K3 Business Technology Group Regulatory News (KBT)

AIM: KBT

13 July 2010

K3 BUSINESS TECHNOLOGY GROUP PLC

("K3" or "the Group")

Pre Close Trading Update

K3, which supplies and supports Microsoft-based Enterprise Resource Planning software for the supply chain industry, announces the following update on trading prior to entering its close period. Following the change of K3's financial year end (from 31 December to 30 June), forthcoming audited results will cover the 18 month period to 30 June 2010. For comparative purposes, the statement will also provide details of results for the 12 month period to 30 June 2010.

The Directors are pleased to report that results for the 12 and 18 month periods ended 30 June 2010 are anticipated to be in line with market expectations. Despite the difficult economic backdrop, trading across both the Group's divisions, Retail Software and Manufacturing Software, has been encouraging. In addition, the high levels of predictable income, generated from software licence renewals and maintenance revenues, continue to support K3's performance. The Group generates good cash flows, with a seasonal weighting in October-December and, notwithstanding the three cash-based acquisitions completed between March and 30 June 2010, net debt at 30 June 2010 has reduced by approximately £2.5m from the same point last year (2009: £13.53m).

The Retail Software Division made good progress over the twelve month period ended 30 June 2010, securing more new business wins than during the same period last year, with growth led by K3's multi-channel retail offering. We achieved a significant overall improvement in the Division's European retail software operations, based in Holland, and IKEA's recent decision to standardise franchisee IT platforms should benefit the Dutch operations over the next three years.

The Manufacturing Software Division saw a slow start to 2010 but finished the 12 months to 30 June ahead of last year's result, with its performance supported by steady levels of services income and a marked pick up in new business pipelines in the final quarter of that period. Our K3 AX unit, which addresses the process manufacturing marketplace, improved markedly year on year, with the benefits of the reorganisation completed in 2009 coming through, and new business pipelines look strong.

Our three recent acquisitions, Digimis, the cloud computing services provider, Pebblestone Netherlands, the specialist ERP solutions provider to the fashion industry, and Pebblestone IP, are integrating well. They open up new opportunities for the Group, especially as we expand our managed services offering and build our European activities. The strategic partnership we signed with Omnica Ltd, the multi-channel retail software solutions specialist, at the end of June also strengthens our multi-channel offering to retailers.

The Board anticipates announcing results in mid September 2010 when it will provide a further update on trading.

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