K3 Business Technology : Half yearly report to 31st May 2022

K3 Business Technology Group plc

Interims

for the six months to 31 May 2022

24 August 2022

Presentation Team

Marco Vergani, CEO

• Appointed 30 March 2021
• Over 30 years in technology, principally in senior commercial sales in Europe, Far East and USA
• Extensive retail, consumer and e-commerce experience (recently AI driven personalisation)
• Previously, IBM VP Business Process Outsourcing EMEA; Digital River SVP Global Sales & Account Mgt

Rob Price, CFO

• Appointed CFO in October 2016
• 20 years' experience in senior financial roles, primarily in technology, retail, manufacturing and distribution
• Significant experience in driving business development

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Vision and Strategy

"Transform retail for good"

Software solutions for designer, fashion and apparel retailers and brands, which

drive intelligent, agile and sustainable business processes

Third-party Solutions

Accelerate growth

• Support global expansion of oversees IKEA franchisees and increase penetration of K3 Products
• Grow SYSPRO business leveraging higher-value projects in selected verticals e.g. aviation and increase sales of K3 Products

K3 Products

Transformative products for the Fashion and Apparel Industry

• Solutions that improve the customer experience, enhance margins and improve efficiencies
• • Omnichannel capabilities
  • Sustainability and Traceability
  • Business Insights
• Leverage Microsoft relationship to expand and address larger midsize/enterprise brands

Accelerate shift to SaaS-based

revenues

• Highly recognizable brand within Fashion and Apparel Industry
• Class-leadingcommercial and customer success functions
• Strong network of active business partners and technology partners
• Owning own destiny with K3 core products

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H1 Performance Summary

Implementing the New Strategic Growth Plan

• Operational change and innovation:
• • Account Management - new team, new tools, and greater sales focus
  • Rebranding and refreshed marketing
  • IT and systems revamp commenced
• Software development:
• • Enhanced Product offering: ViJi acquisition, next gen Pebblestone version new Imagine features to drive migrations and new sales
• Sales:
• • New business pipeline reinvigorated, US team established, greater partner focus

Financial Progress

• Revenue from continuing operations of £19.9m (2021: £20.9m) | adj. EBITDA up 13% to £1.0m
  (2021: £0.9m)
• Gross margin increased to 59.6% (2021: 58.1%)
• Net cash of £1.4m (2021: £4.4m) - H2 position expected to close significantly higher, reflecting seasonal H2 cash weighting

Outlook

• Encouraging trading in June and July - ahead of 2021. Attractive deals in the pipeline,
• Traditional H2 weighting expected to be replicated in FY 2022

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Third-party Solutions - Growth Strategy

Exploit growth opportunity in UK manufacturing

• Focus on larger transformational projects in key verticals of aerospace, electronics, machinery, plastics and medical devices
• Target market: top 25% of SYSPRO 3,000 addressable UK manufacturers with >£10m rev
• Upsell K3 Product modules and add-ons to embed deeper

Predictable growth via IKEA and franchisee relationships

• IKEA sales of €40bn+. 12 large IKEA franchisees (with other major brands in each)
• Supporting the expansion roll-out of IKEA franchisee stores into new geographies
• • approx. 20 new franchisee stores per annum
• Highly specialist services, strategic development of core Master System,
  additional software development, integration and enhancements (K3 Product opportunity)

Growth Opportunity - 50% revenue growth in next 4-5 years

•	Increased recurring revenue	• Increased cash contribution (already high)
•	Medium term margin improvement	• Cross-sell K3 Product software to embed further

FY 2021 Revenue Analysis

Software licences

Services

FY 2021

Revenue

Maintenance£28.9m

and support

Hardware & other revenue

Recurring

RevenueRecurring

Revenue

Non-recurring85%

Revenue

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