combination of exceptional costs and increased working capital as the business expanded into larger contracts has meant that cash generation has reduced from historical levels. We have seen a working capital outflow of £2.79m in the current year as the business grew, compared to an inflow of £1.51m in the prior year. Adding back the cash impact of exceptional costs the adjusted cash flow from operations*5 was £7.07m (2013: £8.66m), with cash generated from operations being £5.35m (2013: £8.02m).

Whilst the Group made debt repayments of £2.31m (net), raised £0.28m from the issue of share capital as employees exercised share options, and received £0.29m of tax repayments (net) in the year, net debt at 30 June 2014 was only marginally lower at £13.63m (2013: £13.81m). A major factor in this was the investment in product development of £3.99m which has been fundamental to the order wins that have driven the current year profit improvement. As K3's profitability improves further, and with significantly reduced exceptional costs, we expect the net debt position to improve significantly, whilst continuing our investment programme.

In August 2014 we agreed the extension of the Group's banking facilities for three years through to August 2017 on substantially the same terms as the existing facilities.

DIVIDEND

With the improving prospects for the Group, the Board is pleased to propose an increased final (and total) dividend for the financial year of 1.25p per share (2013: 1.0p). Subject to shareholder approval at K3's General Meeting, this dividend will become payable on 16 January 2015 to shareholders on the register on 12 December 2014.

K3's Annual General Meeting will be held on 26 November 2014 at 10.30 a.m., at the Group's head office at Baltimore House, 50 Kansas Avenue, Manchester M50 2GL.

BOARD Changes

In January 2014, we announced that after nearly 14 years as Chief Executive, Andy Makeham was leaving the Group and that Chief Finance Officer, David Bolton, who had led the Group's expansion with Andy, was assuming the role of Chief Executive. On behalf of the Board, I am delighted to welcome David in his new role and to thank Andy for his significant contribution over the years.

We appointed two new Non-executive Directors, Peter Cookson in July 2013 and Paul Morland in May 2014. Peter, achartered accountant, has many years' experience in senior management and finance roles, especially in the technology and retail sectors. Paul Morland has a well-established track record in the Technology sector both in management and as an analyst. 

In June 2014, we announced that, after nine years as Non-executive Chairman of the Group, I would be retiring at K3's forthcoming AGM. Plans for my succession are well advanced and the Board expects to announce further appointments in due course.

Outlook

The year has seen a strong recovery in the business with the initiatives we have taken in the development of intellectual property for the Retail sector paying dividends. The work we are now doing with Microsoft provides the opportunity for substantial further growth in our Microsoft Dynamics AX proposition, supported by a stable and profitable underlying business. Whilst further investment will be required to exploit the opportunity fully, I am confident that K3 is well placed to do this in future years. With a strong pipeline of opportunities ahead, the outlook for K3 is particularly encouraging.

Chairman

CHIEF EXECUTIVE'S STATEMENT

KEY PERFORMANCE INDICATORS

The key performance indicators used by the Board are summarized below and the table sets out K3's performance for the year under review.

Strong growth in revenues with significant rise in software at £12.89m (2013: £9.0m) and services at £19.83m (2013: £16.4m).

The improvement in gross margin to 54% reflected higher services revenues and improved software margin.

The adjusted cash flow from operations*7 reduced due to higher working capital as the business has grown over the last 12 months, but has remained healthy at 97% (2013: 170%) of adjusted profit from operations*6.

OPERATIONAL REVIEW

K3 comprises four trading Divisions: Microsoft UK, International, SYSPRO and Sage, and Managed Services. The financial results of each Division together with head office costs are summarised in the table below. A fuller review of each Division is also provided below.

Microsoft-based activities

The K3 Microsoft Dynamics business, comprising our Microsoft UK Division and International Division, is working together on global initiatives to generate additional intellectual property, cost effective resourcing and improved channels to market, particularly to support our new "ax|is" solution. Revenue for the total Microsoft business increased by 19% year-on-year to £37.78m (2013: £31.72m) and adjusted profit from operations*9 rose by 2.7 times to £2.18m (2013: £0.60m).

Microsoft UK Division

Results

The closure of major software wins for both our "ax|is" proposition (based on Microsoft Dynamics AX) and Dynamics NAV product drove a major turnaround in the Division's performance this year.

After a very encouraging first half, the Division continued to perform well, fuelled by "ax|is" and improving retail sentiment. Divisional revenue increased by 34% to £25.26m (2013: £18.86m) and turned an adjusted loss*10 in the prior year of £1.66m into an adjusted profit*10 of £0.65m. As would be expected, the improvement in services revenue to £8.90m (2013: £5.88m) and software revenue to £5.57m (2013: £3.64m) has had a major impact on the results. However there has also been a large increase in the cost of delivery. At the half year we highlighted that a significant increase in demand for Dynamics AX had in turn created a surge in demand for skilled Dynamics AX resource. We have made a significant short term investment on an accelerated programme of global recruitment, including near-shoring, and training to equip our staff. The reduction of costs of delivery is a key initiative for future profitable growth in the division.

Having secured a number of pilot orders for our "ax|is" product at the end of the last financial year, the Division secured wins worth a total of £12.63m for the solution over the year, across nine major contracts. This contributed some 82% of the total value of the Division's new wins. Including orders for our established Microsoft Dynamics NAV solution, the total value of new orders was £15.4m over the year (2013: £6.87m). Of these orders, we closed £6.16m in the second half year, including another two pilot projects for "ax|is" that could lead to further large orders.

What has helped to drive our new Microsoft Dynamics AX orders is our intellectual property ("IP"), which has created a richer more enhanced enterprise resource planning ("ERP") solution for retailers. It is worth noting that the average size of Microsoft Dynamics AX orders is much larger than for our traditional Microsoft Dynamics NAV business and that delivery is also over a more extended period. We are working closely with Microsoft on product releases and this relationship on product development is benefiting our overall stance in the marketplace.

Whilst our focus has been on the Microsoft Dynamics AX proposition, our traditional Microsoft Dynamics NAV business has also returned to growth with two major contracts worth £1.3m secured in the year, and a further deal worth £0.86m secured since the year end. We are also investing in a product upgrade path for existing customers to provide additional functionality for solutions purchased in previous years.

Software income of £5.57m compared to £3.64m in the prior period. These sales are from a mix of traditionally structured deals and Microsoft Enterprise Agreements. Enterprise Agreements are used by Microsoft on larger contracts and under these agreements K3 receives a "commission" for the software delivered to the customer combined with follow-on services as normal. We estimate that the software recognised would have increased by £1.16m to £6.73m on the traditional sales basis. Recurring maintenance income of £9.47m is up 14% over the prior year (2013: £8.32m) reflecting the impact of new deals and initiatives to encourage customer retention.

Whilst the Division is primarily focused on the Retail market, it also includes our businesses that service the wholesale, manufacturing and distribution, and events sector. These units saw strong growth, with an encouraging level of new contract wins in both our AX and NAV businesses. Revenues grew by 18% to £7.43m (2013: £6.27m) with a strong recovery in adjusted profit from operations*11 to £0.49m (2013: £0.10m). We also saw some good growth in our point of sales RSG business that focuses on the events sector, utilising the Microsoft Dynamics RMS product. The opportunities in this area encouraged us to make a small acquisition of a competitor (RTL) in July 2014.

At 30 June 2014, the pipeline for the Division was at £37.9m (2013: £38.8m). This excludes approximately £7.18m still to be delivered on the large contracts won in the current year.

International Division

The International Division includes our Dutch Microsoft Dynamics reseller business, our Point of Sale business focused on smaller retailers, and our ISV (software author and channel management) company.

The ISV contains the "ax|is" product set developed in conjunction with the Microsoft UK Division, which has been pivotal in the improvement in the results of the Group. Early market interest in our enhanced retail solution is very encouraging and Microsoft's support for our software development programme has led to a deepening relationship with them.

Revenue was broadly flat year-on-year at £12.53m (2013: £12.86m), however adjusted profit from operations*12 decreased to £1.54m (2013: £2.26m). Whilst the slow recovery of the Dutch fashion and retail market has continued to be a major factor in the business performance, we have also made an investment in resources in the Dynamics AX product, which we have not historically sold in this territory. This division also includes our global reseller channel and personnel engaged in the development and marketing of our "ax|is" software product, which is having a profound impact on Group performance.

Software sales at £1.93m were up 19% (2013:£1.62m) though services revenues at £4.64m were down 3% (2013: £4.81m). Margins at 50% showed an improvement over the prior year as the development of product has been in full swing throughout the year and more cost has been capitalised. There has however been a significant increase in sales and marketing personnel to build our channel team and prepare the Dutch business to become a player in the local Dynamics AX market, having previously focused on the Dynamics NAV product.

Our relationship with Inter IKEA Systems B.V. (the owner and franchisor of the IKEA concept and the largest customer in the Group) continues to be very strong, with good levels of services income on planned projects, with further potential business to come. Shortly before the year end we commenced a major work stream for one of the franchisees and we are being encouraged by certain franchisees to use our expertise to assist them in other activities.

The Unisoft business is performing in line with our expectations with its RVE Point of Sale product gaining traction, whilst the market remains difficult. The move to subscription based sales is a big change, reducing the sales cycle down to weeks instead of months and building a recurring revenue base with commitments up to five years. Sales in the current year at £3.45m were in line with the prior year (2013: £3.48m). We are looking at the wider potential sales opportunities for this product.

The Division secured a total of £3.2m of major order wins (2013: £1.13m). The prospects pipeline, excluding potential business anticipated in a long term plan with Inter IKEA Systems B.V., currently amounts to £6.7m of orders (2012: £5.2m), highlighting that further improvement in business performance can be expected.

SYSPRO and Sage Division

Revenues at the SYSPRO and Sage Division increased marginally to £26.02m (2013: £25.38m). Adjusted profit from operations*13 was satisfactory at £5.07m (2013: £5.58m), with the reduction mainly due to investment in sales resources in Sage and the acceleration of a programme in our SYSPRO business that is designed to replace employees likely to retire in the coming years.

The Division's recurring revenues remain high at £15.12m, albeit a £0.86m decrease on last year (2013: £15.98m), with the reduction reflecting the disposal of a small non-core Sage business in May 2013. SYSPRO maintenance and support levels remained strong with a 97% renewal rate (2012: 98%). Total software sales were excellent at £5.00m (2013: £3.84m) and total services income increased by £0.32m to £5.56m (2013: £5.24m).

The SYSPRO operation is the exclusive UK and sole European SYSPRO partner with a rolling five year distribution agreement. It has over £1.0m of income from own IP products covering functional requirements which are usually found only in significantly more expensive software. The SYSPRO business remains strong with high levels of recurring income, excellent management of opportunities and encouraging levels of new business wins. These increasingly involve elements of hosted services.

The SYSPRO business secured 14 new wins in total worth £2.34m compared with ten worth £1.77m last year. The majority of these new deals came with extended period maintenance agreements. At the year end the pipeline was £2.8m (2013: £3.4m), the reduction coming about as a result of a number of the current year wins were sizeable and are taking longer to replace.

Our SYSPRO customer base generates high levels of recurring revenues through annual software licence and support renewals, with income at £7.35m (2013: £6.96m). The major part of this income is recognised at the annual renewal date in October, giving the first half in this division a significant weighting compared to the second half. We will be investing in new resources over the next year to underpin longer term continuity within our professional services team and to take advantage of new technologies that will improve our own IP products, maintaining our competitive advantage.

After a slow start to the year as it reorganised its delivery and support functions and recruited a new Sales Director (ex- Sage), our K3 Sage operation enjoyed an extremely good second half year. In total, we signed 87 deals worth £3.7m over the year (2013: 60 deals worth £2.05m). The second half year was very strong for Sage's new X3 Enterprise level solution and we closed 12 deals worth £1.85m. We have an extremely popular standard template X3 model that allows us to deliver an ERP solution in less than 60 man days, which is almost unheard of for a relatively functionally rich ERP product. The X3 product is also sold in a premium version for larger implementations and this is a market that we are gradually moving into.

Our other business units in the Division have customers who can be offered upgrade opportunities to our Enterprise level solutions and hosting. These businesses contributed £3.58m (2013: £3.24m) of sales in the year. £2.50m of the income is recurring (2013: £2.52m).

The pipeline of prospects for the Division totalled £17.0m (2013: £14.8m) after significant wins in the final quarter of the financial year.

Managed Services Division

The Managed Services Division offers a range of application solutions delivered on-premises, hosted or via 'Software as a Service' using hosting centres in Philadelphia, London, Edinburgh and Toronto.

Revenue over the year rose by 27% to £8.15m (2013: £6.41m) and moved back into profit, generating £0.43m of adjusted profit from operations*14 (2013: adjusted loss*14 of £0.56m). The move back into profitability was achieved through a combination of increased revenues and lower operating costs. At the beginning of the year we recruited a small team of "operating system" consultants, who are delivering managed services for a number of our retail clients who were reported in our Microsoft UK division. Prior year comparatives for divisional results have not been restated as the impact is not material to the Group.

The run rate of recurring income at the year-end showed a 16% increase year-on-year to £5.30m (2013: £4.55m). Hosting represented £2.75m (2013: £2.78m) of this recurring revenue, having lost a major contract in the second half year with an external customer.

We have focused very strongly on widening the product offering to include "network as a service", "platform as a service" and "infrastructure as a service", in addition to our traditional "ERP as a service" model. Our ability to host multi-site overseas customers offers significant growth opportunities with deal wins of this nature in both AX and SYSPRO. We also expect to benefit from the marked improvement in new order wins in the Microsoft UK division in due course.

The pipeline of demand for hosting has increased to £4.1m (2013: £3.37m).

Head office Division

Central costs*15for the year were £0.39m (2013: £0.53m). These costs included Directors' costs, group human resources, accounting and legal personnel, and costs associated with the Plc including financing. The costs are stated net of recovery of elements recharged to the operating units. The costs have fallen year on year due to changes in management implemented in the second half year.

Change in reporting structure

It should be noted that in future the Board intends to report the Group's performance by reference to its industry sectors (retail, manufacturing and distribution) and its global intellectual property.

OUTLOOK

The investments we have made over the last two years in Microsoft technology are starting to yield real benefits for the Group. We believe that there is significant long term potential to accelerate and widen sales for our new enhanced Microsoft Dynamic AX solution. The route is via further development of our global partner channel, which also brings margin benefits, and the launch of additional Dynamics AX products over the next few years, tailoring our existing "ax|is" template with IP for various retail market segments. Our deepening relationship with Microsoft is another positive step forward as we seek to scale the growth.

Whilst there are further costs to growth, we are also concentrating on driving margins and expect to see these improve progressively over the near term.

Overall, we continue to remain very encouraged by growth prospects and look forward to another year of progression.

David Bolton

Chief Executive

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2014

All of the profit for the period is attributable to equity shareholders of the parent.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2014

All of the total comprehensive income is attributable to equity holders of the parent. All of the other comprehensive income will be reclassified subsequently to profit or loss when specific conditions are met.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2014

CONSOLIDATED STATEMENT OF CASHFLOWS

For the year ended 30 June 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2014

The amount included in retained earnings of £2.56m (2013: £1.24m) represents profit attributable to owners of the parent company.

NOTES

1. Profit from operations

During the year, further reorganisation costs have been incurred to implement major changes in the business structure to facilitate improvements in operating performance and also some changes in senior management and restructuring of acquisitions made in recent years at a cost of £1.72m (2013: £0.73m).

2. Tax income/expense

3. Earnings per share

The calculations of earnings per share are based on the profit for the period and the following numbers of shares:

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.

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 and the above number of shares.

3. Earnings per share (continued)

4. Loans and borrowings

The above split between non-current and current loans and borrowings reflects the situation as at 30 June 2014.

In August 2014 the Group agreed the extension of existing facilities through to August 2017 on substantially the same terms.

5. Other non-current liabilities

6. Trade and other payables - current

7. Notes to the cashflow statement

Cash generated from operations is stated after payments made to regularise liabilities that were significantly outside normal statutory due dates and commercial terms at the date of acquiring companies, that the directors consider to be a cost of the acquisition. In addition, cash flows from operations include acquisition costs and exceptional reorganisation costs arising as a result of acquisitions. 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:

8. The Board recommends the payment of a dividend of per share 1.25p (2013: 1.0p) to be payable on 16 January 2015 to shareholders on the register on 12 December 2014.

9. The financial information set out above does not comprise the Company's statutory accounts. The Annual Report and Financial Statements for the year ended 30 June 2013 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 2013 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. 

The Independent Auditors' Report on the Annual Report and Financial Statement for the year ended 30 June 2014 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. These will be delivered to the Registrar of Companies following the annual general meeting.

10. The Group's full statutory financial statements for 30 June 2014 have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) as endorsed by the European Union ("endorsed IFRS") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under endorsed IFRS.

11. This preliminary announcement was approved by the Board of directors on 14 September 2014.

12. The full financial statements will be posted to shareholders on or around 20 October 2014. Further copies will also be available on its website (www.k3btg.com) and from the Company's registered office at Baltimore House, 50 Kansas Avenue, Manchester, M50 2GL from that date.