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Published on: May 17, 2017

Contract disappointment but encouragement elsewhere

Following the half year results which were in line with reduced guidance (reflecting contract slippage) K3 has announced that certain large Enterprise contracts ‘have not been secured as expected’ so far during the second half of its current financial year. Consequently, it says that results for the year to 30 June 2017 will be significantly below current market expectations. We are withdrawing our estimates for the time being but expect to reissue them in due course. Meanwhile, we note that K3 is seeing encouraging progress and healthy cash flows elsewhere in the business. It has previously reported an increase in recurring revenues while the move towards higher own-IP sales and cloud delivery continues. That latter point is supported by news that pilot customers have been secured for its cloud based solutions. The management has started a review to further focus on cash generation and on leveraging the strong relationships with its well-established customer base.

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