Positive H2 trading update
K3’s trading update for the financial year to the end of November 2018 retains the positive tone which was seen at the time of the interim results in July. K3 expects to report results that are slightly ahead of market expectations. The result includes a net debt figure of around £0.7 million which compares favourably to our existing estimate of £1.6 million, reflecting the reduced cost base and better working capital management. Overall, the Group’s performance in the second half of the financial year continued to benefit from the significant changes made by the management team over the last two years. The update says that the Group continues to focus on its own IP and that new business wins for its fashion solution have continued at ‘encouraging levels’ – and we note the international flavour to recent wins which emphasises K3’s geographical diversity. We also note the potential for the Group’s Imagine platform as it gains further traction. Aside from adjusting our FY 2018E net debt number to be in line with the level flagged in the announcement, we have left our estimates unchanged. Consequently, we would expect the reported outturn for FY 2018E, expected in mid-March, to be a little ahead of our numbers.