Deal slippage amid weak retail conditions, the soft launch of a new product, and heavy investment in a new retail solution for Microsoft, all combined to hit retail sector software specialist K3 Business Technology's (KBT) earnings hard at the full-year stage. But a flurry of contract wins in the fourth quarter partially salvaged what would have otherwise been a disastrous performance.
Management says that retailers are now beginning to spend again and that this is leading to a marked increase in sales and contracts in the pipeline - much "more than just green shoots", says chief executive officer Andy Makeham. In the Microsoft UK division, for example, the prospect pipeline currently stands at £38m, up from £21m a year ago. The group's new Gemstone software is also progressing well, with reference customers now in place and the full product to be released in the next few months. And, while Mr. Makeham admits that profits "are not where they should be", the company's confidence going forward is expressed in the dividend payout - that was maintained, despite the huge drop in full-year earnings. Cash generated from operations rose 10 per cent, too, to £8.02m.
Broker finnCap expects adjusted pre-tax profit of £6.5m for end-June 2014, giving EPS of 16.3p (from £4.4m and 13.8p in 2013) rising to £7.9m and 19.7p for end-June 2015.
K3 BUSINESS TECHNOLOGY (KBT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 139p | MARKET VALUE: | £43.6m | |
| TOUCH: | 137-140p | 12-MONTH HIGH: | 177p | LOW: 86p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 163p* | NET DEBT: | 27% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008† | 37.6 | 3.94 | 11.8 | 0.50 |
| 2010** | 59.8 | 4.77 | 15.2 | 0.75 |
| 2011 | 52.8 | 4.91 | 17.5 | 0.75 |
| 2012 | 68.0 | 6.04 | 20.3 | 1.00 |
| 2013 | 63.5 | 0.46 | 4.30 | 1.00 |
| % change | -7 | -92 | -79 | - |
Ex-div: 11 Dec Payment: 17 Jan *Includes intangible assets of £65.7m, or 209p a share **18 months †Year-end December | ||||
