9th Jul 2019 11:50
(Alliance News) - K3 Business Technology Group PLC on Tuesday reported a widened pretax loss for the first half of its financial year due to contract delays which hurt its Services unit activity and gross margin.
The software, cloud solution, and managed services company company posted a GBP1.5 million pretax loss for the six months to May 31, widened from GBP1.0 million the year prior.
Revenue for the half year came at GBP38.2 million, 7.0% below its GBP41.4 million revenue the year before. Gross profit was GBP19.5 million, 9.7% below 2018's figure of GBP21.6 million.
K3 said this was the result of "delayed contract signings, which severely impacted services activity and consequently utilisation and services gross margin", with Services gross profit cut to GBP2.7 million from GBP4.1 million and gross margin down 7.1 percentage points at 21.8% versus 27.9%.
Software Licence gross profit fell to GBP3.4 million from GBP3.9 million with a drop in gross margin to 68.7% from 71.7%. Overall, the group gross margin shrank to 51.1% from 52.2%.
The company is expecting profit and cash flows to be weighted toward the second half than prior years due to expected services gross margin growth.
K3 Chief Executive Adalsteinn Valdimarsson said: "K3's transformation programme continues to make good progress, and while first half results are below the same period last year, the group remains on track to meet market expectations for the full year and to show good year-on-year earnings progression."
"Delays to certain contract signings affected first half results, however we have now largely caught up on the outstanding delays, and the second half includes significant licence and maintenance contract renewals where renewal rates are very high - around 98%. The near-term pipeline also remains encouraging."
"Our growth strategy - based on selling more of our own IP - has the potential to drive earnings and recurring income significantly. 'K3 I imagine', our new, cutting-edge product, is especially exciting, and is relevant for both new and existing customers. We remain very positive about prospects."
Shares in K3 were down 0.6% at 172.06 pence on Tuesday.
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