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.
K3 BUSINESS TECHNOLOGY (KBT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 145p | MARKET VALUE: | £41.3m | |
| TOUCH: | 143-147p | 12-MONTH HIGH: | 208p | LOW: 120p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 7 | |
| NET ASSET VALUE | 165p* | NET DEBT: | 33% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 34.1 | 3.68 | 13.4 | 0.50 |
| 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 |
| % change | +29 | +23 | +16 | +33 |
Ex-div: 12 Dec Payment: 18 Jan *Includes intangible assets of £64.8m, or 227p per share **18-months | ||||
