Half-year Report

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR

7 February 2022

K3 CAPITAL GROUP PLC

("K3", the "Company" and including its subsidiaries, the "Group")

Interim Results

K3 Capital Group plc, a multi-disciplinary professional services firm providing advisory services to SMEs, today announces its interim results for the six months ended 30 November 2021.

Financial highlights

· Group revenue £31.2m (H1 2021: £18.0m*) with strong organic growth

· All divisions recording growth in revenues and profits:

o M&A: Revenue £9.8m (H1 2021: £5.9m), EBITDA £5.0m (H1 FY21 £2.9m)

o Tax: Revenue £4.8m (H1 2021: £2.6m), EBITDA £2.4m (H1 FY21 £1.4m)

o Restructuring: Revenue £16.6m (H1 2021: £9.5m*), EBITDA £3.0m (H1 FY21 £2.3m*)

· Group Adjusted EBITDA** £9.4m (H1 2021: £5.8m*)

· Net cash £8.8m (H1 2021: £10.1m)

· Headline earnings per share*** 9.4p (H1 2021: 7.2p*)

· Dividend per share 4.0p (H1 2021: 3.0p)

* Restated values post year end audit

** Adjusted for acquisition related costs

*** Headline EPS calculated at an average of 72.1m shares vs 61.7m shares H1 FY21. Adjusted to exclude exceptional items

Operational highlights

· Building a resilient and diversified group with a broad base of SME clients (H1 c.4,200 invoices at an average value of c.£7,250)

· Excellent organic growth in both revenue and EBITDA in the period vs H1 FY21

· Successful fundraise followed by acquisitions of Knight businesses in H1

· New service line launches starting to contribute and utilise cross selling opportunities

· Senior management team strengthened in line with our future ambitions

· Continued investment in people sees our headcount increase to c.550

· Progressive Dividend policy continues to reward and deliver attractive returns to our shareholders

· Strong foundation of H1 coupled with fast start to H2 gives confidence in delivering market expectations

Outlook

· M&A Division continues to see strong levels of KPI performance, with growing transaction fee pipelines underpinning our expectations for H2 and beyond. December was the most profitable month within the M&A division in FY22 to date

· Tax Division now offers broader service lines and greater scale following the acquisition of Knight R&D and the launch of K3 Tax Advisory. Whilst the pandemic is causing temporary reductions and delays in R&D claim processing, we are encouraged by our growing client base driven by the launch of our new client acquisition model

· Restructuring Division is pleased to see that the insolvency market is showing signs of recovery following the withdrawal of Government support and the unwinding of legislative changes. Whilst there are obvious time delays before these market improvements filter through to financial performance, we continue to build our market share and fee earner base as we look to take advantage of the returning market

· We remain confident that the outlook for the remainder of the financial year, and beyond, is positive and are pleased to report a strong start to H2 FY22

Commenting on the results, Chief Executive of K3 Capital Group plc, John Rigby, said:

"I am delighted to report that both myself and the Board are extremely satisfied with a strong financial performance during the first half of FY22, with trading comfortably in line with market expectations.

"The Group successfully completed the acquisitions of Knight Corporate Finance and Knight R&D in the period, both of which are immediately earnings enhancing. Knight Corporate Finance is a specialist M&A advisory firm within the telecoms and tech sector, and Knight R&D is a specialist research and development ("R&D") tax advisory firm servicing UK SMEs. The Acquisitions are in line with K3's strategy to acquire complementary and value accretive businesses to build out its existing SME focussed service lines, providing the Group with counter-cyclical service lines.

"The Board remains confident that the outlook for the remainder of the financial year, and beyond, is positive and is pleased to report a strong start to H2 FY22, with December delivering £6m of revenue and £1.7m EBITDA during a traditionally quieter festive period. We continue to evaluate acquisition targets which could be additive to overall product offering and allow further diversification of Group revenues."

-ENDS-

For further information please contact:

Information on K3 Capital Group plc can be accessed via the Group's website at: www.k3capitalgroupplc.com

About K3 Capital

K3 Capital Group plc is a multi-disciplinary and complementary professional services group advising UK SMEs, with operations throughout the UK and overseas.

Services provided by the Group fall into three key operating divisions:

· M&A Division:

o Company sales and business brokerage

o Corporate finance services

o Transaction services

o Off-market acquisitions

o Debt advisory

· Tax Division:

o Research and development tax credit advisory

o Tax investigations

o Tax planning

o Tax advisory

· Restructuring Division:

o Restructuring advisory

o Financial advisory

o Creditor services

o Forensic accounting and expert witness

o Pensions advisory

o Accelerated M&A

CEO's Statement

Interim Results

I am delighted to report that both myself and the Board are extremely satisfied with a strong financial performance during the first half of FY22, with trading in line with market expectations.

The Group successfully completed the acquisitions of Knight Corporate Finance and Knight R&D in the period, both of which are immediately earnings enhancing. Knight Corporate Finance is a specialist M&A advisory firm within the telecoms and tech sector, and Knight R&D is a specialist research and development ("R&D") tax advisory firm servicing UK SMEs. The Acquisitions are in line with K3's strategy to acquire complementary and value accretive businesses to build out its existing SME focussed service lines, providing the Group with counter-cyclical service lines.

We are very pleased to be reporting Group revenues of £31.2m for H1 FY22 (£18.0m H1 FY21*), which delivered £9.4m of Adjusted EBITDA** for the period (£5.8m H1 FY21*). Net Cash was £8.8m (£10.1m H1 FY21).

Headline EPS for the period was 9.4p (7.2p H1 FY21*) having adjusted for costs relating to the acquisition of the Knight businesses in July 2021, with actual EPS 4.9p (1.7p H1 FY21*).

* Restated values post year end audit

** Adjusted for acquisition related costs

Divisional Breakdown

I am pleased to report that all Group companies have traded strongly during the period.

Our M&A division increased revenue by 66% in the period compared to the first six months of FY21 and EBITDA by 72%. The acquisition of Knight Corporate Finance inevitably added revenue and profit for the M&A division, however I am particularly pleased with the organic growth within the existing brands, which delivered a 53% increase in revenue, and a 52% increase in EBITDA. The division's innovative use of big data and technology has resulted in the continuing increase in volumes of sell-side clients, new buyer registrations and, ultimately, overall transaction numbers, demonstrated by strong KPIs in the period. Increasing visibility of the division's contingent fee pipeline gives us confidence of a strong H2.

Our restructuring division had a successful trading period, reporting an increase in revenue of 75% and an increase in EBITDA of 30%. We are buoyed by the increasing number of insolvency appointments in the market (up 59% vs H1 FY21), and particularly delighted that Quantuma has increased its number of appointments by 40%. This level of activity gives the Board confidence that the division will deliver a strong H2 performance.

We are pleased with the performance of the Tax division, as revenues increased by 85% and EBITDA by 71%. The improved trading performance can be attributed to adding the revenue streams of Intax, Knight R&D and K3 Tax advisory.

Dividend

The Board is committed to a progressive fixed dividend policy, being a 9.1p dividend per share ("DPS") in FY21, 12.1p DPS in FY22 and 15.5p DPS in FY23. As per previous years, this will be paid approximately 1/3 on interim results and the balance on annual results.

Accordingly, the Board is recommending a 4.0p interim dividend per share (FY21: 3.0p). The interim dividend will be paid on 4 March 2022; the record date is 18 February 2022; the ex-dividend date is 17 February 2022.

Current Trading and Outlook

The Board is pleased with the Group's H1 FY22 financial performance, especially when taking into account the prolonged effects of the global pandemic on UK SMEs, and therefore expects its full year results will be comfortably in line with market expectations.

· Our M&A Division continues to see strong KPI performance, with growing transaction fee pipelines underpinning our expectations for H2 and beyond. December was the most profitable month within the M&A division in FY22 to date.

· Our Tax Division now offers broader service lines and greater scale following the acquisition of Knight R&D and the launch of K3 Tax Advisory. Whilst the pandemic is causing both a temporary reduction and delays in R&D claim processing, we are encouraged by our growing client base driven by the launch of our new client acquisition model.

· Our Restructuring Division is pleased to see that the insolvency market is showing signs of recovery following withdrawal of Government support and the unwinding of legislative changes. Whilst there are obvious time delays before these market improvements filter through to financial performance, we continue to build our market share and fee earner base as we look to take advantage of the returning market.

The Board is confident that the outlook for the remainder of the financial year, and beyond, is positive and is pleased to report a strong start to H2 FY22, with December delivering £6m of revenue and £1.7m EBITDA during a traditionally quieter festive period. We continue to evaluate complementary acquisition targets which could be additive to overall product offering and allow further diversification of Group revenues.

John Rigby

Chief Executive Officer

7 February 2022

All the activities of the group are from continuing operations.

ASSETS

Non-current assets

Current assets

Current liabilities

Non-current liabilities

EQUITY

Equity attributable to owners of the Company:

Cash flows from operating activities

Investing activities

Financing activities

1. General Information

K3 Capital Group PLC is incorporated in England and Wales under the Companies Act (listed on AIM, a market operated by the London Stock Exchange PLC) with the registered number 06102618. The address of the registered office is KBS House, 5 Springfield Court, Summerfield Road, Bolton, BL3 2NT.

The interim condensed consolidated financial statements comprise the Company and its subsidiaries "the Group". This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

2. Basis of preparation

The financial information set out in this Interim Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 May 2021, prepared under IFRS, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The interim financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) and on the same basis and using the same accounting policies as used in the financial statements for the year ended 31 May 2021, subject to the introduction of any new accounting standards applicable in the period.

The Interim Report has not been audited or reviewed in accordance with the International Standard on Review Engagement 2410 issued by the Auditing Practices Board.

3. Significant accounting policies

New standards, amendments to and interpretations to published standards which are now effective

There were no new standards, interpretations or amendments effective for the first time for periods beginning on or after 1 January 2021 that had a significant effect on the Group's financial statements.

4. Critical Accounting Estimates and Sources of Estimation Uncertainty

There have been no material revisions to the nature and amount of changes in estimates of amounts reported or any areas of judgements in the annual financial statements for the year ended 31 May 2021.

5. Earnings per Share

Basic earnings per share amounts are calculated by dividing the profit for the period attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:

The calculation of basic and diluted headline earnings per share is based on the following data:

6. Dividends

Dividends paid on equity shares

7. Revenue and segment information

Following acquisitions made in the year, and subsequent group restructure, the Group has 3 main reporting lines:

a. M&A Advisory - this division constitutes the original Group companies and is involved in providing corporate finance services to customers.

b. Restructuring Advisory - this division is involved in providing funding and corporate recovery services to customers.

c. Tax Advisory - this division is involved in providing technical taxation advice, including R&D tax claims and support with HMRC investigations, to customers.

Internal management reports are reviewed by the directors on a monthly basis, including revenue information by subsidiary. Such revenue information alone does not constitute sufficient information upon which to base resource allocation decisions. Performance of the segment is assessed based on a number of financial and non-financial KPI's as well as on EBITDA which inform management decisions.

8. Share-based payments

Employee share option plan of the Company

Details of the employee share option plan of the Company

The Company has a share option scheme for executives and senior employees of the Company and its subsidiaries. In accordance with the terms of the plan executives and senior employees may be granted options to purchase ordinary shares.

Each employee share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

The number of options granted is calculated in accordance with the performance-based formula approved by the remuneration committee. The formula rewards executives and senior employees to the extent of the Group's and the individual's achievement judged against both qualitative and quantitative criteria from the following financial measures:

· improvement in adjusted earnings per share

· improvement in return to shareholders

Details of growth share plan of the Company

"Growth Share Awards" are awards granted in the form of an immediate beneficial interest to be held by participants in a discrete and bespoke class of ordinary shares, namely the Growth Shares in K3 Advisory Group Limited. After a minimum period of three or five years, depending on the series in issue, the Growth Shares may be exchanged for new Ordinary Shares or cash (at the Company's discretion), subject to the rules of the plan, continued employment, and meeting certain share price hurdles, which the Remuneration Committee considers to be challenging. If the share price for the 5 day period following the announcement of the Company's financial results for the financial year, indicated below, is below the target, all of the Growth Shares will be bought back by the Company for nominal value. If the share price following the announcement of the Company's financial results for the financial year, indicated below, is above the target, the Growth Shares will vest in full, when each vested Growth Share may be exchanged for an ordinary share in the Company or cash (at the Company's discretion).

The following share-based payment arrangements were in existence during the current period:

Series 1-3 options and Growth Shares series 1-3 vest over a 3 year performance period, Growth Shares series 4-5 vest over a 5 year performance period. The performance period start date for Series 1 was 1 June 2017, for Series 2 1 December 2017 and for Series 3 1 June 2020. Growth Shares series 1-4 performance period start date was 1 June 2020, Growth Share series 5 performance period start date was 1 June 2021. The earliest expected date for exercise would be after publication of the Group's annual results for the year ending 31 May 2020, in respect of series 1, publication of the Group's interim results for the period ended 30 November 2020, in respect of series 2 and publication of the Group's annual results for the year ending 31 May 2023, in respect of series 3 and Growth shares series 1-3. The earliest expected date for exercise for Growth Shares series 4 would be the publication of the Group's annual results for the year ending 31 May 2025, and for Growth Share series 5 the year ending 31 May 2026.

The SAYE scheme options vest on 1 December 2023 and there are no specific performance criteria to achieve.

Cautionary Statement

This Interim Report has been prepared solely to provide information to shareholders. The Interim Report should not be relied upon by any party or for any other purpose.