Retail specialist K3 Business Technology Group has weathered the storm and hit its revised FY13 numbers, despite issuing a profit warning earlier this year.
The firm posted turnover of £63.5m for the financial year, compared with £67.9m last year, with recurring maintenance and support revenue up at £34.5m, compared with £33.7m in 2012. However, pre-tax profit plummeted to £4.3m compared with £10m the previous year, but on a positive note net debt fell to £13.8m, from £15.6m in 2012.
But the VAR is investing heavily in Microsoft’s AX retail solution – codenamed Project Gemstone – which it claims will pay dividends in the new financial year and beyond.
Tom Milne, chairman of K3, said the year had been one of K3’s toughest to date.
“The year combined very weak markets, especially in the retail sector, at a time of major investment in Project Gemstone, which is delivering a new Microsoft-certified AX solution for the retail market.
"The final quarter of the financial year ended very encouragingly, however. We secured a number of initial order wins for the first release of Gemstone with some high-profile retailers.
“We also sold significantly more of our established Microsoft NAV-based retail solution in this quarter than in any other quarter in the year. The full benefit of these wins will be felt in the new financial year. More generally, there seem to be signs that retailers are returning to spending on technology.”
He said the new financial year was looking encouraging.
“There is positive momentum in the SYSPRO and Sage Division, and the International Division will benefit from strong demand from Inter IKEA Systems B.V. (the owner and franchiser of the IKEA concept). Having completed our investment and reorganisation in the Managed Services Division, we expect to see a significant improvement in the division’s performance.”
He added: “Financially, the Group remains robust, with good cash generation and high levels of recurring revenue, which continues to be a major strength of the business. With initial implementations of our new Gemstone functionality completed and signs of an improving market, K3 enters the new financial year in a stronger position and we expect to see a much improved financial performance.”
Angela Eager, research director at analyst TechMarketView, said it was a nerve-wracking time for the business.
“K3 is still pouring revenue into product development, including the Microsoft AX-based Gemstone multi-channel retail suite. Initial modules are attracting customers and the full product is expected in mid-2014 so the proof point for the product is rapidly approaching,” she said. “Early signs are positive, with four confirmed contracts and two more expected soon. They are phase-one deals though, so the onus is on K3 to execute well to release up to £8m in follow-on sales.
“We think K3 is in the right spot because retail is undergoing major change as technology alters the way customers buy, and industry solutions are the way to go, but this is still a nerve-wracking time for the business.”
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