Trading update

AIM: KBT

K3 Business Technology Group plc

("K3")

Trading Update

K3, which provides mission-critical software, cloud solutions and managed services to the retail, manufacturing and distribution sectors, provides a trading update for the first six months of the current financial year. 

K3 has made important progress over the first half in its operational reorganisation. However, trading in December, a key selling period, has not been as strong as expected, reflecting a softening in market conditions. Given the lengthening sales cycles around larger deals and the accelerating industry shift to cloud-based consumption, management now believes it prudent to expect that EBITDA (pre-exceptional items) for the full year will be approximately £3.5m less than the originally anticipated.

The operational reorganisation, announced in the autumn, is largely complete and has established a more unified and streamlined operating structure across the Group. This will enhance sales opportunities and deliver cost efficiencies. The associated exceptional costs are expected to amount to approximately £3.0m, with the annualised future benefit likely to exceed £3.0m. The Board will continue to look for additional efficiencies.

The Board views K3's prospects positively, supported by the pipeline of opportunities and the benefits expected to flow from the reorganisation. The quality of the Group's earnings continues to improve as a result of the increasing adoption of cloud-based consumption and the ongoing own IP strategy, with recurring revenues remaining high. Cash conversion is also expected to increase through further improvements in working capital management.

The Board intends to issue half year results towards the end of March. 

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