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K3 Business Technology – interims, meaningful progress now being made?

By Steve Moore | Monday 9 July 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Writing previously on K3 Business Technology (KBT) towards the end of 2017, I concluded I’d want further evidence of meaningful progress before reconsidering a present cautious stance. Half-year results today include “pleased with the progress K3 has made over the first half… we believe that K3 is very well-positioned to make further progress over the second half of the year, and view growth prospects with confidence”

The results show a return to profit on an adjusted basis as revenue was increased (to £41.4 million) and “lower cost base, recovery in productivity, and growth in own IP software licences” emphasised. After though particularly working capital outflow, net debt increased by £4.2 million to £8.5 million.

Total non-current liabilities increased by £3.9 million to £12.6 million, though net current assets were £4.7 million higher to £7.6 million – with the company noting it “continues to work on reducing working capital balances” and “with the seasonally stronger weighting in software licence and support contract renewals in the second half, the group's cash generation should show further progress by the financial year end”.

It is added “we expect good growth across the group, with the ongoing development of channel partner sales, opportunities in global accounts and renewed sales momentum”, with confidence “supported by a healthy new business pipeline and expected high levels of renewals”.

With a market cap of more than £90 million, significant further recovery needs to be delivered to justify the valuation. However, it looks to be on the right track and to now merit a place on watchlists.

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