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Inhouse technology sharpens K3's margins

The software and IT services provider is benefiting from greater use of its own technology alongside the catalyst of its acquisitions
September 14, 2016

A record high in orders of £35.3m - up two-thirds on the prior year - gave additional momentum to K3 Business Technology (KBT). The stock rose 4 per cent on the back of these full-year results, which showed sales up 7 per cent to £89.2m. More encouraging was the growth in recurring income, from service areas of the business engaged in software maintenance renewals and support contracts, which rose 4 per cent to £41.6m.

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Greater use of its own technology rather than that of third parties is also proving beneficial. Product licence revenues now make up a quarter of total licence sales, compared with 23 per cent, while gross margins leapt nearly 3 percentage points to 54.4 per cent. Management is also optimistic about recent acquisitions. The company raised £13m in April via a share placing to fund its bid for Danish group DdD Retail. The purchase contributed £0.80m to revenue and £0.02m to profit in the two months to end-June. The company has also since its June year-end, acquired Exeter-based Merac Limited for £1.7m, including £430,000 of cash. The business is a leader in the visitor attractions retail sub-sector. The balance sheet is looking in decent shape with net debt reduced by 26 per cent to £8.88m, aided by the placing proceeds.