K3 Business Technology transition continues

The decision by K3 Business Technology Group to focus on full square on the retail vertical has continued to deliver improvements to the firm’s position.

The channel player has been a business in transition over the past couple of years and has shown further progress in its interim results for the six months to 31 May.

The firm delivered £20.3m in revenues in H1, up from £19.9m a year earlier. Pre-tax losses remained stable at around £2.9m.

The overall performance was ahead of management expectations. The firm now counts income from new contracts secured by strategic fashion and apparel products over the term of the contract, instead of upfront. As a result, around £1.1m of income was not recognised in the first-half period.

K3 products division continued to drive sales from the firm’s fashion and apparel offering, with revenues of £6.5m flat year on year because of the impact of legacy products.

The firm has been following a strategy set out by K3 CEO Marco Vergani, who joined in March 2021, with his time in charge including disposals of non-core operations and a focus on the firm’s own enterprise resource planning (ERP) solution. 

Vergani said that the business had made progress in the first half and saw reasons to be positive about the prospects for the rest of the fiscal year.

“We made encouraging progress in key strategic areas of the business in the first half. We are especially pleased with the performance of our strategic products for the fashion and apparel market in the K3 products division. Our flagship K3 fashion product has the potential to maintain its high growth trajectory and has strong endorsement from Microsoft,” he said.

“Third-party solutions remains a cash engine for the group, and the division will generate high cash inflows in the second half of the financial year as software licence and maintenance and support renewals come through,” he added.

Vergani also touched on its ongoing strategy and restated its commitment to focusing on products that will deliver improved margins.

“Our healthy balance sheet underpins the improvements that we are making to the business. We remain focused on our high-margin growth opportunities, cost discipline and adjusted net cash as we continue to move to higher quality earnings,” he said.

Looking ahead, the interim results stated that trading and cash flow were both in line with management expectations and the new business pipeline was looking strong.

The firm is targeting annual growth of 30% in recurring revenue, with its strategic fashion products this year and in the future.

There was also an ongoing commitment to continue simplifying operations, reducing central cost and sticking with the transition to higher margin growth activities.