Interim Results

K3 Business Technology Group PLC 22 September 2003 K3 BUSINESS TECHNOLOGY GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2003 Results for the six months show an improved operating profit before goodwill amortisation. The results also include the impact of the write down of the loans to the RAP Group Limited, following the sale of that business in July 2003. • Enterprise Resource Planning businesses demonstrate resilience in difficult markets Business Systems Division: - upgrades of software products well received - solid performance in difficult market conditions Enterprise Systems Division: - major new release of product planned for the second half of 2003 - benefits of cost initiatives now showing through • Cash position will be strengthened by the disposal of interest in RAP Group Limited - £0.45m cash expected by December 2003 • Turnover of £3.48m (2002 - £3.94m) in difficult market conditions. • Operating profit before amortisation of goodwill and write down relating to disposal of interest in RAP Group Limited up at £0.4m (2002 - £0.2m) despite lower turnover. Underlying margins up 2% to 11%. Operating loss £0.4m (2002 - £0.02m) reflects write down relating to disposal of interest in RAP. Enquiries: K3 Business Technology Group plc Andy Makeham, Chief Executive T: 01270 211211 David Bolton, Finance Director T: 01270 211211 Biddicks Katie Tzouliadis or Kathryn Burn T: 020 7448 1000 Rowan Dartington & Co. Limited Barrie Newton, Managing Director T: 0117 933 0010 K3 BUSINESS TECHNOLOGY GROUP PLC CHAIRMAN'S STATEMENT OVERVIEW Against a background of continuing difficult market conditions, the Group has traded in line with expectations. The Group's performance was aided by the benefit of the cost-saving initiatives we put in place last year and we remain focused on maintaining business efficiencies. At the operating level, our figures show a significant underlying improvement on 2002. This improvement however, is masked by the write-offs we have made relating to the sale of RAP Group Limited ('RAP'). In July 2003, we announced that RAP, in which we held an interest, had sold its hardware companies. K3 disposed of these hardware companies to RAP in March 2001 but the consideration had been deferred until their onward sale by RAP. Deferred consideration of £0.2m is included in debtors and is expected to be recovered in full. In addition, since March 2001, K3 had provided additional funding to RAP and the debt outstanding at July 2003 amounted to approximately £1.1m. The proceeds due to us from the sale of the hardware companies are approximately £0.75m , of which £0.45m is expected by 31 December and the balance in early 2004. This will result in a loss of £0.55m. We intend to retain the cash for future acquisitions as and when suitable opportunities arise. Financial Results During the six months under review, turnover on continuing operations was £3.48m against £3.79m in the same period last year. This reflected the challenging trading conditions in our maintenance renewal marketplaces, however, it is pleasing to note that with our focus on client service, the trend over the last 18 months of declining maintenance revenues has been arrested. Operating profit on continuing operations, before amortisation of goodwill and exceptional write-offs, was £0.41m (2002: £0.36m). The operating loss, which reflects the impact of write-offs of £0.55m, was £0.39m (2002: £0.02m). In July 2003, our interest in RAP was realised when RAP sold its hardware companies. The disposal has resulted in a write-off of £0.55m of K3's loan to RAP.. However, our cash position will be strengthened by the disposal proceeds of £0.75m . Loss on ordinary activities before taxation was £0.43m (2002: loss of £0.05m). This resulted in loss per share before amortisation of goodwill of 0.4p (2002: earnings of 0.4p) and loss per share of 0.8p (2002: loss per share of 0.1p). At 30 June 2003, the Group had a positive cash balance of £0.12m compared with an overdraft of £0.18m at 30 June 2002 and a cash balance of £0.12m at 31 December 2002. The cash balance at 31 August 2003 is £0.16m. The Directors do not propose to pay a dividend (2002: nil). OPERATIONAL REVIEW Business Systems Division The Business Systems Division, based in Walton-on-Thames, continued its excellent trading performance in the first half. Towards the end of the period, the Division introduced its new SmartVision product, which replaces the MFW mid range manufacturing control system. Uptake has been good so far and the new product is expected to help stimulate sales in the second half and beyond. Enterprise Systems Division The Enterprise Systems Division, based in Crewe, saw modest new sales in the first half. In June 2003, we released Version 3 of our IBS ERP solution. The product is targeted at both new and existing customers and we are pleased with the interest it is generating although we remain realistic about the time required in the current environment to convert prospects into firm orders. The business rationalisation undertaken in mid-2002 resulted in cost savings of £0.25m against the comparable period last year and we will continue to manage the business in line with market conditions. Outlook Market conditions for both our ERP divisions remain difficult and more especially for the Enterprise Systems Division. The second half of the year is, traditionally, our stronger period, and whilst the outcome is dependent on closing substantial new business sales, with the Group's large client base, and new products, we remain cautiously optimistic. We continue to evaluate a number of potential acquisition opportunities in our sector and with our improving cash position we will seek to exploit these appropriately. George Matthews Chairman 22 September 2003 K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months ended 30 June 2003 Unaudited Unaudited Audited Six months Six months Year to 31 to 30 June to 30 June December 2002 Notes 2003 2002 £'000 £'000 £'000 Turnover Continuing 3,483 3,790 7,916 Discontinued - 154 172 Total 3,483 3,944 8,088 Operating profit before goodwill amortisation and exceptional write down 407 220 975 Goodwill amortisation (243) (242) (463) Exceptional write down (550) - - Continuing (386) 115 658 Discontinued - (137) (146) Operating (loss) profit 3 (386) (22) 512 Loss on disposal of operations - - (173) Net interest payable and similar charges (46) (27) (73) (Loss) profit on ordinary activities before (432) (49) 266 taxation Tax on (loss) profit on ordinary activities - - 108 (Loss) profit for the financial period (432) (49) 374 Earnings (loss) per share Basic 4 (0.8p) (0.1p) 0.7p Diluted 4 (0.8p) (0.1p) 0.7p Basic before amortisation of goodwill 4 (0.4p) 0.4p 1.6p Basic before amortisation of goodwill and 4 0.7p 0.4p 2.0p exceptional items The group has no recognised gains or losses in any of the above periods other than the (loss) profit for that period. K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED BALANCE SHEET As at 30 June 2003 Unaudited Unaudited Audited As at As at As at 31 30 June 30 June December 2003 2002 2002 Notes £'000 £'000 £'000 Fixed assets Goodwill 3,574 4,038 3,817 Tangible assets 425 567 426 3,999 4,605 4,243 Current assets Properties for resale - 70 30 Debtors - due within one year 3,338 2,982 3,668 - due after one year - 250 200 Cash at bank and in hand 122 - 123 3,460 3,302 4,021 Creditors: amounts falling due within one year 5 (4,565) (4,933) (4,920) Net current liabilities (1,105) (1,631) (899) Total assets less current liabilities 2,894 2,974 3,334 Creditors: amounts falling due after more than one year (33) (70) (51) Provisions for liabilities and charges - (12) - Net assets 2,861 2,892 3,293 Capital and reserves Called-up share capital 2,548 2,540 2,548 Shares to be issued - 58 - Share premium account 6 6,441 6,452 6,441 Other reserve 6 2,359 2,320 2,359 Profit and loss account 6 (8,487) (8,478) (8,055) Equity shareholders' funds 2,861 2,892 3,293 K3 BUSINESS TECHNOLOGY GROUP PLC CONSOLIDATED CASH FLOW STATEMENT For the period ended 30 June 2003 Unaudited Unaudited Audited Six months Six months Year to 31 to 30 June 2003 to 30 June December 2002 2002 Notes £'000 £'000 £'000 Net cash inflow (outflow) from operating 7 113 (7) 471 activities Returns on investments and servicing of finance (11) (10) (35) Taxation - - - Capital expenditure and financial investment (87) (62) (66) Acquisitions and disposals - - (105) Cash inflow (outflow) before financing 15 (79) 265 Financing (16) (40) (79) (Decrease) increase in cash in the period (1) (119) 186 NOTES TO THE FINANCIAL STATEMENTS 1. The interim financial information has been prepared in accordance with the accounting policies adopted in the accounts for the year ended 31 December 2002. 2. The financial information in this statement relating to the six months ended 30 June 2003 and the six months ended 30 June 2002 is unaudited and does not constitute full statutory accounts within the meaning of Section 240 of the Companies Act 1985. The figures for the year ended 31 December 2002 have been extracted from the statutory accounts which have been filed with the Registrar of Companies. The audit report was unqualified and did not contain any statement under section 237 (2) and (3) of the Companies Act 1985. 3. Operating (loss) profit The operating (loss) profit is stated after charging a write down £0.55m (2002: £nil) relating to the disposal of the Group's interest in RAP Group Limited. 4. Earnings (loss) per share The calculations of earnings (loss) per share are based on the following earnings (losses) and numbers of shares: Basic and diluted Unaudited six Unaudited six Audited year months to 30 June months to 30 June to 31 December 2003 2002 2002 £'000 p £'000 p £'000 p Basic (loss) earnings per share (432) (0.8) (49) (0.1) 374 0.7 Effect of goodwill amortisation 243 0.4 242 0.5 463 0.9 Basic (loss) earnings per share before amortisation of goodwill (189) (0.4) 193 0.4 837 1.6 Exceptional items (net of tax) 550* 1.1 - - 173 0.4 Basic earnings per share before amortisation of goodwill and exceptional items 361 0.7 193 0.4 1,010 2.0 Number of shares Number of shares Number of shares Weighted average number of shares 50,962,144 50,794,279 50,844,943 * Relates to write-off of debt due from RAP Group. 5. Creditors: amounts falling due within one year Included in creditors due within one year is deferred income of £2,285,000 (2002: £2,135,000) relating to income from support which is generally invoiced in advance and recognised as revenue in equal monthly instalments over the relevant periods. 6. Reserves Share Other Profit and Total premium reserve loss account account £'000 £'000 £'000 £'000 At 1 January 2003 6,441 2,359 (8,055) 745 Retained loss for the period - - (432) (432) At 30 June 2003 6,441 2,359 ( 8,487) 313 7. Cash flow statement Reconciliation of operating (loss) profit to operating cash flows Unaudited Unaudited Audited Year Six months Six months to 31 Dec 2002 to 30 June to 30 June 2003 2002 £000 £000 £000 Operating (loss) profit (386) (22) 512 Depreciation and fixed asset impairment 88 113 206 Loss on sale of tangible fixed assets - - 29 Write down of properties held for resale - - 40 Amortisation of goodwill 243 242 463 Decrease (increase) in debtors 560 222 (312) Decrease in creditors (392) (443) (336) Decrease in provisions - (119) (131) 113 (7) 471 8. The above information is being sent to the shareholders and is available from the Company's registered office: Unit 19, Linden Business Centre, Linden Road, Colne, Lancashire, BB8 9BA. This information is provided by RNS The company news service from the London Stock Exchange

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