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Published on: September 13, 2016

Further progress, encouraging prospects

K3’s FY 2016 results are broadly in line with management expectations and just a touch below our estimates at revenue and EBITDA level. Margins and profitability continue to benefit from transitioning the business into a software vendor with product suites that contain increasing levels of its own intellectual property. K3 had flagged a negative impact from a customer entering administration in its July trading update. That, and record sales activity at the year-end, impacted operating cash and left net debt at the previously announced £8.9 million at the end of June 2016. K3
has announced that CEO, David Bolton, will become Executive Chairman with a successor appointed in due course. We note record new orders, good momentum in the business and the benefits of cost reduction initiatives offset by further investment and slower revenue and profit recognition. We make reductions to our adjusted FY 2017 estimates and introduce FY 2018 estimates.

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