After six months of talks and several indicative offers, software services group K3 Business Technology has rejected them all. Price was the sticking point - last year’s placing at 205p was the benchmark and none came close. Without that bid premium the shares slumped 20 per cent and bosses will have a job making it back.
It won’t be easy and K3 still needs to spend. Last year, cash costs hit £4m and it will do the same again this year. A lot of that will go on the shift towards Microsoft’s new AX product aimed at larger companies - heavy investment cut adjusted operating profit at the Microsoft UK division by a fifth to £2.2m last year. And the fledgling managed services unit, where investment wiped out profits, will need more money, too. Management believes this will pay off and drive recurring revenues - already half of all sales - but a spurt in performance is still between six and 12 months away. True, the Microsoft UK side closed seven major deals during the period worth almost £6m, but retailers are phasing spending and deal slippage remains a problem. Still, demand from Ikea franchisees pushed overseas profits up 57 per cent, and more are being rolling out over the next five to eight years.