K3 Business Technology concluded a strategic review earlier this month that indicated that the company – which provides cloud computing support for UK and international retailers – might be better off in private hands as it works to develop its managed services business.
That, says chief financial officer David Bolton, is because it has "become harder to convince the market that the potential for growth in managed services is worth the upfront cost". And K3 must take big risks by paying now for infrastructure before it can sell its services directly to clients. Yet management is convinced there's a growth story here and, while managed services still generates a small proportion of total sales, it's growing fast – sales jumped 55 per cent year on year to £2.61m, although divisional overheads doubled to £1.36m as new developers and IT specialists were hired.
The performance of K3's remaining business, meanwhile, was impacted by generally tough conditions for its retailer customer base. The group's underlying pre-tax profit still rose 7 per cent in the period to £6.23m, however, and K3 completed several acquisitions as well.
K3 BUSINESS TECHNOLOGY (KBT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 193p | MARKET VALUE: | £55m | |
| TOUCH: | 190-195p | 12-MONTH HIGH: | 239p | LOW: 120p |
| DIVIDEND YIELD: | 0.4% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 158p* | NET DEBT: | 30% | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 24.7 | 4.23 | 12.7 | nil |
| 2011 | 33.4 | 3.97 | 12.3 | nil |
| % change | +35 | -6 | -3 | – |
Ex-div: – Payment: – *Includes intangible assets of £67.1m, or 236p share | ||||
