K3 Business Technology pulls out of formal sale process

Software firm K3 Business Technology Group has terminated its previously announced formal sale process with immediate effect, after deciding that the proposals it had received are not at 'a level that would be acceptable to shareholders and are therefore not recommendable by the board'.

The news came as the firm restated its results for the year ended June 30th. Revenue for the year increased from £52.8m to £67.96m, boosting gross profit from £29.3m to £39.5m. Cost of sales rose from £23.5m to £28.5m. Pre-tax profit for the 12 months rose slightly from £4.9m to £6.0m. The final dividend for the year was increased to 1.0p per share (2011: 0.75p).

Adjusted earnings per share increased by 10% over the year to 30.2p (2011: 27.5p) while basic earnings per share increased by 16% to 20.3p over the year (2011: 17.5p).

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Cash generated from operations was £7.28m (2011: £5.64m). Operating cash flows in the year included £1.24m in respect of regularising liabilities that were significantly outside normal statutory due dates and commercial terms at the date of acquiring companies and trades, £0.59m of acquisition costs, £0.32m of exceptional reorganisation costs and £0.76m of exceptional income relating to the sale of IP.

Chairman Tom Milne said: "In tough trading conditions, K3 delivered good results for the year. One of the strengths of the business is that a considerable portion of group income is recurring, with existing customers accounting for recurring revenues of £33.74m, up 40% on last year. Revenues also benefited from the five significant acquisitions completed in the year.

"All four of our divisions recorded increases in revenue year-on-year although the Microsoft UK Division was affected both by market conditions and our investment programme, and saw profitability decrease. Against that, the International Division delivered an especially good performance and the Managed Services Division continues to show significant growth potential. We signed £13.3m of major new contract wins across the group, up 20% on last year, with many of the benefits still to come. Deal slippage continues to be a feature of the trading environment.

"We see the new financial year as a year of investment, with two areas of specific focus being our Microsoft Dynamics AX product and Managed Services. We anticipate that the benefits of our investment programme should come through during the course of 2013."

The share price fell 16.67% to 147.50p by 13:28.

NR