Interim Results
K3 Business Technology Group PLC
06 September 2002
K3 BUSINESS TECHNOLOGY GROUP PLC ('K3')
INTERIM RESULTS
FOR THE SIX MONTHS TO 30 JUNE 2002
In the last 18 months, the company has been significantly transformed under new
management and K3 is now wholly focused on the provision of supply chain
management and e-business solutions. The sale of a non-core, subsidiary
operation, Touchline, is currently under discussion.
The results of the same period last year do not offer a like-for-like comparison
of trading. They comprise three months contribution from the disposed of
hardware businesses and only three months contribution from the ERP businesses.
• Turnover up by 14% to £3.94 million (2001: £3.45million)
• Group operating profit before goodwill amortisation of £220,000 (2001:
loss of £75,000)
• Business Systems Division:
- turnover up by 6% in period to £2.3 million
- new versions of Omnis and Sigma products well received
- expect continuing strong trading in second half
• Enterprise Systems Division:
- turnover declined by 9% to £1.5 million due to order deferrals
- three major new contracts confirmed in August
- encouraging order pipeline, despite difficult market conditions
• Board remains cautiously optimistic of prospects
Enquiries:
K3 Business Technology Group plc Tel: 01270 211211
Andy Makeham, chief executive
David Bolton, finance director
Biddicks Tel: 020 7448 1000
Katie Tzouliadis or Kathryn Burn
Rowan Dartington & Co. Limited Tel: 0117 933 0010
Barrie Newton, managing director
K3 BUSINESS TECHNOLOGY GROUP PLC - INTERIM RESULTS
CHAIRMAN'S STATEMENT
OVERVIEW
Sales for the core ERP businesses overall were comparable with those for 2001.
The Business Systems division performed strongly, however the sales of the
Enterprise Systems division declined, with some decisions being deferred.
Overall, K3's performance for the first six months was below management
expectations due largely to the poor performance and non-disposal of Touchline,
where operating losses grew to £137,000.
At the end of June, we commenced a programme to consolidate the two ERP
divisions, the full monthly impact of which will be felt from September 2002.
Additionally, the cost base of Touchline has been reduced thereby minimising
future losses whilst the sale of this business is completed.
FINANCIAL RESULTS
Turnover for the half year to 30 June 2002 increased by 14% to £3.94m (2001:
£3.45m) and the group generated an operating profit before goodwill amortisation
of £0.22m (2001: loss of £0.08m). The loss before tax and goodwill for the six
months to 30 June 2002 was £0.05m (2001: loss of £0.88m) resulting in an
earnings per share (pre-goodwill amortisation) of 0.4p (2001: a loss per share
of 2.0p). (It is important to note that the results for the six months to June
2001 comprised three months contribution from discontinued businesses for the
period January to March 2001, together with only three months contribution from
the ERP businesses for the period April to June 2001.)
At 30 June 2002, the Group had an overdraft of £0.18m compared to a positive
cash balance of £0.25m at 30 June 2001 and an overdraft of £0.06m at 31 December
2001.
The directors do not propose to pay an interim dividend (2001: nil).
OPERATIONAL REVIEW
Business Systems Division
The Business Systems division at Walton-on-Thames registered very strong new
sales activity, up 46% on the comparable period last year. The new releases of
product, including Omnis which is a new Windows/Browser version of the well
established Micross manufacturing control system and Sigma, the latest release
of Omicron, K3's integrated financial control system, were particularly well
received at a forum for the Group's customers held in June, which we believe
will underpin a strong full year performance.
Enterprise Systems Division
While the Enterprise Systems division at Crewe continued to enjoy a strong
pipeline in the first half of 2002, the conversion rate into orders was
disappointing and major new business which was expected towards the end of the
first half was not confirmed. However, I am pleased to report that the position
has improved since the end of June, with three major new business contracts
recently having been confirmed.
We began the process of consolidating the ERP divisions during the summer. With
this substantially completed, the lower level of operating costs will help to
underpin the future profitability of the business.
K3 BUSINESS TECHNOLOGY GROUP PLC - INTERIM RESULTS
Touchline
We are currently in discussions to sell Touchline and expect to conclude
negotiations in the second half. However, during the period we reduced costs to
minimise losses whilst those discussions take place.
BOARD CHANGES
I was very pleased to be appointed as non-executive chairman of the company on
14 May 2002, taking over from Johan Claesson, who stepped down as chairman to
become a non-executive director. On behalf of the board, I would like to thank
Johan for his efforts in effecting a major restructuring of the company and I
look forward to working with him and the management team going forward.
PROSPECTS
Market conditions remain difficult and, whilst traditionally the second half of
the year is the strongest period, the outcome for the year is dependent on
closing significant new business sales. Given the recent new contract awards
and the rationalisation programme the management has undertaken, the board
remains cautiously optimistic.
George Matthews
Chairman
K3 BUSINESS TECHNOLOGY GROUP PLC - INTERIM RESULTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2002
Unaudited Unaudited Audited
Six months Six months Year
to 30 Jun to 30 Jun to 31 Dec 2001
Notes 2002 2001
£'000 £'000 £'000
Turnover
Continuing 3,944 2,294 6,817
Discontinued - 1,155 1,155
Total 3,944 3,449 7,972
Operating profit (loss) before goodwill
amortisation
Continuing 220 234 1,077
Discontinued - (309) (367)
Total 220 (75) 710
Goodwill amortisation (242) (122) (534)
Operating profit (loss) (22) (197) 176
Loss on disposal of operations - (659) (1,463)
Net interest payable and similar charges (27) (25) (86)
Loss on ordinary activities before taxation (49) (881) (1,373)
Tax on loss on ordinary activities - - (246)
Loss for the financial period (49) (881) (1,619)
Earnings (loss) per share
Basic 3 (0.1p) (2.3p) (3.6p)
Basic (pre-goodwill amortisation) 3 0.4p (2.0p) (2.4p)
Diluted 3 (0.1p) (2.3p) (3.6p)
Basic before exceptional items 3 (0.1p) (0.6p) (0.3p)
The group has no recognised gains or losses in any of the above periods other
than the loss for that period.
K3 BUSINESS TECHNOLOGY GROUP PLC - INTERIM RESULTS
CONSOLIDATED BALANCE SHEET
As at 30 June 2002
Unaudited As Unaudited Audited
at As at As at
30 Jun 2002 30 Jun 2001 31 Dec 2001
Notes
£'000 £'000 £'000
Fixed assets
Goodwill 4,038 4.824 4,280
Tangible assets 567 366 618
4,605 5,190 4,898
Current assets
Properties for resale 70 145 70
Debtors - due within one year 2,982 2,363 3,204
- due after one year 250 1,045 250
Cash at bank and in hand - 253 -
3,302 3,806 3,524
Creditors: amounts falling due within 4
one year (4,933) (4,655) (5,265)
Net current liabilities (1,631) (849) (1,741)
Total assets less current liabilities 2,974 4,341 3,157
Creditors: amounts falling due after more than
one year (70) (400) (85)
Provisions for liabilities and charges (12) (202) (131)
Net assets 2,892 3,739 2,941
Capital and reserves
Called-up share capital 5 2,540 2,536 2,536
Shares to be issued 5 58 73 73
Share premium account 6 6,452 6,501 6,441
Other reserve 6 2,320 2,320 2,320
Profit and loss account 6 (8,478) (7,691) (8,429)
Equity shareholders' funds 2,892 3,739 2,941
K3 BUSINESS TECHNOLOGY GROUP PLC - INTERIM RESULTS
CONSOLIDATED CASH FLOW STATEMENT
For the period ended 30 June 2002
Unaudited Unaudited Audited
Six months Six months Year to
to 30 Jun 2002 to 30 Jun 2001 31 Dec 2001
Notes
£'000 £'000 £'000
Net cash outflow from operating activities 7 (7) (292) (414)
Returns on investments and servicing of finance (10) (25) (33)
Taxation - (11) (11)
Capital expenditure and financial investment (62) (44) (89)
Acquisitions and disposals - 891 891
Cash (outflow) inflow before financing (79) 519 344
Financing (40) 78 (63)
(Decrease) increase in cash in the period (119) 597 281
K3 BUSINESS TECHNOLOGY GROUP PLC - INTERIM RESULTS
NOTES TO THE FINANCIAL STATEMENTS
1. The summarised results for the six months ended 30 June
2002, which are unaudited, have been prepared in accordance with the accounting
policies adopted in the accounts for the year ended 31 December 2001.
2. The figures for the year ended 31 December 2001 have been
extracted from the statutory accounts which have been filed with the Registrar
of Companies. The audit report was unqualified and did not contain any
statement under section 237 (2) and (3) of the Companies Act 1985.
3. Earnings (loss) per share
The calculations of earnings (loss) per share are based on the following
earnings (losses) and numbers of shares:
Unaudited six Unaudited six Audited year
months to 30 Jun months to 30 Jun to 31 Dec 2001
2002 2001
£'000 £'000 £'000
Loss for the financial period (49) (881) (1,619)
Goodwill amortisation 242 122 534
Profit (loss) pre-goodwill amortisation 193 (759) (1,085)
Loss for the financial period (49) (881) (1,619)
Loss on disposal of operations - 659 1,463
Loss before exceptional items (49) (222) (156)
No. of shares No. of shares No. of shares
Weighted average number of shares 50,794,279 38,875,933 44,957,508
4. Creditors: amounts falling due within one year
Included in creditors due within one year is deferred income of £2,135,000
(2001: £2,653,000) relating to income from support which is generally invoiced
in advance and taken to income in equal monthly instalments over the relevant
periods.
5. Called-up share capital and shares to be issued
On 1 January 2002, the Company issued 66,000 ordinary shares of 5p each in
relation to the acquisition of Touchline Network Television Limited. The
balance of the further shares to be issued of 264,000 ordinary shares of 5p each
is included at the fair value at the date of acquisition.
K3 BUSINESS TECHNOLOGY GROUP PLC - INTERIM RESULTS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. Reserves
Share Other Profit and Total
premium reserve loss
account account
£'000 £'000 £'000 £'000
At 1 January 2002 6,441 2,320 (8,429) 332
Retained loss for the period - - (49) (49)
Share capital issued 11 - - 11
At 30 June 2002 6,452 2,320 (8,478) 294
7. Cash flow statement
Reconciliation of operating (loss) profit to operating cash flows
Unaudited Unaudited Audited Year
Six months Six months to 31 Dec 2001
to 30 Jun 2002 to 30 Jun 2001
£000 £000 £000
Operating (loss) profit (22) (197) 176
Depreciation and fixed asset impairment 113 110 211
Write down of investment - - 7
Amortisation of goodwill 242 122 534
Increase in stocks - (62) (62)
Decrease (increase) in debtors 222 (570) (1,418)
(Decrease) increase in creditors (443) 346 250
Decrease in provisions (119) (41) (112)
(7) (292) (414)
8. The above information is being sent to the shareholders and
is available from the Company's registered office: RAP House, Harrison Street,
Briercliffe, Burnley, Lancashire, BB10 2HP.
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