K3 Business Technology Group Regulatory News (KBT)

20 January 2016

AIM: KBT

K3 Business Technology Group

("K3" or "the Group")

Trading Update

K3, which provides and supports software, hosting and managed services to the retail, manufacturing and distribution sectors, provides the following update on trading for the six months to 31 December 2015.

The Board is pleased with the progress K3 has made in the first half of the financial year, particularly with its transition to focus on software products with increasing levels of its own intellectual property. The Group's strategy to drive sales through channel partners also continued to show excellent progress and K3 signed its first major software order through a global systems integrator ("GSI") in the period, as reported on 15 September. It has since secured a further major order through another GSI, with details to be disclosed in due course.

Group profitability for the first half is expected to show a significant increase year-on-year in line with management expectations, reflecting a strong performance in retail activities and the benefits of reorganisation changes. Revenues for the period were flat, reflecting lower performance in non-core activities as well as a shift toward cloud-based consumption. K3's cloud hosting revenues grew significantly during the period, with the contracted run rate at 31 December 2015 increasing by approximately 15% since 30 June 2015. K3 expects the cloud-based consumption trend to be an increasing feature of the revenue mix, together with rising channel partner sales and hosting.

Net debt at the period end is anticipated to show a reduction of £1.7m over the first half to £10.4m, also in line with management expectations.

K3 remains well positioned to attain market forecasts for the financial year, with high levels of recurring revenues as well as a strong pipeline of prospects.

The Board expects the half year results to be issued in mid-March.

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