K3 upbeat despite high-margin orders falling through

Tom Wright
@TomWrightCRN
27 July 2020

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K3 has issued upbeat full-year results, despite sales declining and a number of high-margin deals not completing.

Sales for the 12-month period ending 30 November 2019 fell 5.9 per cent year on year to £78.4m, while a £700k reported profit from operations last year swung to a £13.7m loss - mostly as a result of a £12.2m impairment related to the UK dynamics business, which went into administration in April.

But the business said it "has the operational and financial capacity to weather the coronavirus crisis and views prospects positively beyond the current period of uncertainty".

CEO Adalsteinn Valdimarsson said that, despite the decline, K3's own intellectual property continues to make progress.

"Results show the impact of certain expected high-margin orders not coming through as well as weaker trading conditions," he said.

"We are confident that K3 has the financial and operational capacity to weather the current challenges created by the coronavirus pandemic and we remain positive about K3's growth prospects beyond the crisis.

"We have a stable cash generative business and believes that our own IP products can create significant value."

The CEO added that K3 has secured additional liquidity in the form of £6m in loans from major shareholders and Barclays.

The firm's £21m-revenue Microsoft Dynamics reseller business was placed in administration in April, with chairman Jonathan Manley saying in this latest trading update that the group could "no longer support" the units loses.

The coronavirus pandemic has also wreaked havoc in the UK retail industry, which is a vertical K3 serves.

It said that around 6.9 per cent of its total revenue is related to the UK high street fashion and apparel space, down from 8.6 per cent in the previous year.