Last checked at 17 Mar 2015 07:00
AIM: KBT
K3 BUSINESS TECHNOLOGY GROUP PLC
("K3" or "the Group" or "the Company")
IT solutions supplier to retail, manufacturing and distribution sectors
Half year results for the six months to 31 December 2014
KEY POINTS
H1 to 31 Dec 2014 | Change | H1 to 31 Dec 2013 | ||
Revenue | £41.67m | 21% | £34.47m | |
Recurring income | £19.84m | 11% | £17.91m | |
Adj PBT*1 | £3.56m | 13% | £3.16m | |
PBT | £1.79m | 103% | £0.88m | |
Adj. EPS*2 | 8.4p | 9% | 7.7p | |
EPS | 3.9p | 34% | 2.9p |
· Very encouraging performance, reflecting:
- progress with new flagship retail product
- improving sales of existing established software products
· Revenues up 21% to £41.67m with continuing high levels of recurring income at 48% of total
- generated from software licence fee renewals, support contracts and hosting
· Software licence sales up by 34% to record £7.63m
· Services income up 30% to £11.93m - driven by strong deal closures in prior year
· Major new orders totalled £12.3m - all product lines contributed
· Significant milestones achieved for flagship retail product "ax l is":
- K3 accredited as member of Microsoft's Global Independent Software Vendor programme
o represents major endorsement of our IP and reflects product's global potential
- first sales from expanded partner channel
· Increasing focus on extending own IP across our core offerings
- will help drive gross margins and recurring revenues
· Prospects for growth remain very encouraging although there are resource-related challenges
Lars-Olof Norell, Chairman, said,
"These very encouraging results - with revenue up 21% to £41.67m and adjusted profit before tax*1 up 13% to £3.56m - reflect the progress K3 has made on many fronts, with both our new and established solutions for the retail and manufacturing and distribution sectors.
A key growth driver continues to be our flagship retail product, which is the outcome of a major development programme. In the period, we achieved two key markers for this product, accreditation as a member of Microsoft's GISV programme - making K3 one of only 25 companies globally to be included in this programme - and first sales through our newly expanded partner channel.
We have a significant opportunity to broaden sales globally for this and other K3 product, which will drive gross margin and recurring revenues.
While cost-related challenges remain, we continue to be confident of the exciting growth prospects available to us."
Enquiries:
K3 Business Technology Group plc | David Bolton (CEO) | T: 020 3178 6378 (today) |
www.k3btg.com | Brian Davis (CFO) | Thereafter 0161 876 4498
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finnCap Limited | Julian Blunt/James Thompson | T: 020 7220 0500 |
(NOMAD) | ||
KTZ Communications | Katie Tzouliadis/Deborah Walter | T: 020 3178 6378 |
Notes:
Note 1 | Adjusted profit from operations and adjusted profit before tax for the six months ended 31 December 2014 is calculated before amortisation of acquired intangibles of £1.61m (2013: £1.71m) and exceptional reorganisation costs of £0.16m (2013: £0.58m).
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Note 2 | Adjusted basic EPS for the six months ended 31 December 2014 is calculated before amortisation of acquired intangibles (net of tax) of £1.29m (2013: £1.05m) and exceptional reorganisation costs (net of tax) of £0.13m (2013: £0.45m). |
CHAIRMAN'S STATEMENT
OVERVIEW
Results for the first half of the new financial year are very encouraging and show the Group continuing to make progress on many fronts. Revenues in the six months increased by 21% to £41.67m and, despite the substantial investment that we are currently making in the business, adjusted profit from operations*1 rose by 14% to £4.11m.
Major new orders in the first half were strong, totalling £12.3m (2014: £12.7m), with all product lines contributing to this result. A total of 81 new customers were added in the period. We are also encouraged by the level of product licence revenues that we derive from our own intellectual property ("IP"), which has grown to £4.89m (2013: £4.11m). This now accounts for 18% of all product licence revenue and we expect it to grow further, benefiting the Group's gross margins.
We are working to increase the international reach of our products with our global partners, which now exceed 60, covering our key technologies.
K3 continues to deliver high levels of recurring revenues from its base of over 3,100 customers. Generated principally from software licence renewals, support contracts and hosting, they have increased by 11% in the period and comprised 48% of Group income.
These encouraging results reflect both the progress we are making with our new and established solutions for the retail, manufacturing and distribution sectors where our own IP that has been developed and enhanced over a number of years gives unique selling points to K3's offerings and help drive recurring revenues.
A key growth driver continues to be our new own IP retail product, powered by the Microsoft Dynamics AX solution ("AX") which has created an enhanced solution meeting the specific needs of retailers globally. We were delighted that this was recognised by Microsoft in November 2014 by being accredited with membership of their Global Independent Software Vendor ("GISV") programme, making K3 the first such partner for the fashion retail sector and one of only 25 companies globally to be included in this programme. The award represents a major endorsement of our IP and the global potential for our products.
The shortage of Microsoft Dynamics AX skills in the UK remains and has had the effect of increasing delivery costs of AX implementations. However, the investment we have made with in-house training and near-shore resourcing is starting to have an impact and we remain focused on reducing delivery costs.
Our hosting and managed services activities continue to be an important focus and contribute to the Group's long term contracted revenues. We have secured a number of sizeable contracts that due to project phasing will show through in later periods. We believe there is significant potential to grow this business in the next 12-18 months.
The Group's results are being presented for the first time in a new format recognising our focus on sectors, and the importance of our IP and recurring revenues. This reflects how the Group now reports internally and the basis on which the Group makes resourcing decisions.
FINANCIAL RESULTS
Six months | Six months | Year | |
to 31 Dec | to 31 Dec | to 30 Jun | |
2014 | 2013 | 2014 | |
Software revenue (£m) | 7.63 | 5.69 | 12.89 |
Services revenue (£m) | 11.93 | 9.19 | 19.83 |
Recurring revenue* (£m) | 19.84 | 17.91 | 35.42 |
Hardware and other revenue (£m) | 2.27 | 1.68 | 3.81 |
Total revenue (£m) | 41.67 | 34.47 | 71.95 |
Gross margin (£m) | 21.11 | 18.92 | 38.96 |
Gross margin % | 50.7% | 54.9% | 54.1% |
Adjusted profit from operations (£m) | 4.11 | 3.61 | 7.30 |
Recurring revenue as % of total revenues | 48% | 52% | 49% |
* from software licence renewals, support contracts, and hosting and managed services
For the first six months to 31 December 2014, revenues rose by 21% to £41.67m (2013: £34.47m). Recurring revenues, from software licence renewals, support contracts, hosting and managed services, accounted for 48% of the total and rose by 11% on the prior period to £19.84m (2013: £17.91m). Software licence sales increased by 34% to a record high of £7.63m (2013: £5.69m) and services income was up 30% to £11.93m (2013: £9.19m) reflecting the excellent level of deals closed in the previous financial year.
Gross margin at £21.11m was up 12% year- on-year (2013: £18.92m) although gross percentage margin reduced to 51% (2013: 55%). This reduction reflected resource cost pressures for implementations although in the last few months of the period our in-house training and near-shore resourcing has helped. Overhead costs increased to £17.0m (2013: £15.3m), including an additional £1.2m of personnel cost and £0.3m of development cost amortisation. A large part of the investment in personnel was in management (partner channel and manufacturing and distribution) and sales resources across the group to support future growth.
Adjusted profit from operations*1 increased by 14% to £4.11m (2013: £3.61m). We incurred £0.16m (2013: £0.58m) of exceptional costs in relation to further organisational and management changes as we simplified the Group's structure. The charge for amortisation of acquired intangibles was £1.61m (2013: £1.71m) with the reduction being due to certain acquisitions now being fully amortised.
Adjusted profit before tax*2 rose by 13% to £3.56m (2013: £3.16m). Profit before tax more than doubled to £1.79m (2013: £0.88m) reflecting the improvement in profit from operations.
Adjusted earnings per share*3 rose by 9% to 8.4p (2013: 7.7p) with basic earnings per share increasing by 34% to 3.9p (2013: 2.9p). Adjusted earnings per share*3 is stated after amortisation of intangibles (net of tax) of £1.29m (2013: £1.05m) and reorganisation costs (net of tax) of £0.13m (2013: £0.45m).
There was a net tax charge for the period of £0.57m (2013: £0.02m credit) after the benefit of a £0.12m deferred tax credit (2013: £0.45m).
Cash flow and banking
Net debt at 31 December 2014 increased to £12.07m (2013: £9.91m) reflecting the significant increase in activity of the business particularly in the last two months of the period, with larger contracts and lower levels of customer deposits leading to a working capital outflow in the period of £1.16m (2013: £1.60m inflow). Cash flow from operations in the first half was £4.30m representing 104% of adjusted profit from operations*1 (2013: £5.85m, representing 162%). The cash generation in the first half year is boosted by the SYSPRO licence and support contract renewals.
The growth of the business has been assisted by additional loan facilities for a three year period agreed in August 2014. Net cash generated from financing in the period was £3.06m (2013: £1.58m absorbed). The expenditure on capitalised development decreased to £1.75m (2013: £1.95m). The development of our IP will remain a key feature of our business. Expenditure on fixed assets and a small acquisition in the current period cost a further £0.78m (2013: £0.23m).
Dividend
In line with the Group's dividend policy, no interim dividend will be declared but the Directors intend to propose a final progressive dividend with results for the full financial year.
Operational Review
SUMMARY
The operational results for the Group are now being reported by industry sector, namely retail, and manufacturing and distribution. This reflects our move to streamline and align our activities globally by customer industry sector.
Group results by industry sector
Revenue | Revenue | Adjusted profit | Adjusted profit | |
six months | six months | six months | six months | |
to 31 Dec | to 31 Dec | to 31 Dec | to 31 Dec | |
2014 | 2013 | 2014 | 2013 | |
£m | £m | £m | £m | |
Retail*4 | 19.63 | 14.67 | 1.06 | 0.47 |
Manufacturing & Distribution*5 | 22.04 | 19.80 | 3.40 | 3.54 |
Head office | - | - | (0.35) | (0.40) |
Total | 41.67 | 34.47 | 4.11 | 3.61 |
Recurring (£m) | 19.84 | 17.91 | ||
Recurring (%) | 47.6% | 52.0% |
K3 Intellectual Property
K3 is increasingly focused on improving sales of its own IP, which will help to enhance Group margins as well as drive recurring revenues. We therefore highlight the Group's current performance against these parameters in the table below. For clarity, it should be noted that the revenue reported in the table above includes the revenue stated below.
Six months | Six months | Year | |
to 31 Dec | to 31 Dec | to 30 Jun | |
2014 | 2013 | 2014 | |
K3 Product Licence Revenue1 (£m) | 4.89 | 4.11 | 9.22 |
K3 Product Related Revenue2 (£m) | 4.18 | 2.86 | 6.46 |
Total K3 Product Revenue (£m) | 9.07 | 6.97 | 15.68 |
Gross Margin (£m) | 5.80 | 4.56 | 10.67 |
Gross Margin % on K3 Product Revenue | 64.0% | 65.0% | 67.8% |
Group Gross Margin % | 50.7% | 54.9% | 54.1% |
1 K3 Product Licence Revenue includes initial and annual software licences.
2 K3 Product Related Revenue represents the additional identifiable revenues which flow directly from our K3 Product sales.
RETAIL ACTIVITIES
Retail results overview
Six months | Six months | Year | |
to 31 Dec | to 31 Dec | to 30 Jun | |
2014 | 2013 | 2014 | |
Software revenue (£m) | 4.08 | 3.39 | 6.62 |
Services revenue (£m) | 7.63 | 5.47 | 12.16 |
Recurring revenue*(£m) | 6.78 | 4.85 | 12.32 |
Hardware and other revenue(£m) | 1.14 | 0.96 | 2.03 |
Total revenue (£m) | 19.63 | 14.67 | 33.13 |
Gross margin (£m) | 8.56 | 6.90 | 16.44 |
Gross margin % | 43.6% | 47.0% | 49.6% |
Adjusted operating profit*4 (£m) | 1.06 | 0.47 | 2.20 |
Recurring revenue as % of total revenues | 34.5% | 33.1% | 37.2% |
Customer Adds | 33 | 30 | 57 |
* from software licence renewals and support contracts
Retail Intellectual Property
Six months | Six months | Year | |
to 31 Dec | to 31 Dec | to 30 Jun | |
2014 | 2013 | 2014 | |
K3 Product Licence Revenue1 (£m) | 2.97 | 2.10 | 5.27 |
K3 Product Related Revenue2 (£m) | 3.97 | 2.57 | 5.98 |
Total K3 Product Revenue (£m) | 6.94 | 4.67 | 11.25 |
Gross Margin (£m) | 3.84 | 2.56 | 6.71 |
Gross Margin % on K3 Product Revenue | 55.4% | 54.8% | 59.7% |
1 K3 Product Licence Revenue includes initial and annual software licences.
2 K3 Product Related Revenue represents the additional identifiable revenues that flow directly from our K3 Product sales.
Introduction
Our core offering to retailers is based around our new flagship product, "ax l is". This product is the outcome of our major IP development programme to deliver our own IP retail product, powered by the Microsoft Dynamics AX solution ("AX") creating a functionally rich product for the retail market. We have done this previously with the Microsoft Dynamics NAV ("NAV") solution, which is typically aimed at mid and smaller-sized retailers. In addition we also offer solutions which are exclusively K3 authored and developed. We augment these products with complementary products, including business information, channel and point of sale software suites. All our products can be provided through the Cloud or on a hosted basis, as well as through traditional on-premise delivery, depending on customer preferences.
Our retail operations are mainly based in the UK and the Netherlands. We also have three satellite offices to support our overseas customers, including Inter IKEA Systems B.V. (the owner and franchisor of the IKEA concept and the largest customer in the Group).
We believe our "ax l is" offering has global sales potential and a central component of our growth plan is to develop a wider international partner channel for both it and our other IP solutions. Sales via this indirect route to market also generate a recurring revenue stream through software licence renewals and support. It was especially pleasing therefore to see the first sales of "ax l is fashion" from our expanding partner channel come through in the period, from Europe, Australasia and North America. We expect to see continuing traction, with the support of Microsoft and channel partners, including global systems integrators. It is testimony to its market appeal that in November 2014, K3 was accredited as Microsoft's first GISV partner for the fashion retail sector. This high status accreditation provides us with extensive technical, sales and marketing support and establishes K3 as Microsoft's preferred partner globally for the fashion sector. In July 2014 we were also named as Microsoft Dynamics ISV of the Year in the UK.
We intend to launch additional K3 authored "ax l is" offerings as we transition to a more product-centric Group. This will include related product to create a family of dedicated solutions addressing key market segments within the retail sector.
Performance
Retail generated total sales of £19.63m, up 34% on the same period last year, driven by sales of our new flagship "ax l is" product and our existing NAV offering as well as a steady flow of work from Inter IKEA and its franchisees. The Dutch fashion and retail market continue to be very slow, with customers deferring software sales in this region. Recurring revenues increased by 40% to £6.78m and accounted for 35% of total retail sales. Software sales rose by 20% to £4.08m. Reflecting the deals closed in previous period, software related services revenue improved by 39% to £7.63m (2013: £5.47m). However, the gross margin on this income stream, at 21%, was hampered by the high cost of AX project delivery as the level of services ramped up to meet demand. This should now improve as cost issues are reduced, helped by initiatives to establish near-shore resource and in-house training.
New orders in the period totalled £6.8m, which was down from the £10.0m achieved in the same period last year but in line with expectations. New wins included deals with Countrywide Farmers and Wasabi, respectively for AX and NAV solutions. Significantly, the first new orders for AX via our expanding international partner channel came through. These included orders from Vince Holding Corp, in the USA, Roberto Verino, in Spain, and Jeanswest in Australia. The total value of sales from our partner channel across all solutions was £2.26m (2013: £1.27m).
Gross margin has grown significantly in the period, reflecting the growth in service revenues, however the gross margin percentage has decreased. The decrease is accounted for by the higher proportion of services income in the overall revenue mix and, for product sales, the agency margin attributed to K3 on the Microsoft embed programme (OEM sales of Microsoft core product) in relation to the NAV fashion wholesale product, Pebblestone. We are encouraged by the growth in IP related revenues and the additional gross margin that this brings.
Prospects
Our retail activities have generated a good level of contracted services revenues which will continue to come through in the second half of the financial year. The new deal pipeline at the period end stood at £26.3m (2013: £38.0m), with the reduction reflecting the strong order wins over the last year which has fuelled services revenues in this period.
MANUFACTURING AND DISTRIBUTION ACTIVITIES
Manufacturing and Distribution Results Overview
Six months | Six months | Year | |
to 31 Dec | to 31 Dec | to 30 Jun | |
2014 | 2013 | 2014 | |
Software revenue(£m) | 3.54 | 2.30 | 6.27 |
Services revenue(£m) | 4.30 | 3.72 | 7.67 |
Recurring revenue* (£m) | 13.06 | 13.06 | 23.09 |
Hardware and other revenue(£m) | 1.14 | 0.72 | 1.79 |
Total revenue (£m) | 22.04 | 19.80 | 38.82 |
Gross margin (£m) | 12.55 | 12.02 | 22.52 |
Gross margin % | 56.9% | 60.7% | 58.0% |
Adjusted operating profit*5 (£m) | 3.40 | 3.54 | 5.49 |
Recurring revenue as % of total revenues | 59.3% | 66.0% | 59.5% |
Customer Adds | 48 | 41 | 105 |
* from software licence renewals, support contracts, and hosting and managed services
Manufacturing and Distribution Intellectual Property
Six months | Six months | Year | |
to 31 Dec | to 31 Dec | to 30 Jun | |
2014 | 2013 | 2014 | |
K3 Product Licence Revenue1 (£m) | 1.92 | 2.01 | 3.96 |
K3 Product Related Revenue2 (£m) | 0.21 | 0.29 | 0.48 |
Total K3 Product Revenue (£m) | 2.13 | 2.30 | 4.44 |
Gross Margin (£m) | 1.96 | 2.00 | 3.96 |
Gross Margin % on K3 Product Revenue | 91.8% | 87.2% | 89.3% |
1 K3 Product Licence Revenue includes initial and annual software licences.
2 K3 Product Related Revenue represents the additional identifiable revenues that flow directly from our K3 Product sales
Introduction
The key offerings to manufacturers and distributors comprise SYSPRO, Sage and Microsoft Dynamics AX and NAV solutions tailored by our own IP for customer requirements.
Supporting these solutions we have many related software products, which have been developed in-house and form part of the overall offering. These serve to enhance the functionality of the core solutions and/or provide valuable integration benefits. They include modules for advanced planning and scheduling, warehouse management, pallet management, data integration and payroll/HR.
To support the products we provide, we also offer hosting and managed services, with a Cloud service recently launched for SYSPRO.
We are the exclusive SYSPRO partner for the UK and Europe and have one of the largest installed user bases in mid-tier manufacturing, with exceptionally high renewals of annual software licence and support contracts. Building on this domestic strength we have invested heavily to establish international distribution channels for not only SYSPRO but also our complementary products.
We are one of the UK's largest Sage partners and the largest reseller globally of their new flagship product "Sage X3".
Having invested heavily in Microsoft Dynamics AX and NAV, these products have yielded very encouraging results, most notably when these technologies have been sold as part of a wider solution encompassing a number of K3's product and service offerings.
Performance
Revenues for the half year increased by 11% to £22.04m (2013: £19.80m), with software sales up 54% to £3.54m (2013: £2.30m). New orders more than doubled to £5.50m (2013: £2.16m). These excellent results benefited from a continuing strong performance from SYSPRO, two large wins for our Microsoft AX and NAV solutions, and increased Sage sales.
Services income in the period increased by 16% to £4.30m (2013: £3.72m) with our available resources in key skill areas being heavily utilised. Skill shortages in both AX and Sage X3 have resulted in higher costs of delivery with a consequent impact on gross margin percentage.
We have been investing significantly in personnel to support future performance, in particular in our SYSPRO resources. This impacted profitability, with adjusted profit from operations*5 reducing by 4% from £3.54m to £3.40m.
Recurring revenues of £13.06m remain high at 59% of the total from our manufacturing and distribution activities (2013: £13.06m) although the unchanged value year-on-year reflects competition in the lower tiers of our Sage offering where there is higher customer volatility. SYSPRO maintenance and support renewals continue to contribute significantly to recurring income, with a 98% renewal rate (2013: 98%). As annual renewals for SYSPRO are billed in October, revenues and cash flows from this segment are significantly weighted to the first half of the financial year.
Our hosting and managed services activities contributed £4.0m to revenues (2013: £3.93m) and is expected to enjoy a stronger second half, benefiting from the activation of projects deferred from the first half together with further internal and external opportunities.
Prospects
The outlook for our manufacturing and distribution activities remains encouraging with new products being introduced such as SYSRPO Business Live (Cloud based SYSPRO), new channel partners in three countries in Europe for SYSPRO, and an upgrade of our Microsoft Dynamics NAV distribution product, K3 Advantage, to the latest version, NAV 2015. The pipeline for our manufacturing and distribution activities has increased by 22% to £29.0m (2013: £23.8m) reflecting these initiatives.
Head Office
Head office costs*6 represent costs after management charges to the trading subsidiaries and reduced in the period to £0.35m (2013: £0.40m).
OUTLOOK
The genesis of our new retail AX based flagship product, formally launched some 16 months ago, illustrates the increasing emphasis we are placing on extending our own IP across our core offerings, and this will remain a key feature, with the consequent benefits on gross margin and recurring revenues.
The opportunity to broaden sales globally through channel partners will also help to drive a valuable stream of long term recurring revenues for K3 and the support of Microsoft within this is significant.
Cost-related challenges, mostly relating to implementations, are being addressed and we remain confident of the exciting growth prospects that are available to us and continue to invest heavily in the business. In addition, we will continue to look at external opportunities and partnerships that will increase our product offerings and accelerate the growth from our existing product portfolios, which together can strengthen our multi product proposition.
Lars-Olof Norell
Chairman
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*1 | Group adjusted profit from operations is calculated before amortisation of acquired intangibles of £1.61m (2013: £1.71m) and exceptional reorganisation costs of £0.16m (2013: £0.58m) |
*2 | Group adjusted profit before tax is calculated before amortisation of acquired intangibles of £1.61m (2013: £1.71m) and exceptional reorganisation costs of £0.16m (2013: £0.58m) |
*3 | Group adjusted earnings per share is calculated before amortisation of acquired intangibles (net of tax) of £1.29m (2013: £1.05m) and exceptional reorganisation costs (net of tax) of £0.13m (2013: £0.45m) |
*4
| Retail adjusted profit from operations is calculated before amortisation of acquired intangibles of £0.32m (2013: £0.31m) and exceptional reorganisation costs of £0.05m (2013: £0.24m) |
*5
| Manufacturing and Distribution adjusted profit from operations is calculated before amortisation of acquired intangibles of £1.29m (2013: £1.40m) and exceptional reorganisation costs of £0.10m (2013: £0.19m) |
*6 | Head office costs are calculated before exceptional reorganisation costs of £nil (2013: £0.15m) |
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| K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED INCOME STATEMENT For the six months ended 31 December 2014
All of the profit for the period is attributable to equity holders of the parent.
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 31 December 2014
All of the total comprehensive income for the period 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.
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2014
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 31 December 2014
K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 31 December 2014
K3 BUSINESS TECHNOLOGY GROUP PLC NOTES TO THE UNAUDITED INTERIM STATEMENT
1. Basis of preparation
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 year ending 30 June 2015 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 2014. 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 June 2015 or are expected to be adopted and effective at 30 June 2015. 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 31 December 2014 and the six months ended 31 December 2013 has neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board. The financial information for the year ended 30 June 2014 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 30 June 2014 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 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.
2. Tax expense (income)
3. Earnings per share
The calculations of earnings per share are based on the profit for the financial period and the following numbers of shares:
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:
4. Loans and borrowings
The bank loans and other facilities include a multi-option facility which expires in August 2017.
5. Other non-current liabilities
6. Trade and other payables
7. Notes to the cash flow statement
Cash generated from operations is stated after exceptional reorganisation 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:
Acquisition of subsidiaries and other business units, net of cash acquired comprises:
8. The above information is being sent to the 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.
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