K3 continues to slim down business with Sage unit sale

K3 Business Technology has continued to divest its non-core operations by selling off its Sage business for £1.68m.

Pinnacle Computing has picked up the business, bolstering its position as one of the largest Sage channel players in the UK.

The deal should complete next month, following a TUPE consultation process in respect of the transfer of employees. In the fiscal year to 30 November 2020, the Sage business generated revenue of £5.2m and a pre-tax loss of £1m. Current recurring revenue is £3.1m, with gross profit of £1.5m. Net liabilities stood at approximately £1m on 30 May 2021.

For K3, this is the latest disposal as part of a strategy that has been followed by the board for the past couple of years. In April 2020, the channel player placed its loss-making UK Dynamics business into administration, leaving the group focused on profitable core units. The firm continued to trim its portfolio with the sale of Starcom Technologies in February 2021, for £14.7m, to Node4.

K3 expects the sale to strengthen its balance sheet and generate pre-tax profit of approximately £1.6m, which will be accounted for as an exceptional contribution to trading results in the current financial year, ending 30 November 2021.

“The sale of our Sage business is another step forward as we continue to sharpen K3’s focus and simplify its operations around its higher margin core products and strategic markets,” said Tom Crawford, chairman of K3 Business Technology Group.

“Following this transaction and other disposals over the last two years, the group is more streamlined, market-focused and strategically better positioned,” he added.

Platinum Sage partner Pinnacle has used acquisition as a means of expanding its footprint in the past, particularly picking up units that specialise in Sage.

Earlier this summer, the firm moved for the Sage business of TMS Scotland, based near Falkirk, adding more depth to its operations north of the border.

Pinnacle managing director James Spencer said the acquisition would add more depth to its business. “The Sage business will transition very smoothly into our operations, benefiting from our scale and depth of focus,” he said. “We are excited for both the team and customers to join Pinnacle to bolster our operations and delivery within the Sage markets.”