Continued improvement in performance
K3’s interim results show that the Group’s focus is bearing fruit, with Own IP sales and Gross Profit both showing good growth against the same period in 2017. There was an improvement in the trading environment for the Enterprise market within which the “ax l is fashion” product ‘saw significantly improved sales’ (seven deals were closed during the period). K3 also states that the uncertainty around cloud-adoption is no longer causing decision delays, a key positive for future growth opportunities, in our view. The outlook statement highlights the significant progress made in turning the Group around and anticipates good growth across the business. We note the weighting of cash flows and profitability towards Q4 of K3’s financial year to the end of November. In light of the interim numbers, we modestly increase our expectations for exceptional reorganisation costs, but leave unchanged our adjusted estimates – which we see as well underpinned by the first half performance.