REG - K3 Bus Tech Grp PLC - Final Results
27/02/2025 07:15
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RNS Number : 6147Y K3 Business Technology Group PLC 27 February 2025
AIM: KBT
K3 BUSINESS TECHNOLOGY GROUP PLC
("K3" or "the Group" or "the Company")
Provider of business-critical software solutions focused on fashion and
apparel brands.
Audited final results for the year to 30 November 2024
Key Points
FY 2024 FY 2023 Change
(re-presented)(2)
Revenue from continuing operations £23.2m £31.3m -26%
Recurring revenue (ARR) £16.7m £16.8m -1%
Gross profit £14.8m £18.6m -21%
- gross margin 64% 59% +5ppt
Adjusted operating loss(1) £(1.1)m £(1.4)m -18%
Loss before tax from continuing operations £(2.8)m £(2.3)m +21%
Net cash(3) £3.6m £8.3m n/a(3)
Reported loss per share from continuing operations (5.4)p (5.3)p -0.1p
Adjusted loss per share for continuing operations (3.4)p (4.7)p +1.3p
(1) Refer to glossary of terms on page 27 for these and other definitions
throughout the document.
(2) The 2023 results have been re-presented to show NexSys Solutions Limited
and K3 Systems Support Limited as discontinued operations in line with IFRS 5.
See Note 5 for further details. All future references to re-presented in this
document refer to these discontinued operations.
(3) The 2024 cash excludes cash held by NexSys Solutions Limited and K3
Systems Support Limited as discontinued operations. The prior year statement
of financial position has not been re-presented in line with IFRS 5. See Note
5 for further details.
Financial
l Results in line with management expectations.
l Improved cash generation and continued cost discipline supported increased net
cash balances at financial year-end of £8.9m (30 November 2023: £8.3m),
which includes the businesses held for sale. Excluding the businesses held for
sale, net cash at year-end was £3.6m.
l Total revenue from continuing operations of £23.2m (2023: re-presented
£31.3m) mainly reflected decrease in revenue from Global Accounts, which was
expected. Annual recurring revenue ("ARR") was consistent year-on-year at
£16.7m, and total software ARR run rate as at year-end increased by 3% to
£11.8m (2023: re-presented £11.5m).
l Adjusted operating loss reduced to £(1.1)m (2023: re-presented £(1.4)m).
l Sale of NexSys Solutions Limited ("NexSys") agreed at close of financial
year-end with disposal completed post year-end in January 2025 for £36.0m
(gross cash):
o acquired by SYSPRO, the global ERP software provider controlled by funds
managed and/or advised by Advent International LP ("Advent"), the
international software investor.
o NexSys results are excluded from the Group's continuing operations.
Operational
l K3 Products division (continuing operations).
o Revenue of £12.3m (2023: re-presented £12.7m); 96% of revenue was recurring.
o Gross profit of £9.9m (2023: £10.0m).
o Gross profit margin of 80% (2023: 79%).
o ARR run rate as at year-end for the Fashion portfolio up 3% to £6.0m (2023:
£5.8m) and net retention rate of 100%.
l Third-party Solutions division (continuing operations).
o Revenue of £10.9m (2023: re-presented £18.6m) and gross profit of £4.8m
(2023: re-presented £8.6m).
o Gross profit margin of 45% (2023: re-presented 46%).
o The anticipated decrease in activity at Global Accounts was managed
effectively with appropriate adjustments to the cost base.
Current Trading and Prospects
l The Board remains focused on cash management and cost discipline, and expects
the continuing operations to be month-on-month cash breakeven from end of
February 2025.
l In the first quarter of the new financial year, the Group's continuing
operations traded in line with management expectations and 2024 gross profit
levels;
o legacy revenue decline is ongoing, but managed, and Global Accounts has a
lower but now stable services run-rate as expected.
l The Board anticipates returning a substantial proportion of the net proceeds
of the NexSys sale via a Tender Offer to shareholders in due course;
o a further update will be provided as soon as possible.
Eric Dodd, Chief Executive Officer of K3 Business Technology Group plc, said:
"It was a challenging year, especially at Global Accounts, where activity
levels reduced significantly, as we previously reported. Nonetheless, results
are in line with our expectations, helped by the actions we took over costs
and resources to maintain firm financial discipline.
"We were pleased to agree the sale of NexSys at an attractive valuation at the
close of the financial year. It enables us to return significant cash to
shareholders, and our focus remains on shareholder value. The ongoing
operations are performing to budget and should trade at cash breakeven from
the end of February, as planned.
"We will make a further announcement on the return of cash to shareholders in
due course."
Enquiries:
K3 Business Technology Group plc Oliver Scott, Chair T: c/o 020 3178 6378
www.k3btg.com (http://www.k3btg.com) Eric Dodd, Chief Executive Officer
Cavendish Capital Markets Julian Blunt/ Dan Hodkinson T: 020 7220 0500
(NOMAD & Broker) (Corporate Finance)
Sunila De Silva
(Corporate Broking)
KTZ Communications Katie Tzouliadis/ Robert Morton T: 020 3178 6378
CHAIR AND CHIEF EXECUTIVE OFFICER'S REPORT
Overview
It was a challenging year, especially at Global Accounts as previously
reported. However, the Group's overall results were in line with management
expectations of both underlying profitability and cash generation.
Results were supported by the Board's continuing strong focus on financial
discipline and its remedial actions - taken over 2023 and 2024 - to bring the
cost base more closely into line with activity levels where required.
Group revenue from continuing operations decreased to £23.2m (2023:
re-presented £31.3m), which mainly reflected the significant reduction in
activity at Global Accounts. However, the adjusted operating loss improved,
decreasing to a loss of £1.1m from a loss of £1.4m (re-presented) in the
prior year. This was a satisfactory result, and it should be noted that these
figures exclude the highly profitable NexSys Solutions Limited ("NexSys")
business unit and K3 Systems Support Limited ("SSL"), classified as held for
sale.
Cash generation also improved, and net cash (including NexSys and SSL) at the
financial year-end was higher at £8.9m from £8.3m at the same point in the
prior year. This was after significant restructuring costs. Excluding the
NexSys and SSL operations, net cash at 30 November 2024 was £3.6m. Some of
the cost reduction measures put into effect in 2024 are still to come through
fully and will be felt in the new financial year. The Group's continuing
operations remain on track to trade at breakeven from the close of the current
financial quarter.
At the end of the financial year, we agreed the sale of NexSys. NexSys
accounted for over half of the revenues of the Third-party Solutions division
in the year and it also generates high levels of cash flows from software
licence and support and maintenance contract renewals. The sale was agreed
with SYSPRO, the global ERP software provider controlled by funds managed
and/or advised by Advent International LP ("Advent"), for a total gross cash
consideration of £36.0m in cash. The sale was approved by shareholders at a
General Meeting on 19 December 2024 and completion and cash received on 6
January 2025. The price achieved was at a premium of c.29% to the market
capitalisation of K3, which stood at approximately £28m as at 29 November
2024 and at a c.31% and c.16% premium to K3's average market capitalisation
respectively one month and three months prior to 2 December 2024, being the
date of the announcement of its sale.
The net proceeds of the sale after deducting transaction costs and associated
fees were £34.3m. After considering the most effective and practicable way of
distributing net proceeds, following a reorganisation of reserves, the Board
anticipates returning a substantial portion of the net proceeds to
shareholders, likely to be distributed by way of a Tender Offer. A small
balance of the net proceeds will be retained within the Group for working
capital and restructure funding purposes.
Operational review
The segmental results of the Group's ongoing operations for the financial year
ended 30 November 2024 and comparatives for 2023 are summarised in the tables
below. Reporting is divided between the K3 Products division and the
Third-party Solutions division. K3 Products encompasses K3's own products and
includes strategic fashion and apparel products. The Third-party Solutions
division now only comprises Global Accounts following the sale of NexSys, and
hence the 2023 columns have been re-presented, in accordance with IFRS 5.
Revenue (£m) Gross profit (£m) Gross margin (£m)
Year ended 30 November 2024 2023 2024 2023 2024 2023
Continuing Operations (re-presented) (re-presented) (re-presented)
K3 Products 12.3 12.7 9.9 10.0 80% 79%
Third-party Solutions 10.9 18.6 4.8 8.6 45% 46%
Total 23.2 31.3 14.8 18.6 64% 59%
K3 Products
The division provides software products and solutions that are powered by our
own IP. They comprise:
· strategic products focused on fashion and apparel markets (the
Fashion portfolio);
· solutions for the visitor attraction market; and other stand-alone
point-of-sale retail solutions ("Retail Solutions").
2024 2023
£m £m
(re-presented)
Revenue 12.3 12.7
Gross profit 9.9 10.0
Gross margin (%) 80% 79%
Adjusted operating loss (0.5) (4.9)
The division managed its trading difficulties well and delivered much improved
results, reducing the adjusted operating loss by £4.3m to a loss of £0.5m,
an excellent outcome. Very meaningful cost savings were achieved following the
decision in the prior year to limit product investment just to the Fashion
portfolio and integrate K3 ViJi product's capabilities within the Fashion
portfolio's existing corporate social responsibility functionalities rather
than maintain K3 ViJi as a standalone product. Operational costs also
continued to be adjusted appropriately in FY24.
The Fashion portfolio increased its contribution to the Group, although
further legacy revenue attrition at Retail Solutions (£0.5m), meant that
total divisional revenue decreased to £12.3m (2023: re-presented £12.7m,
which excludes SSL, the business classed as held for sale).
The gross margin was higher at 80% (2023: re-presented 79%). The year-on-year
rise in gross margin reflected the higher margin revenue mix, together with
pricing and cost base actions and other initiatives. Gross profit remained
consistent at £9.9m (2023: re-presented £10.0m). As stated above, the
adjusted operating loss shows a very significant decrease on the prior year to
£0.5m (2023: re-presented £4.9m loss), helped by the actions on the cost
base.
The Fashion portfolio, which includes K3 Fashion and K3 Pebblestone, increased
its ARR by 3% to £6.0m (2023: £5.8m). This reflected some new customer wins
as well as existing customers increasing the number of their software licences
and adopting multi-year agreements. The net revenue retention ("NRR") rate was
100% and the Fashion portfolio's gross profit margin improved to 86% from 83%,
helped by our focus on financial discipline.
As we reported previously, deal closure through our business partner network,
which is our main route to market for Fashion portfolio products, was slower
in the first half with some improvement in the second half. We believe the
slower pace reflects a more cautious approach, with customers shifting
purchases of industry specific software solutions towards the later stages of
larger 'vanilla' ERP implementation projects.
We continue to focus on supporting our business partner network and the new
financial year has started as expected, with an important new logo win.
The team at Retail Solutions managed the expected legacy revenue attrition
well. This is shown in the gross margin result, which remained high at 76% and
was unchanged on the prior year. Annual Recurring Revenue ("ARR") was
maintained at £5.8m and the team's focus remains on customer service,
retention and efficiency.
Third-party Solutions
Third-party Solutions comprised two units until the sale of NexSys, which was
announced at the end of the financial year and completed on 6 January 2025.
The segmental results in the table below are those of Global Accounts, which
is the continuing operation.
· Global Accounts provides specialist services and support,
predominantly to the Inter IKEA Concept overseas franchisee network. Its
results are below.
2024 2023
£m £m
(re-presented)
Revenue 10.9 18.6
Gross profit 4.8 8.6
Gross margin (%) 45% 46%
Adjusted operating profit 2.4 5.7
NexSys's results have not been included in the table above, which only shows
continuing operations. The revenue and profit performance of the Third-party
Solutions reflected the continued downturn in activity at Global Accounts,
which mainly provides its specialist services to the overseas franchisees of
the Inter IKEA Concept.
As predicted, revenue decreased significantly year-on-year to £10.9m (2023:
re-presented £18.6m) and gross profit declined to £4.8m (2023: re-presented
£8.6m). Given the substantial contraction in activity, with very limited new
IKEA store openings by overseas franchisees, we took action to adjust the
resource base. Gross margin, therefore, decreased only marginally to 45%
(2023: re-presented 46%). We expect the lower-level of activity we experienced
as we exited 2024 to persist into the medium term. Our specialists continue to
provide franchisees with a deep level of support and expert advice, and we
remain focused on developing new ways of working with them in response to the
existing situation.
NexSys, which provides business-critical ERP solutions for UK manufacturers
and distributors, performed well despite the higher energy costs affecting its
sector. The business signed six new contracts over the financial year.
Software licence and maintenance and support contract renewals, which
overwhelmingly fall due in the final quarter of the financial year, remained
at their expected high levels, in line with prior years.
Group strategy
The sale of NexSys has been a milestone event and the Board is pleased to be
returning net proceeds (less gross costs and a balance for working capital and
restructure funding purposes) to shareholders.
The Board's principal focus remains on shareholder value and cash returns, and
it will continue to concentrate on profitable growth opportunities available
for the software products and solutions of its continuing operations. Cash
management and cost control also remains a priority.
The K3 Products Fashion portfolio offers the opportunity of higher-margin
growth, which reflects the fact that its solutions are based on K3
intellectual property ("IP"). A key focus is the development and growth of our
core strategic fashion and apparel products. Microsoft's endorsement of K3
Fashion as its 'go to' embedded solution for the fashion and apparel sector is
a benefit in this regard. Our key route-to-market remains our business partner
network.
The Global Accounts business, which makes up the Third-party Solutions
division, is a long-established partner to the overseas franchisees of the
Inter IKEA Concept. While the expansion of IKEA stores by franchisees has
contracted, adversely impacting the performance of Global Accounts, the
business nonetheless remains a key support and services partner to the
overseas franchisee network.
Board changes
There were a number of Board changes over the year. In July 2024, Executive
Chair, Tom Crawford, stepped down from his role to become a Non-executive
Director. This reflected Tom's need to reduce his work commitments in the
light of the health condition of a close family member. Non-executive
Director, Oliver Scott, was appointed as Non-executive Chair in Tom's place
and Eric Dodd, Chief Financial Officer, became Chief Executive Officer.
Lavinia Alderson, Group Corporate Finance Director, was appointed as Chief
Financial Officer.
In September 2024, Non-executive Director, Pernille Fabricius retired from the
Board. We take this opportunity to thank her for her contribution to K3,
especially as Chair of the Audit Committee. Tom Crawford took up this role in
her place.
In line with the QCA's Corporate Governance Code, the Company continues to
have two non-executive directors who are considered as independent, these
being Tom Crawford and Gabrielle Hase.
We welcomed Lavinia Alderson to the Board. She joined K3 in December 2020, as
Group Corporate Finance Director, and has significant commercial and financial
experience. She was previously Finance Director of Concept Life Sciences,
which provides scientific services globally, and before that, Head of Finance
UK Support & Governance at Cape plc, an energy services company.
Colleagues
On behalf of the Board, we thank all our colleagues at K3 for their hard work
and commitment during the year. It is valued and much appreciated.
Summary and Prospects
The Group performed in line with the Board's expectations and our focus in the
new financial year remains on shareholder value, as well as on maintaining
strong financial discipline. We believe that the Group remains appropriately
resourced and sufficiently funded. Continuing operations should trade on a
cash breakeven basis from the end of February 2025.
We are pleased that the sale of NexSys, which we completed at an attractive
valuation in early January 2025, will enable us to return funds to
shareholders in due course. We plan to do this via a Tender Offer, and we will
be making a subsequent announcement, after a number of necessary practical
steps are completed.
O Scott, Chair E Dodd, Chief Executive Officer
CHIEF FINANCIAL OFFICER REVIEW
Overview
The Group's reported segments are 'K3 Products' and 'Third-party Solutions',
with Central Support costs stated separately, as previously. This aligns
segmental reporting with the Group's strategy.
Focus on value creation for shareholders
The Board's main focus is on value creation and cash returns for shareholders.
Driving cash generation and growing annual recurring revenues ("ARR") is
central to this.
We completed some important steps during the prior year in line with these
goals. Late in the second half of last year, we moved in full to a Business
Unit structure. Decentralising the business established a better platform from
which to realise value creation and cash returns for shareholders. It
increased accountability while also driving significant reductions in IT, HR
and finance expenditure.
We further tightened our approach to expenditure on new product development
activities, which has helped to support a meaningful improvement in cash
generation. Specifically, we have allocated expenditure according to where
market, pipelines and margins indicated the highest probability of cash
returns over the medium term, withdrawing or reducing expenditure elsewhere.
We also identified unnecessary cost burdens, such as certain structures and
financing arrangements that did not offer tangible benefit to the Company. We
are continuing to exit these arrangements and to work on further simplifying
the business in order to establish the most appropriate cost base.
Since we believe that the closest metric to understanding cash generation is
adjusted operating profit/(loss), we have continued to retain it as the key
measure of the Company's performance.
The Group's products for the fashion and apparel market offer the
highest-margin, highest growth opportunity, and ARR in the Fashion portfolio
grew by 3% in 2024 to £6.0m (2023: £5.8m).
Key performance indicators
The Group's results for the year end to 30 November 2024, together with
comparatives for 2023, are summarised for the continuing operations in the
tables below.
Continuing Operations 2024 2023
£m £m
(re-presented)
Revenue 23.2 31.3
Gross profit 14.8 18.6
Gross profit margin 64% 59%
Adjusted operating loss (1.1) (1.4)
Net cash from operating activities including held for sale operations 1.9 3.5
Annual recurring revenue - the Fashion portfolio 6.0 5.8
Income statement
Total revenue for the year ended 30 November 2024 decreased by 26% to £23.2m
(2023: re-presented £31.3m). The reduction mainly reflected lower revenue
from Global Accounts, whose customers are principally the overseas franchisees
of the Inter IKEA Systems B.V (the owner and franchisor of the Inter IKEA
Concept), which have strategically decreased further store expansion.
Combined ARR from K3 Fashion and K3 Pebblestone increased by 3% year-on-year
to £6.0m, helped by new customers and existing customer expansion.
Gross profit decreased by £3.8m or 21% to £14.8m (2023: re-presented
£18.6m) as Global Accounts revenue declined by £7.7m. However, gross profit
margin increased by 5 percentage points to 64%, reflecting the change in sales
mix and divisional focus on gross margin improvement.
The Group's adjusted operating loss decreased to £1.1m in 2024 (2023:
re-presented £1.4m loss), which was a key target. This was driven by lower
amortisation and a continued disciplined approach to overhead expenditure.
Amortisation continued to decrease year-on-year due to lower capitalisation of
development costs, reducing by £0.3m in the financial year under review.
A total of £1.4m in reorganisation costs were incurred (2023: re-presented
£2.1m) and related primarily to the cost of people leaving the business. The
departure of a number of senior staff members in the prior year led to lapses
of outstanding share options in 2023 and a remaining credit of £0.2m was
recognised during the year (2023: £1.1m credit). There are no outstanding
share options in 2024.
The reported statutory loss from operations increased to £2.4m (2023:
re-presented £2.0m loss). Excluding the exceptional items, acquisition
credits in the prior year and share-based payment credits, the adjusted
operating loss improved by £0.3m to a loss of £1.1m (2023: re-presented
£1.4m loss).
Pleasingly, reported adjusted administrative expenses decreased by 20% to
£15.7m (2023: re-presented £19.6m), helped by our continued focus on costs,
a discipline that continues to yield savings.
The reported loss before tax from continuing operations increased slightly to
£2.8m (2023: re-presented £2.3m), largely due to the reduced in year
share-based payment credit offset by the adjusted operating loss improvement
year-on-year. This mainly reflects our actions over the cost base, as stated
above. Net finance expenses were £0.4m (2023: re-presented £0.3m) and we
expect these to reduce in 2025 as the banking facility has fallen away with
the sale of NexSys.
The corporation tax credit for the financial year was £0.3m (2023: £0.06m
charge). This comprised a credit for current taxation of £0.2m (2023:
re-presented £0.3m), which related to the non-UK businesses, and a credit for
deferred taxation of £0.1m (2023: re-presented £0.3m charge).
Earnings Per Share
The adjusted loss per share from continuing operations shows an improvement of
1.3p from the prior year to 3.4p (2023: re-presented 4.7p loss). The adjusted
loss per share excludes exceptional reorganisation costs, exceptional
impairment costs, acquisition costs/credit and share-based charges/credit and
is net of the related tax credit of £0.4m (2023: re-presented £0.4m credit).
The reported loss per share from continuing operations was consistent at 5.4p
(2023: re-presented 5.3p loss).
Dividends
No dividend will be declared for the year ended 30 November 2024 (2023: nil).
Statement of Financial Position
The Group's statement of financial position is disclosed after assets and
liabilities relating to operations held for sale have been removed from
individual captions in the current year, however they remain in the prior
year's position. The Group's cash position remains robust, with net cash of
£3.6m at 30 November 2024. Following the sale of NexSys, the Group will
retain a small level of net proceeds, which will be used for working capital
and restructure funding purposes. It is expected that the majority of the net
consideration will be distributed to shareholders via a Tender Offer once
reserves have been reorganised.
Total assets reduced by £1.8m to £43.2m (2023: £45.0m), which reflected a
reduction in trade receivables, in line with reducing revenue, and robust
collection procedures, which maintained excellent receivables ageing, with
little unprovided exposure over 60 days.
Trade and other payables reduced, driven by a reduction in contract
liabilities.
Cash Flow
Group cash flow is shown inclusive of operations held for sale.
Net cash inflow from operating activities decreased by £1.7m to £1.9m (2023:
£3.5m), the reduction largely driven by working capital changes year-on-year
of £1.5m.
The disciplined approach to capital allocation and the ongoing corporate
simplification process have delivered tangible benefits. Both investing
expenditure and financing cost have almost halved to £0.8m and £0.5m
respectively (2023: investing expenditure of £1.4m and financing cost of
£1.0m). A specific illustration is the 30% reduction in lease liability
payments to £0.3m (2023: £0.7m), which mainly related to properties and
vehicles.
The Group's closing cash balance at 30 November 2023 was £8.9m (2023:
£8.3m), and £3.6m excluding operations held for sale.
Summary and Prospects
The business unit structure established in the prior financial year created a
better platform for the Group, as the Board focused on driving value and cash
for shareholders. It provided clearer focus, greater accountability, and
enhanced cost discipline.
The Board remains committed to shareholder value and will maintain a
disciplined approach to cash management and the appropriate level of resource.
Lavinia Alderson, Chief Financial Officer
K3 Business Technology Group plc
Consolidated income statement
for the year ended 30 November 2024
Notes Year ended Year ended
30 November 30 November
2024 2023
(re-presented^)
£'000 £'000
Revenue 3 23,217 31,297
Cost of sales (8,446) (12,689)
Gross profit 14,771 18,608
Adjusted administrative expenses (15,735) (19,606)
Impairment losses on financial assets (148) (357)
Adjusted operating loss (1,112) (1,355)
Exceptional impairment - (72)
Exceptional reorganisation costs (1,441) (2,116)
Exceptional acquisition/disposal (costs)/credit (30) 406
Share-based payment credit 192 1,126
Loss from operations 3 (2,391) (2,011)
Finance expense (378) (282)
Loss before taxation from continuing operations (2,769) (2,293)
Tax credit/(charge) 4 332 (67)
Loss from the year from continuing operations (2,437) (2,360)
Profit/(loss) for the year from discontinued operations 5 3,011 (25)
Profit/(loss) for the year 574 (2,385)
All the profit/(loss) for the year is attributable to equity shareholders of
the parent.
Earnings/(loss) per share Year ended Year ended
30 November 30 November
2024 2023
(re-presented)
Basic and diluted 1.3p (5.3)p
Diluted 1.3p (5.2)p
Basic from continuing operations (5.4)p (5.3)p
^ The 2023 results have been re-presented to show NexSys Solutions Limited and
K3 Systems Support Limited as discontinued operations. See Note 5 for further
details.
K3 Business Technology Group plc
Consolidated statement of comprehensive income
for the year ended 30 November 2024
Year ended Year ended
30 November 30 November
2024 2023
£'000 £'000
Profit/(loss) for the year 574 (2,385)
Other comprehensive (expense)/income
Exchange differences on translation of foreign operations (314) 76
Other comprehensive (expense)/income (314) 76
Total comprehensive income/(expense) for the year 260 (2,309)
Total comprehensive income/(expense) is attributable to equity holders of the
parent.
All the other comprehensive income will be reclassified subsequently to profit
or loss when specific conditions are met. None of the items within other
comprehensive (expense)/income had a tax impact.
K3 Business Technology Group plc
Consolidated statement of financial position
as at 30 November 2024
Notes 2024 2023
£'000 £'000
ASSETS
Non-current assets
Property, plant, and equipment 967 1,323
Right-of-use assets 679 1,025
Goodwill 6 10,108 24,911
Other intangible assets 1,404 1,533
Deferred tax assets 145 77
Total non-current assets 13,303 28,869
Current assets
Stock 154 275
Trade and other receivables 3,652 7,556
Cash and short-term deposits 3,643 8,304
Assets classified as held for sale 22,428 -
Total current assets 29,877 16,135
Total assets 43,180 45,004
LIABILITIES
Non-current liabilities
Lease liabilities 497 646
Provisions 622 105
Deferred tax liabilities 71 91
Total non-current liabilities 1,190 842
Current liabilities
Trade and other payables 7,574 15,946
Current tax liabilities 130 285
Lease liabilities 179 338
Borrowings 1 12
Provisions 167 305
Liabilities classified as held for sale 6,595 -
Total current liabilities 14,646 16,886
Total liabilities 15,836 17,728
EQUITY
Share capital 11,183 11,183
Share premium account 31,450 31,450
Other reserves 6,401 11,151
Translation reserve 1,370 1,684
Accumulated losses (23,060) (28,192)
Total equity attributable to equity holders of the parent 27,344 27,276
Total equity and liabilities 43,180 45,004
K3 Business Technology Group plc
Consolidated statement of cash flows
for the year ended 30 November 2024
Notes Year ended Year ended
30-Nov 2024 30-Nov 2023
£'000 £'000
Cash flows from operating activities
Profit/(loss) for the year 574 (2,385)
Adjustments for:
Finance expense 397 417
Tax expense (274) 564
Depreciation of property, plant, and equipment 530 552
Impairment of property, plant, and equipment - 464
Depreciation of right-of-use assets 294 591
Amortisation of intangible assets and development expenditure 761 1,091
Impairment of intangible assets (including goodwill) - 1,606
Gain/(loss) on sale of property, plant, and equipment and right of use assets (374) 11
Share-based payments credit (192) (969)
Net cash flow from provisions 366 (740)
Net cash flow from stock 121 208
Net cash flow from trade and other receivables 1,711 3,319
Net cash flow from trade and other payables (2,050) (1,104)
Cash generated from operations 1,864 3,625
Income taxes received/(paid) 25 (82)
Net cash from operating activities 1,889 3,543
Cash flows from investing activities
Development expenditure capitalised (747) (734)
Acquisition of a subsidiary, net of cash acquired - (86)
Purchase of property, plant, and equipment (32) (588)
Net cash from investing activities (779) (1,408)
Cash flows from financing activities
Proceeds from loans and borrowings 2,250 3,500
Repayment of loans and borrowings (2,261) (3,536)
Repayment of lease liabilities (265) (708)
Interest paid on lease liabilities (74) (126)
Finance expense paid (120) (163)
Net cash from financing activities (470) (1,033)
Net change in cash and cash equivalents 640 1,102
Cash and cash equivalents at start of year 8,304 7,113
Exchange (losses)/gains on cash and cash equivalents (55) 89
Cash and cash equivalents at end of year 7 8,889 8,304
K3 Business Technology Group plc
Consolidated statement of Changes in Equity
for the year ended 30 November 2024
Share capital Share premium Other reserves Translation reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
At 30 November 2022 11,183 31,450 11,151 1,608 (24,838) 30,554
Loss for the year - - - - (2,385) (2,385)
Other comprehensive income for the year - - - 76 - 76
Total comprehensive income/(expense) - - - 76 (2,385) (2,309)
Share-based payment - - - - (969) (969)
At 30 November 2023 11,183 31,450 11,151 1,684 (28,192) 27,276
Profit for the year - - - - 574 574
Other comprehensive expense for the year - - - (314) - (314)
Total comprehensive (expense)/income - - - (314) 574 260
Share-based payment - - - - (192) (192)
Other reserves reclassification^ - - (4,750) - 4,750 -
At 30 November 2024 11,183 31,450 6,401 1,370 (23,060) 27,344
^ Nature and purpose of other reserves:
Merger relief reserve
The merger relief reserve represents the memorandum accounting reserve
generated through acquisitions made by the Group where shares were issued as
part of those acquisitions. During the year there has been a reduction in this
reserve to retained earnings representing those parts of the merger relief
reserve where the previous acquired companies are no longer held by the Group.
Other reserve
This reserve represents the fair value element of warrants previously issued.
This fair value has amortised through the income statement in full in prior
years. During the year there has been clear down of this reserve to retained
earnings to match the income statement impact.
NOTES
1 Basis of preparation
Statement of compliance
The Group financial statements from which this statement of Final Results is
extracted have been prepared in accordance with UK endorsed IFRS in conformity
with the requirements of the Companies Act 2006 ("IFRS") ("UK Adopted internal
accounting standards").
The financial information has been prepared under the historical cost
convention except for derivative financial instruments which are stated at
their fair value.
Whilst the financial information included in this statement of Final Results
has been prepared in accordance with the recognition and measurement criteria
of IFRS, this announcement does not itself contain sufficient information to
comply with IFRS.
The Group's statutory financial statements for the year ended 30 November
2024, from which the financial information presented in this announcement has
been extracted, were prepared using the accounting policies disclosed in the
principal accounting policies set out in the Group's Annual Report. These
policies have been consistently applied to all years presented.
The preparation of financial statements in conformity with IFRS requires the
use of estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting year. Although these
estimates are based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from these estimates.
This statement of Final Results does not constitute the Company's statutory
accounts for the years ended 30 November 2024 and 30 November 2023 within the
meaning of Section 435 of the Companies Act 2006 but is derived from those
statutory accounts.
The Group's statutory accounts for the year ended 30 November 2023 have been
filed with the Registrar of Companies, and those for 2024 will be delivered
following the Company's Annual General Meeting. The Auditor has reported on
the statutory accounts for 2024 and 2023. Their report for 2024 was (i)
unqualified, (ii) did not contain any material uncertainties and (iii) did not
contain statements under Sections 498 (2) or 498 (3) of the Companies Act 2006
in relation to the financial statements.
Going Concern
The Group closely reviews its funding position throughout the year, including
monitoring compliance with covenants and available facilities to ensure it has
sufficient headroom to fund operations. The Group cancelled its current
Banking Facilities arrangements with Barclays plc in anticipation of receipt
of the proceeds from the sale of NexSys Solutions, which were received on 6
January 2025 totalling £36m gross (£34.3m net pf transaction fees and
costs).
The Group ended the year ended 30 November 2024 with a Net Cash position of
£8.3m, including operations held for sale.
The Group has prepared a cashflow forecast for a period of at least 12 months
from the date of approval of the financial statements which shows that the
Group will have reasonable headroom to support its forecast working capital
requirements. The forecast includes an assumption that an element of the
proceeds from the sale of NexSys Solutions will be retained for working
capital requirements, with a substantial proportion of the proceeds being
returned to shareholders. The forecast has undergone sensitivity analysis and
stress testing and the Directors have concluded that there is no worst-case
scenario that is likely which would mean the Group would run out of cash.
The Directors therefore have a reasonable expectation that there are no
material uncertainties that cast significant doubt about the Group's ability
to continue in operation and meet its liabilities as they fall due for the
foreseeable future, being a period of at least 12 months from the date of
approval of the financial statements. For these reasons the financial
statements have been prepared on a going concern basis.
2 Key Accounting policies for the Group financial statements
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least annually.
For impairment testing, goodwill is allocated to each of the Group's
subsidiaries or cash-generating units (or groups of cash-generating units)
expected to benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for impairment annually,
or more frequently when there is an indication that the unit may be impaired.
If the recoverable amount of the cash-generating unit is less than the
carrying amount of the unit, the impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata based on the carrying
amount of each asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent year.
On disposal of a subsidiary or cash-generating unit, the attributable net book
value of goodwill is included in the determination of the profit or loss on
disposal.
Revenue recognition
The Group contracts for products and services in a variety of contractual
forms and deployment methods which impact IFRS 15 revenue recognition. These
include:
· Reselling of 3rd party products for which following contracting,
the Group has no continuing performance obligations for software and the
customer controls the software. These are usually perpetual licenses with
customer on premise installations. Since the Group is reselling these all
already functional products, services are unbundled. Customers can also choose
to take maintenance and support for these products or indeed obtain services,
support, and maintenance from different suppliers.
· K3 bolt on own software IP (Intellectual Property) that adds
incremental vertical functionality and bolts onto Microsoft Dynamics products
and that is either sold directly to customer or via a channel partner. There
is an ongoing performance obligation to maintain the product to ensure the
functionality continues to bolt onto Microsoft Dynamics products.
· K3 own products for which K3 controls and has ongoing performance
obligations. These products are typically SaaS (Software as a Service) based
subscription products which include a right to access as the customer
continuously consumes functionality. The product offer is a typical bundle of
software access, maintenance, and support. The contracts typically have a low
level of services.
Software licence revenue:
Software licenses for 3rd party products are recognised at a point in time, on
contract and issue of the initial license key which is contemporaneous.
K3 bolt on own software IP is recognised over time.
K3 own products which is SaaS based is recognised over time and not in
software but rather in maintenance and support for the purposes of revenue
disaggregation disclosures. Revenue is recognised over time as K3 controls the
product, the license is not distinct, and the customer continually receives
benefits.
Services revenues:
Services are linked to implementation and set up of K3 own and 3rd party
products, rather than product functionality build. Services are contracted for
on a time and materials basis, the customer takes ownership of the work
delivered and revenue is recognised as it is performed.
Hardware:
Hardware is peripheral to a number of contract implementations; the revenue is
recognised when the customer takes control of the asset on delivery.
Maintenance and Support:
Maintenance refers to the maintenance of the products and ensuring a right to
upgrade whilst Support refers to ongoing customer support including for
example help desk access.
3rd party products maintenance is provided by the product's author. K3 has no
performance obligation and this is sold through K3 for a margin. Revenue is
recognised for the term of the contract at a point in time when the contract
is signed. Support of 3rd party products is provided by K3 over time over the
term of the contract.
K3 bolt on own software IP is typically re-sold via channel partners who
provide support. K3 has an ongoing performance obligation for the maintenance
of the product and recognises a portion of revenue associated with that over
time.
K3 own SaaS/subscription products and usually hosted by K3 and typically a
bundled offer of maintenance and support is provided to customers which are
both performance obligations for K3 and revenue is recognised over time.
Allocation of transaction price:
Transaction price is measured based on the consideration specified in a
contract with a customer and, where applicable, the best estimate of any
consideration related to modifications to the contract which has yet to be
agreed. Any amounts expected to be paid to the customer, such as penalties for
late delivery, are deducted from the consideration. Where a transaction price
must be allocated between multiple performance obligations, this is generally
achieved through allocating a proportion of total price against each using
either standard list sales prices or an estimated cost methodology.
Critical accounting estimates and judgements
In applying the Group's accounting policies above the Directors are required
to make judgements (other than those involving estimations) that have a
significant impact on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year, or in the year of
the revision and future years if the revision affects both current and future
years.
The Directors are of the opinion that there are no significant judgements to
be disclosed. The key sources of estimation that have a significant impact on
the carrying value of assets and liabilities are discussed below:
Impairment of goodwill and other intangibles
Determining whether goodwill is impaired requires an estimation of the value
in use of the cash generating units to which goodwill has been allocated. The
value in use calculation requires an entity to estimate the future cash flows
expected to arise from the cash generating unit. It also requires judgement as
to a suitable discount rate in order to calculate present value, i.e., the
Directors' current best estimate of the weighted average cost of capital
("WACC"). Other intangibles are assessed annually for impairment as well as
when triggers of impairment arise. An impairment review has been performed at
the reporting date.
Recoverability of investments in subsidiaries held by the Parent
Investments in subsidiaries held by the Parent Company are compared to the net
assets of the entities which the investment is held against when considering
whether the investments are recoverable. Where the net assets fall below the
investment value, the investment is assessed against other criteria, such as
past profitability, future expected profitability and other known information
such as recent dividend payments. A value in use calculation is performed to
assess the appropriateness alongside the other known information as to whether
the investment is considered recoverable. If the investment is deemed not to
be supportable, it is written off through the Consolidated Income Statement.
Capitalised development expenditure and subsequent amortisation
Where such expenditure meets the relevant criteria, the Group is required to
capitalise development expenditure. In order to assess whether the criteria
are met the Board is required to make estimates in relation to likely income
generation and financial and technical viability of the relevant development
projects and the period over which the Group is likely to benefit from such
expenditure. Development projects are subject to an investment appraisal
process with the product managers to assess the status of the development and
the expected commercial opportunities. Development costs are assessed for
impairment which requires an estimation of the future expected revenues to be
generated from each product. This methodology is similar to that used to
assess any impairment of goodwill. Expenditure is only capitalised when the
investment appraisal process has assessed that the product is likely to
benefit the Group in the future.
3 Segment information
The Group operates a streamlined organisation with management resource and
central services focused on working across the Group in a more unified manner
to increase the strategic focus on the level of our own product sales.
Reporting is based on product split between K3 own products ('K3 Products')
and Third-party reseller activities ('Third-party Solutions') across revenue
and gross margin. Global Accounts and Third-Party Products continue to be
merged into Third-party Solutions. Overheads and administrative expenses are
included as a central cost given resource works across these three segments.
The activities and products and services of the operating segments are
detailed in the Strategic Report.
Transactions between operating segments are on an arms-length basis. The CODM
(Chief Operating Decision Maker, the Board) primarily assesses the performance
of the operating segments based on product revenue, gross margin and Group
adjusted operating profit/(loss). The segment results for the year ended 30
November 2024 and for the year ended 30 November 2023, reconciled to profit
for the year.
Year ended 30 November 2024 K3 Products Central Costs Total
Third-party Solutions
£'000 £'000 £'000 £'000
External revenue 12,340 10,877 - 23,217
Cost of sales (2,412) (6,034) - (8,446)
Gross profit 9,928 4,843 - 14,771
Gross margin 80% 45% - 64%
Adjusted administrative expenses and impairment losses on financial assets (10,461) (2,419) (3,003) (15,883)
Adjusted operating profit/(loss) (533) 2,424 (3,003) (1,112)
Exceptional reorganisation costs - - (1,441) (1,441)
Exceptional acquisition/disposal costs - - (30) (30)
Share-based payment credit - - 192 192
(Loss)/profit from operations (533) 2,424 (4,282) (2,391)
Finance expense - - (378) (378)
(Loss)/profit before tax (533) 2,424 (4,660) (2,769)
Tax expense - - 332 332
(Loss)/profit for the year from continuing operations (533) 2,424 (4,328) (2,437)
Profit from discontinued operations 3,011
Profit for the year 574
Year ended 30 November 2023 K3 Products Central Costs Total
(re-presented) Third-party Solutions
£'000 £'000 £'000 £'000
External revenue 12,734 18,563 - 31,297
Cost of sales (2,699) (9,990) - (12,689)
Gross profit 10,035 8,573 - 18,608
Gross margin 79% 46% - 59%
Adjusted administrative expenses and impairment losses on financial assets (14,891) (2,857) (2,215) (19,963)
Adjusted operating profit/(loss) (4,856) 5,716 (2,215) (1,355)
Exceptional impairment - - (72) (72)
Exceptional reorganisation costs - - (2,116) (2,116)
Acquisition/disposal related credit - - 406 406
Share-based payment credit - - 1,126 1,126
(Loss)/profit from operations (4,856) 5,716 (2,871) (2,011)
Finance expense - - (282) (282)
(Loss)/profit before tax (4,856) 5,716 (3,153) (2,293)
Tax expense - - (67) (67)
(Loss)/profit for the year from continuing operations (4,856) 5,716 (3,220) (2,360)
Loss from discontinued operations (25)
Loss for the year (2,385)
Segment assets and segment liabilities are reviewed by the CODM in a
consolidated statement of financial position. Accordingly, this information is
replicated in the Group consolidated statement of financial position. As no
measure of assets or liabilities for individual segments is reviewed regularly
by the CODM, no disclosure of total assets or liabilities has been made, in
accordance with the amendment to paragraph 23 of IFRS 8.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. Transactions
between segments are accounted for at cost.
The Group has one customer relationship which accounts for 12% (2023: 42%) of
external Group revenue.
Analysis of the Group's external revenues (by customer geography) and
non-current assets by geographical location are detailed below:
External revenue by end-customer geography
External revenue Non-current assets
Year ended Year ended 2024 2023
30 November 30 November 2023
2024 (represented)
£'000 £'000 £'000 £'000
United Kingdom 3,999 4,755 12,203 21,911
Netherlands 4,349 5,761 1,039 5,913
Ireland 26 44 - -
Rest of Europe 6,891 7,466 55 974
Middle East 1,896 2,142 - -
Asia 3,220 6,195 (3) 68
USA 575 98 9 3
Rest of World 2,261 4,836 - -
23,217 31,297 13,303 28,869
% of non-UK revenue 83% 85%
External revenue by business unit geography
Year ended Year ended
30 November 30 November 2023
2024 (represented)
£'000 £'000
United Kingdom 4,917 4,338
Netherlands 15,776 23,657
Ireland - 727
Rest of Europe 2,524 2,575
Rest of World - -
Total 23,217 31,297
% of non-UK revenue 79% 86%
4 Tax credit/(charge)
2024 2023
(represented)
£'000 £'000
Current tax (credit)/expense
Income tax of UK operations on profits/(losses) for the year (1) (406)
Income tax of overseas operations on profits/(losses) for the year 56 597
Adjustment in respect of prior years (299) (462)
Total current tax credit (244) (271)
Deferred tax (credit)/expense
Origination and reversal of temporary differences (14) 84
Effect of changes in tax rate - -
Adjustments in respect of prior years (74) 254
Total deferred tax (credit)/expense (88) 338
Total tax (credit)/expense in the current year (332) 67
2024 % 2023 %
(represented)
£'000 £'000
Loss before taxation (2,769) (2,293)
Expected tax credit based on the standard rate of corporation tax (692) 25.0 (527) 23.0
Effects of:
Items not deductible for tax purposes 91 107
Income not taxable (177) (369)
Group relief on held for sale operations 757 -
Intercompany impairments - (459)
Adjustment to tax charge in respect of prior years (372) 651
Movements in deferred tax not recognised 66 464
Differences between overseas tax rates (5) 125
Effect of deferred tax rate difference - 75
Total tax (credit)/expense in current year (332) 12.0% 67 (2.9)%
Deferred tax recognised directly in equity for the year was £nil (2023:
£nil). Current tax recognised in equity for the year was £nil (2023: £nil).
None of the items within other comprehensive income in the Consolidated
Statement of Comprehensive Income have resulted in a tax expense or tax
income.
5 Discontinued operations held for sale
Total disposals
On 29 November 2024, the Group announced the proposed sale of NexSys to SYSPRO
and on 20 December 2024, the Group sold K3 Systems Support Limited ("SSL").
NexSys was part of the Third-party Solutions segment and SSL was part of the
K3 Products segment. The total results of these two entities can be seen in
the below table, with individual tables provided later in the note:
2024 2023
£'000 £'000
External revenue 12,481 12,482
Cost of sales (3,744) (3,950)
Gross profit 8,737 8,532
Administrative expenses (5,588) (5,916)
Impairment losses on financial assets 1 3
Exceptional impairment - (1,998)
Exceptional reorganisation costs (62) (14)
Profit from operations 3,088 607
Finance expense (19) (135)
Profit before taxation from discontinued operations 3,069 472
Tax expense (58) (497)
Profit/(loss) for the year from discontinued operations 3,011 (25)
2024 2023
Basic earnings/(loss) per share from discontinued operations 6.7p (0.1p)
The major classes of assets and liabilities of the both entities classified as
held for sale as at 30 November 2024 can be seen in the below table, with
individual tables provided later in the note:
2024
£'000
Goodwill 14,448
Property, plant and equipment 4
Right-of-use assets 3
Other intangible assets 450
Trade and other receivables 2,277
Cash and cash equivalents 5,246
Assets classified as held for sale 22,428
Trade and other payables* 6,596
Lease liabilities 6
Current tax asset (7)
Liabilities directly associated with assets classified as held for sale 6,595
Net assets directly associated with disposal group 15,833
* Included in this caption is £3m of contract liabilities.
NexSys Solutions Limited ("NexSys")
On 29 November 2024, the Group announced the proposed sale of NexSys to
SYSPRO, via funds managed and/or advised by Advent International, for gross
consideration of £36.0m. The sale was subject to shareholder approval, which
was received post year-end on 19 December 2024, with final completion and
funds being received on 6 January 2025. NexSys has been classified as a
disposal group held for sale as it represents a major line of business of the
Group. The carrying amount of the disposal group is lower than its fair value
less costs to sell and therefore no impairment loss is recognised.
The results of the NexSys business for the year are presented below:
2024 2023
£'000 £'000
External revenue 12,048 12,131
Cost of sales (3,710) (3,921)
Gross profit 8,338 8,210
Administrative expenses (5,194) (5,617)
Exceptional impairment - (1,998)
Exceptional reorganisation costs (62) (14)
Profit from operations 3,082 581
Finance expense (19) (135)
Profit before taxation from discontinued operations 3,063 446
Tax expense (53) (491)
Profit/(loss) for the year from discontinued operations 3,010 (45)
2024 2023
Basic earnings/(loss) per share from discontinued operations 6.7p (0.1p)
The major classes of assets and liabilities of the NexSys business classified
as held for sale as at 30 November 2024 are as follows:
2024
£'000
Goodwill 14,448
Property, plant and equipment 4
Right-of-use assets 3
Other intangible assets 450
Trade and other receivables 2,258
Cash and cash equivalents 5,040
Assets classified as held for sale 22,203
Trade and other payables 6,390
Current tax asset (19)
Lease liabilities 6
Liabilities directly associated with assets classified as held for sale 6,377
Net assets directly associated with disposal group 15,826
The net cashflows incurred by NexSys are as follows:
2024 2023
£'000 £'000
Operating 2,154 (221)
Investing - -
Financing (20) (151)
Net cash inflow/(outflow) 2,134 (372)
K3 Systems Support Limited ("SSL")
On 20 December 2024, the Group sold SSL to its management team for
consideration of £20k, being £500 cash consideration and £19.5k deferred
consideration.
The results of the SSL business for the year are presented below:
2024 2023
£'000 £'000
External revenue 433 351
Cost of sales (34) (29)
Gross profit 399 322
Administrative expenses (394) (299)
Impairment losses on financial assets 1 3
Profit from operations 6 26
Finance expense - -
Profit before taxation from discontinued operations 6 26
Tax expense (5) (6)
Profit for the year from discontinued operations 1 20
2024 2023
Basic earnings per share from discontinued operations 0.0p 0.0p
The major classes of assets and liabilities of the SSL business classified as
held for sale as at 30 November 2024 are as follows:
2024
£'000
Trade and other receivables 19
Cash and cash equivalents 206
Assets classified as held for sale 225
Trade and other payables 206
Current tax liabilities 12
Liabilities directly associated with assets classified as held for sale 218
Net assets directly associated with disposal group 7
The net cashflows incurred by SSL are as follows:
2024 2023
£'000 £'000
Operating 152 26
Investing - -
Financing - -
Net cash inflow/(outflow) 152 26
6 Goodwill and impairment
Goodwill acquired in business combinations is allocated at acquisition to the
cash generating units ("CGUs") that are expected to benefit from that business
combination. The allocation made represents the lowest level at which goodwill
is monitored for internal management purposes and are not larger than the
single operating segment defined under IFRS 8 (Operating Segments).
During the prior year, IBS CGU was merged with that of NexSys CGU as IBS
entity merged with NexSys entity to drive operational efficiency. This CGU has
been moved to held for sale in the current year.
The carrying value of goodwill in respect of all CGUs is set out below. These
are fully supported by value in use calculations in the year.
Goodwill carrying amount 2024
£'000
Global Accounts 9,011
Walton 1,097
10,108
Goodwill carrying amount 2023
£'000
NexSys and Integrated Business Solutions (IBS) 14,448
Global Accounts 9,366
Walton 1,097
24,911
The recoverable amounts of the remaining CGUs are determined from value in use
calculations. The key assumptions for these calculations are discount rates,
sales growth, gross margin, and admin expense growth rates. The assumptions
for these calculations reflect the current economic environment. The discount
rate represents the current market assessment of the risks specific to the
Group, taking into consideration the time value of money and individual risks
of the underlying assets that have not been incorporated in the cash flow
estimates. The discount rate calculation is based on the specific
circumstances of the Group and its operating segments and is derived from the
weighted average cost of capital (WACC). Other assumptions used are based on
external data and management's best estimates.
For all the CGUs where the recoverable amount is determined from value in use,
the Group performs impairment reviews by forecasting cash flows based upon the
Annual Budget starting in 2025, which anticipates sales, gross margin and
admin cost growth based on management's best estimates. A projection of sales
and cash flows based upon a blended inflation rate 2% for the Walton CGU and
nil inflation rate for the Global Accounts CGU is then made for a further four
years, into a terminal amount.
The rate used to discount the forecast pre-tax cash flows is 20.7% for Global
Accounts and 20.6% for Walton, which represents the Directors' current best
estimates of the pre-tax weighted average cost of capital ("WACC"). The
Directors consider that there are no material differences in the post-tax WACC
for different CGUs. For the Global Accounts CGU to become impaired, which
would be a £3.5m reduction in headroom, the pre-tax WACC would need to
increase to 25.9%, an increase in the pre-tax WACC of 25% (post tax WACC of
16.6% and a 34.4% increase).
7 Notes to the cash flow statement
Cash and cash equivalents
Goodwill carrying amount 2024 2023
£'000 £'000
Cash and cash equivalents 3,643 8,304
Bank overdrafts - -
Cash and bank excluding held for sale operations 3,643 8,304
Cash and cash equivalents - held for sale 5,246 -
Cash and bank including held for sale operations 8,889 8,304
Cash and cash equivalents comprise cash and bank balances available on demand.
The carrying amount of these assets is approximately equal to their fair
value. Cash and cash equivalents at the end of the reporting year as shown in
the consolidated statement of cash flows can be reconciled to the related
items in the consolidated reporting position as shown above.
Non-cash transactions
Additions to buildings and motor vehicles during the year amounting to £0.1m
(2023: £0.8m) were financed by new leases.
Reconciliation of financial liabilities
No reconciliation of financing liabilities is shown in this note as the only
financing liabilities are the lease liabilities.
8 Events after the reporting date
On 19 December 2024, the sale of NexSys Solutions Limited to SYSPRO
(controlled by funds managed and/or advised by Advent International), received
Shareholder approval and gross proceeds of £36m were received by the Group on
6 January 2025. The Group profit on disposal was £15.7m.
On 20 December 2024, the Group sold K3 Systems Support Limited ("SSL") to its
management team, for total consideration of 20k, being £500 cash
consideration and £19.5k deferred consideration.
Glossary of terms
'Adjusted administrative expense' - administrative expenses adjusted to
exclude exceptional impairment costs, exceptional re-organisation cost and
exceptional acquisition costs/(income) and share-based payment
charges/(credit).
'Adjusted loss/earnings per share' is the basic profit/(loss) per share from
continuing operations adjusted to exclude exceptional impairment costs,
exceptional re-organisation cost and exceptional acquisition costs/(income)
and share-based payment charges/(credit), net of the related tax charge.
'Adjusted operating profit/(loss)' is the profit/(loss) from continuing
activities adjusted to exclude exceptional impairment costs, exceptional
re-organisation cost and exceptional acquisition costs/(income) and
share-based payment charges/(credit).
'ARR' stands for Annual Recurring Revenue. It is ongoing revenue from
contracted support, maintenance and annual licenses for the future periods
after taking into account churn and cancellations, price increases and new
revenue.
'ERP' means Enterprise Resource Planning and refers to a type of software used
by businesses to manage day-to-day business activities.
'FY' means financial year.
'IP' means Intellectual Property, intangible assets owned by the company and
legal protected from outside use or implementation without consent.
'Net cash' is calculated as cash and cash equivalents balances less bank
borrowings. The 2023 cash excludes NexSys Solutions Limited and K3 Systems
Support Limited as discontinued operations. The prior year balance sheet has
not been represented in line with IFRS 5. See Note 5 for further details.
'NRR' mean Net Revenue Retention and is calculated as ARR (defined above) less
new revenue, taken as a % of the prior year revenue.
'Recurring revenue (ARR)' means Annual recurring Revenue. See more detail
below under 'ARR'.
'Re-presented' means that the 2023 results have been re-presented to show
NexSys Solutions Limited and K3 Systems Support Limited as discontinued
operations in line with IFRS 5. See Note 5 for further details.
'SaaS' stands for Software as a Service.
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