K3 Business Technology Group Regulatory News (KBT)

AIM: KBT

K3 BUSINESS TECHNOLOGY GROUP PLC

("K3" or "the Group")

Trading Update

K3, which provides and supports Enterprise Resource Planning software, hosting and managed services to the retail and supply chain industries, is pleased to provide the following update on trading for the financial year ending 30 June 2014.

Trading in the second half of the financial year across the Group has been good and, accordingly, the Board expects results for the year to be in line with market expectations.

There has been continuing momentum in H2 in the Microsoft-based operations. Demand for K3's new flagship solution for retailers, "ax|is", which is based on Microsoft's Dynamic AX product, remains extremely encouraging and K3 signed further major new orders for the solution. As planned, the Group has continued to invest in additional AX resource and in software development. Microsoft remains highly supportive as K3 pursues its strategy of developing a global channel to market for this offering. The Group's operating divisions outside the Microsoft-based operations will also show year-on-year progress.

Recurring income is expected to show a year-on-year increase and operating cash flows remain robust. Net debt at 30 June 2014 is anticipated to be c.£13.6m (2013: £13.8m), reflecting the high levels of trading activity in the final quarter, investment in product development and the costs of the significant changes required to move to a new organisational structure and position the business for the future. The net debt position will reduce in the first half of the new financial year in line with historic patterns of cash flows and improving profitability should lead to a year-on-year reduction in net debt.

Full year results will be published in mid September.

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