World Class Software. World Class Service.
K3 Business Technology Group plc
Annual report and financial statements for the year ended 30 June 2014
World Class Software. World Class Service. K3 is the UK’s leading supplier of integrated business systems 
encompassing mission critical business software
*
,  
Customer Relationship Management (CRM) software, 
Business Intelligence and e-commerce, hosting and managed 
services to the retail, manufacturing and distribution sectors. 
Focussed on these markets, we support more than  
3,100 customers in over 30 countries.
*
Enterprise Resource Planning (ERP)
K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
Overview
1 Financial and Operational Key Points
2 At A Glance
Strategic Report
4 Chairman’s Statement
7 Business Model
8 Strategy and Objectives
9 Chief Executive’s Review
16 Financial Review
17 Principal Risks and Uncertainties
19 Acquisition History
Governance
20 Corporate Governance
24 Remuneration Report
26 Directors’ Report
28 Board of Directors
Financial Statements
Group
30 Independent Auditors’ Report
31 Consolidated Income Statement
32 Consolidated Statement of Comprehensive Income
33 Consolidated Statement of Financial Position
34 Consolidated Statement of Cash Flows
35 Consolidated Statement of Changes in Equity
36 Notes forming part of the Financial Statements
Parent Company
81 Company Balance Sheet
82 Notes forming part of the Company Financial Statements
Other
95 Unaudited Five Year Summary
96 Notice of Annual General Meeting
103 Information for Shareholders
104 Officers and Advisors
K3 Business Technology Group plc
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AIM: KBT
k3btg.com K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
3
Overview Strategic Report Governance Financial Statements Other
*1 Calculated before amortisation of acquired intangibles of £2.99m (2013: £3.18m) and exceptional reorganisation costs of £1.72m (2013: £0.73m).
*2 Calculated before amortisation of acquired intangibles (net of tax) of £1.95m (2013: £2.27m) and exceptional reorganisation costs (net of tax) of 
£1.34m (2013: £0.58m).
Financial Key Points
Operational Key Points
 Major contracts wins more than doubled to £25.3m (2013: £11.80m and 2012: £12.94m): 
– £12.63m of “ax|is” contracts signed (50% of total), including high profile retailers 
–  Microsoft UK Division returned to profit
 SYSPRO and Sage Division continued to generate high levels of recurring income  
(46% of Group’s total recurring income base) and good cash flows
 Managed Services Division delivered improved performance 
– including return to profitability
 Next steps for “ax|is” solution include:
 – capitalising on deepening Microsoft relationship
 – increased investment to broaden international channel to market 
 – further software product releases tailored to specific market segments
 Board expects business recovery to continue and views growth prospects very positively  
– pipeline of opportunities is significant
Revenue Adjusted Operating Profit
*1
Adjusted EPS
*2
£71.95m £7.30m £18.6p
12 12 12 13 13 13 14 14 14
Very encouraging results –  
reflecting growing sales of  
new Microsoft-based flagship solution, “ax|is” K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
4
At a Glance
What does K3 do?
K3 is one of the UK’s leading providers of integrated business solutions to 
the supply chain sector. Our customers are Retailers, Manufacturers and 
Distributors who are looking for global, brand leading business solutions 
from a specialist provider who is dedicated to their market sector.
We support over 3,000 customers from five regional 
centres in the UK, with our international operations 
headquartered in Holland.
Increasingly our customers are considering Cloud 
Computing, to defray IT costs and to provide a more 
flexible and secure IT infrastructure that will deliver 
them a competitive edge.
We take market leading solutions from Microsoft, 
Sage and SYSPRO and add our own Intellectual 
Property (“IP”) to create industry specific solutions.
By having our own IP , we can tailor these solutions 
to our core markets and our solutions are thus more 
competitive, creating more loyal customers, whilst at 
the same time driving up margins.
We have loyal customers and once installed, our 
software systems can remain in place for 15 years 
or longer. This ensures that K3 generates very high 
levels of recurring income. 
K3 has a strong and successful track record of 
growth. We have steadily grown organically and 
through acquisition over the last 10 years and will 
continue with this dual growth strategy.
 Over 3,100 customers
 10 support centres across
 the UK and Europe
 c680 staff
 Microsoft Inner Circle
 Microsoft President’s Club
 Investors in People
 Sage X3 partner of the year
David Bolton 
Chief Executive Officer
Reseller Channel K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
5
Overview Strategic Report Governance Financial Statements Other
Our markets
Retail
K3 entered the retail market in 2004 
with a key acquisition. This business 
unit has grown significantly since 
then. Our customers tend to be 
well known ‘high street’ retailers 
which select K3 because of our 
sector knowledge, track record and 
innovative solutions. In recent times, 
high street retailers have been under 
pressure but K3 has continued to 
benefit from a strategic investment 
in multi-channel retail (including 
internet, store and mail order), and 
continues to win major new contracts 
year on year. Over the last two years, 
K3 has invested heavily in its new ax|is 
offering which will provide a Retail 
and Wholesale solution for Microsoft 
Dynamics AX. The ax|is solution is 
being marketed worldwide through 
global distributors.
Manufacturing
With over 1,000 manufacturing 
customers, K3 is the largest provider 
of integrated business solutions to 
the manufacturing sector. We offer 
solutions for both ‘discrete’ and 
‘process’ manufacturers, and our 
customers range from global multi-
nationals running K3 solutions.
Distribution
Distribution is the most recent 
area of K3’s expansion, with several 
acquisitions creating a dedicated 
business unit of size and scale. Whilst 
there is considerable overlap with our 
retail and manufacturing customers, 
we now have some 700 dedicated 
distribution customers relying on K3 
for their IT services and support.
International
Our International Operations 
Division based in The Hague 
has become a major contributor 
to K3s performance in recent 
years. From here we support our 
international retail and distribution 
customers, with some major global 
corporate customers such as Inter 
IKEA Systems B.V., the owner and 
franchisor of the IKEA concept. Our 
Pebblestone fashion distribution 
solution is managed from here, 
supporting a network of 24 
distributors in 27 countries.
Hosting and 
Managed Services
From data centres in Edinburgh, 
London, New York and Toronto 
we support a global hosting and 
managed service business that 
looks after the IT infrastructures for 
K3 customers around the globe, 
both on-premise and hosted. Cloud 
Computing is a fast growing sector 
for industry as a whole and this is 
also one of K3’s fastest growing 
business units.
Dedicated teams for dedicated markets
K3
Europe
K3 supports 64 distributors  
and over 3,000 customers in 
more than 30 countries
K3 Distributors
K3 Development Centres
K3 Hosting Centres
K3 Offices K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
6 *See note 30 on page 80 for further details
Chairman’s Statement
“Very encouragingly, the total value of major 
orders won in the year at £25.3m was more 
than double the level of last year”
Overview
In my final results statement as Chairman 
I am delighted to report on the very 
encouraging progress K3 has made 
across the business. Most importantly, 
we have commercially launched our 
new flagship Microsoft-based software 
product, “ax|is” , which has been 
developed for the retail sector. Results 
for the year to 30 June 2014 reflect this 
progress with revenues up 13% year-
on-year to £71.95m and adjusted profit 
before tax
*1
 up 51% to £6.6m.
Very encouragingly, the total value 
of major orders won in the year at 
£25.3m was more than double the 
level of last year (2013: £11.8m). All our 
software products achieved year-on-
year increases, assisted by a general 
improvement in trading conditions in 
the UK. The strongest growth came from 
our “ax|is” solutions which accounted 
for approximately £12.63m of our new 
business wins, some 50% of K3’s total. 
This included two important pilot “ax|is” 
projects which are currently underway 
and should lead to further large orders. 
The financial benefits of these major 
new wins will continue to come through 
in the new financial year. 
We are pleased with the traction we are 
gaining with our “ax|is” solution. The 
significant development work we have 
invested in tailoring Microsoft’s generic 
Dynamics AX product for the retail 
sector and initial market reaction has led 
to a closer relationship with Microsoft. 
This is extremely helpful in supporting 
our plans to expand our channel to 
other markets around the world. 
As we previously reported, the 
expansion of our existing international 
partner channel is a major strategic 
focus and we have invested 
significantly in this over the year. We 
have already entered into agreements 
with a number of new key partners 
and are engaging with global system 
integrators. The development of this 
indirect sales channel will fuel high 
margin growth and will be a key area of 
investment over the new financial year 
and beyond. We are now co-ordinating 
our plans with Microsoft.
We stepped up our recruitment and 
training of AX resource over the year. As 
we have commented before, Microsoft 
Dynamics AX skills are currently in 
short supply and this has had the effect 
of increasing our costs. However, our 
Dynamics AX in-house training and use 
of Dynamics AX resources which we 
have established in near-shore locations 
will help to mitigate this. 
Our SYSPRO and Sage Division 
continued to generate high levels of 
recurring income and cash and the 
Division also saw strong software sales. 
New sales of our SYSPRO software also 
benefit our Managed Services Division 
as we are now delivering most of our 
new SYSPRO systems as part of a hosted 
cloud offering. Our Managed Services 
activities recorded a profit of £0.43m 
for the year compared to a loss of 
£0.56m last year. This reflected both the 
reorganisation and managerial changes 
we made in the Division and increasing 
sales of our products. The potential to 
develop significant recurring revenues 
from this activity, especially as we add 
new “ax|is” customers, remains exciting.
K3 continues to generate high levels 
of recurring revenues, principally from 
software licence renewals and support 
contracts, and as we grow our software 
product sales, this income stream 
will incrementally increase. Recurring 
revenues for the year amounted to 
£35.42m, accounting for 49% of K3’s 
total revenues (2013: £34.54m, 54%). 
Net debt at the year end was £13.63m, 
only marginally lower than at the same 
period last year. We anticipate that it 
will reduce in the new financial year 
as a result of significantly decreased 
exceptional costs and a further 
improvement in profitability. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
7
Overview Strategic Report Governance Financial Statements Other
*See note 30 on page 80 for further details
Financial Results
Revenues for the year ended 30 June 
2014 increased by 13% to £71.95m 
(2013: £63.51m), with revenues in the 
second half 17% ahead year-on-year 
at £37.48m (2013: £31.96m). Growth 
was largely driven by the improving 
performance of our Microsoft-based 
activities, including our traditional 
Microsoft Dynamics NAV business 
but most especially from our newer 
Microsoft Dynamics AX-based  
solution, “ax|is” . 
Adjusted profit from operations
*2
 over 
the year increased by 43% to £7.30m 
(2013: £5.09m). Adjusted profit from 
operations
*3
 in the second half year was 
up 72% year-on-year to £3.69m (2013: 
£2.15m). The performance in the second 
half was especially notable in a business 
which historically has been H1 weighted 
due to the profit arising on SYSPRO 
annual licence fee renewals.
Adjusted profit before tax
*1
 for the year 
ended 30 June 2014 increased by 51% 
to £6.60m (2013: £4.37m). Adjusted 
earnings per share
*4
 increased by 33% to 
18.6p (2013: 14.0p). 
This recovery came off the back of 
the significant software product 
development investment that the 
Group has been making which totalled 
£3.99m over the year (2013: £3.56m). 
The largest element, approximately 
£2.06m (2013: £1.45m), was related to 
our “ax|is” solution but we made further 
investment in our other products, 
including Dynamics NAV and SYSPRO, 
and in our sales channel products.
We incurred exceptional costs of £1.72m 
(2013: £0.73m). This principally related 
to: our decision to restructure our 
Microsoft UK Division and Managed 
Services Division to accelerate the return 
of these businesses to profitability; 
senior management changes and some 
restructuring of prior acquisitions. We 
do not expect major exceptional costs in 
the coming year.
Finance expenses were broadly flat 
at £0.70m (2013: £0.73m) as working 
capital requirements increased for the 
enlarged business.
We have recognised a deferred tax 
credit of £0.89m (2013: £0.65m) largely 
in respect of intangibles and together 
with the impact of lower profits and 
research and development credits (that 
are recognised only as claims are agreed 
with tax authorities), there is an overall 
tax credit of £0.68m in the year (2013: 
£0.78m).
Taking into account amortisation of 
intangibles of £2.99m (2013: £3.18m) 
and exceptional reorganisation costs 
of £1.72m (2013: £0.73m), profit from 
operations for the year more than 
doubled to £2.59m (2013: £1.19m). Profit 
before taxation rose 3.1 times to £1.89m 
(2013: £0.46m). Basic earnings per share 
increased by 91% to 8.2p (2013: 4.3p).
 Revenues in the second half 17% ahead  
year-on-year at £37.48m
Revenue Adjusted Operating Profit
*2
£71.9m £7.3m
13 13 14 14 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
8 *See note 30 on page 80 for further details
Cash flows and banking
K3 has traditionally generated good 
cash flows, with a seasonal weighting to 
October-December. This has continued 
to be the case, although a combination 
of exceptional costs and increased 
working capital as the business 
expanded into larger contracts has 
meant that cash generation has reduced 
from historical levels. We have seen a 
working capital outflow of £2.79m in 
the current year as the business grew, 
compared to an inflow of £1.51m in the 
prior year. Adding back the cash impact 
of exceptional costs the adjusted cash 
flow from operations
*5
 was £7.07m 
(2013: £8.66m), with cash generated 
from operations being £5.35m  
(2013: £8.02m). 
Whilst the Group made debt repayments 
of £2.31m (net), raised £0.28m from 
the issue of share capital as employees 
exercised share options, and received 
£0.29m of tax repayments (net) in the 
year, net debt at 30 June 2014 was only 
marginally lower at £13.63m (2013: 
£13.81m). A major factor in this was the 
investment in product development of 
£3.99m which has been fundamental 
to the order wins that have driven the 
current year profit improvement. As 
K3’s profitability improves further, and 
with significantly reduced exceptional 
costs, we expect the net debt position to 
improve significantly, whilst continuing 
our investment programme.
In August 2014 we agreed the extension 
of the Group’s banking facilities for 
three years through to August 2017 
on substantially the same terms as the 
existing facilities. 
Dividend
With the improving prospects for the 
Group, the Board is pleased to propose 
an increased final (and total) dividend 
for the financial year of 1.25p per share 
(2013: 1.0p). Subject to shareholder 
approval at K3’s General Meeting, this 
dividend will become payable on  
16 January 2015 to shareholders on  
the register on 12 December 2014. 
K3’s Annual General Meeting will be held 
on 26 November 2014 at 10.30am, at the 
Group’s head office at Baltimore House, 
50 Kansas Avenue, Manchester M50 2GL. 
Board Changes
In January 2014, we announced that 
after nearly 14 years as Chief Executive, 
Andy Makeham was leaving the Group 
and that Chief Finance Officer, David 
Bolton, who had led the Group’s 
expansion with Andy, was assuming the 
role of Chief Executive. On behalf of the 
Board, I am delighted to welcome David 
in his new role and to thank Andy for his 
significant contribution over the years. 
We appointed two new Non-executive 
Directors, Peter Cookson in July 2013 
and Paul Morland in May 2014. Peter, a 
chartered accountant, has many years’ 
experience in senior management 
and finance roles, especially in the 
technology and retail sectors. Paul 
Morland has a well-established track 
record in the Technology sector both in 
management and as an analyst. 
In June 2014, we announced that, after 
nine years as Non-executive Chairman 
of the Group, I would be retiring at 
K3’s forthcoming AGM. Plans for my 
succession are well advanced and the 
Board expects to announce further 
appointments in due course.
Outlook
The year has seen a strong recovery in 
the business with the initiatives we have 
taken in the development of intellectual 
property for the Retail sector paying 
dividends. The work we are now doing 
with Microsoft provides the opportunity 
for substantial further growth in our 
Microsoft Dynamics AX proposition, 
supported by a stable and profitable 
underlying business. Whilst further 
investment will be required to exploit 
the opportunity fully, I am confident 
that K3 is well placed to do this in 
future years. With a strong pipeline of 
opportunities ahead, the outlook for K3 
is particularly encouraging.
Tom Milne
Chairman
 An increased final 
dividend for the 
financial year of 
1.25p per share
 The year has seen 
a strong recovery 
in the business K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
9
K3 is one of the UK’s leading providers of integrated business solutions encompassing 
Enterprise Resource Planning (ERP) software, Customer Relationship Management 
(CRM) software, Business Intelligence and e-commerce, hosting and managed services 
to the supply chain sector. Our customers are Retailers, Manufacturers and Distributors 
who are looking for global, brand leading business solutions from a specialist provider 
who is dedicated to their market sector.
Business Model
Overview Strategic Report Governance Financial Statements Other
More information about our business  
can be found at www.k3btg.com K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
10
The Board believes that K3 has the potential to build on its current position as a leading supplier of SME and 
mid-tier supply chain management solutions, with a particular emphasis on our own Intellectual Property 
linked to established ERP and hosted solutions. The Board’s main objectives are to: 
• achieve growth in our target markets;
• create shareholder value through increases in adjusted earnings per share; 
• grow recurring income levels; and
• achieve progressive increases in the dividend. 
Cautionary Statement
This Strategic Report has been prepared for shareholders to provide them with additional information 
to assess the company’s strategies and the potential for those strategies to succeed. It should be noted 
that the Strategic Report contains certain forward looking statements. These statements are made by the 
directors in good faith, based on the information available to them up to the time of the approval of this 
report. Accordingly, all these statements should be treated with caution, due to the inherent uncertainties, 
including both economic and business risk factors, underlying any such forward looking information.
Strategy and Objectives K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
11
Overview Strategic Report Governance Financial Statements Other
*See note 30 on page 80 for further details
  2014 2013
Revenue (£’000)  71,950 63,513
Recurring revenue (£’000)  35,415 34,538
Percentage of recurring revenue  49% 54%
Gross margin percentage  54% 52%
Adjusted profit from operations
*6
 (£’000)  7,301 5,094
Adjusted cash flow from operations
*7
 (£’000)   7,074 8,659
Adjusted EPS
*8
 (pence)   18.6p 14.0p
Key Performance Indicators
The Board considers the key performance indicators by which it measures the performance of the Group 
to be revenue, recurring revenue (both the level and the percentage of total revenue), gross margin, profit 
from operations and earnings per share, both adjusted for amortisation of acquired intangibles, acquisition 
costs, exceptional reorganisation costs and exceptional income. The key performance indicators used by the 
Board are summarised below and the table sets out K3’s performance for the year under review.
Definitions:
Revenue is the gross revenue as reported 
in the financial statements, comprising 
software, hardware, consultancy, and 
support and managed services. This is 
a key measure of activity within each 
business segment and for the Group as 
a whole.
Recurring revenue is the income 
provided for annual licence renewals 
and support for software used by our 
customers. This is a key indicator in 
measuring the underlying resilience and 
growth of the business.
Percentage of recurring revenue 
measures the growth of income 
providing core stability to the business.
Gross margin percentage is calculated as 
gross profit as a percentage of revenue. 
This measure identifies the level of 
contribution derived from each sale or 
component thereof. 
Adjusted profit from operations is 
calculated as profit from operations per 
the financial statements, adjusted for 
the impact of amortisation of acquired 
intangibles, acquisition costs, exceptional 
reorganisation costs and exceptional 
income. This is a key performance 
indicator for quoted companies. 
Adjusted operating cash percentage 
is the operating cash generated after 
adding back cash flows in respect 
of regularising liabilities that were 
significantly outside normal statutory 
due dates and commercial terms at 
the date of acquiring companies and 
trades, acquisition costs and exceptional 
reorganisation costs, divided by the 
adjusted operating profit. This is a key 
indicator in measuring the Group’s ability 
to convert operating profit into cash. 
Adjusted EPS is calculated as profit 
for the period, adjusted for the 
tax affected impact of acquired 
intangibles amortisation, exceptional 
reorganisation costs and acquisition 
costs, divided by the weighted average 
number of shares during the period. 
This is a key performance indicator for 
quoted companies. 
Chief Executive’s Review
Strong growth in revenues with significant rise in software at £12.89m (2013: £9.0m) and services at £19.83m (2013: £16.4m).
The improvement in gross margin to 54% reflected higher services revenues and improved software margin.
The adjusted cash flow from operations
*7
 reduced due to higher working capital as the business has grown over the last  
12 months, but has remained healthy at 97% (2013: 170%) of adjusted profit from operations
*6
. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
12 *See note 30 on page 80 for further details
Operational Review
K3 comprises four trading Divisions: Microsoft UK, International, SYSPRO and Sage, and  
Managed Services. The financial results of each Division together with head office costs are  
summarised in the table below. A fuller review of each Division is also provided below. 
 Revenue Revenue Adjusted profit Adjusted profit
 year to 30 June year to 30 June year to 30 June year to 30 June
 2014 2013 2014 2013
 £’000 £’000 £’000 £’000
Microsoft UK 25,255 18,860 647 (1,663)
International 12,526 12,864 1,537 2,258
Total Microsoft 37,781 31,724 2,184 595
SYSPRO and Sage 26,017 25,377 5,070 5,580
Managed Services 8,152 6,412 432 (555)
Head office  – – (385) (526)
Total 71,950 63,513 7,301 5,094
Revenue 
£26.0m
13 14
SYSPRO and Sage
Revenue
£12.5m
13 14
International
Revenue 
£25.2m
13 14
Microsoft UK
Revenue 
£8.1m
13 14
Managed Services
Microsoft-based activities
The K3 Microsoft Dynamics business, 
comprising our Microsoft UK Division 
and International Division, is working 
together on global initiatives to 
generate additional intellectual 
property, cost effective resourcing 
and improved channels to market, 
particularly to support our new “ax|is” 
solution. Revenue for the total Microsoft 
business increased by 19% year-on-
year to £37.78m (2013: £31.72m) and 
adjusted profit from operations
*9
 rose by 
2.7 times to £2.18m (2013: £0.60m). Results 2014 2013
Revenue (£’000) 25,255 18,860
Recurring revenue (£’000) 9,472 8,315
Percentage of recurring revenue 38% 44%
Gross margin percentage 48% 44%
Adjusted profit (loss) from operations
*10
 (£’000) 647 (1,663)
K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
13
Overview Strategic Report Governance Financial Statements Other
*See note 30 on page 80 for further details
The closure of major software wins for 
both our “ax|is” proposition (based on 
Microsoft Dynamics AX) and Dynamics 
NAV product drove a major turnaround in 
the Division’s performance this year. 
After a very encouraging first half, the 
Division continued to perform well, 
fuelled by “ax|is” and improving retail 
sentiment. Divisional revenue increased 
by 34% to £25.26m (2013: £18.86m) and 
turned an adjusted loss
*10
 in the prior 
year of £1.66m into an adjusted profit
*10
 
of £0.65m. As would be expected, the 
improvement in services revenue to 
£8.90m (2013: £5.88m) and software 
revenue to £5.57m (2013: £3.64m) 
has had a major impact on the results. 
However there has also been a large 
increase in the cost of delivery. At the 
half year we highlighted that a significant 
increase in demand for Dynamics AX had 
in turn created a surge in demand for 
skilled Dynamics AX resource. We have 
made a significant short term investment 
on an accelerated programme of global 
recruitment, including near-shoring, and 
training to equip our staff. The reduction 
of costs of delivery is a key initiative for 
future profitable growth in the division.
Having secured a number of pilot orders 
for our “ax|is” product at the end of the 
last financial year, the Division secured 
wins worth a total of £12.63m for the 
solution over the year, across nine major 
contracts. This contributed some 82% 
of the total value of the Division’s new 
wins. Including orders for our established 
Microsoft Dynamics NAV solution, the 
total value of new orders was £15.4m 
over the year (2013: £6.87m). Of these 
orders, we closed £6.16m in the second 
half year, including another two pilot 
projects for “ax|is” that could lead to 
further large orders.
What has helped to drive our new 
Microsoft Dynamics AX orders is our 
intellectual property (“IP”), which 
has created a richer more enhanced 
enterprise resource planning (“ERP”) 
solution for retailers. It is worth noting 
that the average size of Microsoft 
Dynamics AX orders is much larger than 
for our traditional Microsoft Dynamics 
NAV business and that delivery is also 
over a more extended period. We are 
working closely with Microsoft on 
product releases and this relationship on 
product development is benefiting our 
overall stance in the marketplace. 
Whilst our focus has been on the 
Microsoft Dynamics AX proposition, 
our traditional Microsoft Dynamics NAV 
business has also returned to growth with 
two major contracts worth £1.3m secured 
in the year, and a further deal worth 
£0.86m secured since the year end. We 
are also investing in a product upgrade 
path for existing customers to provide 
additional functionality for solutions 
purchased in previous years.
Software income of £5.57m compared to 
£3.64m in the prior period. These sales 
are from a mix of traditionally structured 
deals and Microsoft Enterprise 
Agreements. Enterprise Agreements are 
used by Microsoft on larger contracts 
and under these agreements K3 
receives a “commission” for the software 
delivered to the customer combined 
with follow-on services as normal. We 
estimate that the software recognised 
would have increased by £1.16m to 
£6.73m on the traditional sales basis. 
Recurring maintenance income of 
£9.47m is up 14% over the prior year 
(2013: £8.32m) reflecting the impact of 
new deals and initiatives to encourage 
customer retention.
Whilst the Division is primarily focused 
on the Retail market, it also includes our 
businesses that service the wholesale, 
manufacturing and distribution, and 
events sector. These units saw strong 
growth, with an encouraging level of 
new contract wins in both our AX and 
NAV businesses. Revenues grew by 
18% to £7.43m (2013: £6.27m) with a 
strong recovery in adjusted profit from 
operations
*11
 to £0.49m (2013: £0.10m). 
We also saw some good growth in our 
point of sales RSG business that focuses 
on the events sector, utilising the 
Microsoft Dynamics RMS product. The 
opportunities in this area encouraged 
us to make a small acquisition of a 
competitor (RTL) in July 2014.
At 30 June 2014, the pipeline for the 
Division was at £37.9m (2013: £38.8m). 
This excludes approximately £7.18m still 
to be delivered on the large contracts 
won in the current year.
Microsoft UK Division
Divisional revenue increased by 34% to £25.26m  
(2013: £18.86m) and turned an adjusted loss in the 
prior year of £1.66m into an adjusted profit of £0.65m £25.3m
Revenue 2014 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
14 *See note 30 on page 80 for further details
The International Division includes 
our Dutch Microsoft Dynamics reseller 
business, our Point of Sale business 
focused on smaller retailers, and our 
ISV (software author and channel 
management) company. 
The ISV contains the “ax|is” product 
set developed in conjunction with the 
Microsoft UK Division, which has been 
pivotal in the improvement in the results 
of the Group. Early market interest in 
our enhanced retail solution is very 
encouraging and Microsoft’s support for 
our software development programme 
has led to a deepening relationship  
with them. 
Revenue was broadly flat year-on-year 
at £12.53m (2013: £12.86m), however 
adjusted profit from operations
*12
 
decreased to £1.54m (2013: £2.26m). 
Whilst the slow recovery of the Dutch 
fashion and retail market has continued 
to be a major factor in the business 
performance, we have also made 
an investment in resources in the 
Dynamics AX product, which we have 
not historically sold in this territory. This 
division also includes our global reseller 
channel and personnel engaged in the 
development and marketing of our “ax|is” 
software product, which is having a 
profound impact on Group performance. 
Software sales at £1.93m were up 
19% (2013:£1.62m) though services 
revenues at £4.64m were down 3% 
(2013: £4.81m). Margins at 50% showed 
an improvement over the prior year as 
the development of product has been in 
full swing throughout the year and more 
cost has been capitalised. There has 
however been a significant increase in 
sales and marketing personnel to build 
our channel team and prepare the Dutch 
business to become a player in the local 
Dynamics AX market, having previously 
focused on the Dynamics NAV product.
Our relationship with Inter IKEA 
Systems B.V. (the owner and franchisor 
of the IKEA concept and the largest 
customer in the Group) continues to 
be very strong, with good levels of 
services income on planned projects, 
with further potential business to 
come. Shortly before the year end we 
commenced a major work stream for 
one of the franchisees and we are being 
encouraged by certain franchisees 
to use our expertise to assist them in 
other activities.
The Unisoft business is performing in 
line with our expectations with its RVE 
Point of Sale product gaining traction, 
whilst the market remains difficult. The 
move to subscription based sales is a 
big change, reducing the sales cycle 
down to weeks instead of months and 
building a recurring revenue base with 
commitments up to five years. Sales in 
the current year at £3.45m were in line 
with the prior year (2013: £3.48m). We 
are looking at the wider potential sales 
opportunities for this product. 
The Division secured a total of £3.2m 
of major order wins (2013: £1.13m). 
The prospects pipeline, excluding 
potential business anticipated in a long 
term plan with Inter IKEA Systems B.V., 
currently amounts to £6.7m of orders 
(2013: £5.2m), highlighting that further 
improvement in business performance 
can be expected.
“The Division secured a total  
of £3.2m of major order wins”
Results 2014 2013
Revenue (£’000) 12,526 12,864
Recurring revenue (£’000) 5,259 5,689
Percentage of recurring revenue 42% 44%
Gross margin percentage 50% 47%
Adjusted profit from operations
*12
 (£’000) 1,537 2,258
International Division
The ISV contains the “ax|is” product set 
developed in conjunction with the Microsoft 
UK Division which has been pivotal in the 
improvement in the results of the group £12.5m
Revenue 2014 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
15
Overview Strategic Report Governance Financial Statements Other
*See note 30 on page 80 for further details
Revenues at the SYSPRO and Sage 
Division increased marginally to £26.02m 
(2013: £25.38m). Adjusted profit from 
operations
*13
 was satisfactory at £5.07m 
(2013: £5.58m), with the reduction mainly 
due to investment in sales resources 
in Sage and the acceleration of a 
programme in our SYSPRO business that 
is designed to replace employees likely to 
retire in the coming years. 
The Division’s recurring revenues 
remain high at £15.12m, albeit a £0.86m 
decrease on last year (2013: £15.98m), 
with the reduction reflecting the disposal 
of a small non-core Sage business in 
May 2013. SYSPRO maintenance and 
support levels remained strong with 
a 97% renewal rate (2013: 98%). Total 
software sales were excellent at £5.00m 
(2013: £3.84m) and total services income 
increased by £0.32m to £5.56m (2013: 
£5.24m).
The SYSPRO operation is the exclusive 
UK and sole European SYSPRO partner 
with a rolling five year distribution 
agreement. It has over £1.0m of income 
from own IP products covering functional 
requirements which are usually found 
only in significantly more expensive 
software. The SYSPRO business remains 
strong with high levels of recurring 
income, excellent management of 
opportunities and encouraging levels of 
new business wins. These increasingly 
involve elements of hosted services. 
The SYSPRO business secured 14 new 
wins in total worth £2.34m compared 
with ten worth £1.77m last year. The 
majority of these new deals came 
with extended period maintenance 
agreements. At the year end the pipeline 
was £2.8m (2013: £3.4m), the reduction 
coming about as a result of a number of 
the current year wins were sizeable and 
are taking longer to replace. 
Our SYSPRO customer base generates 
high levels of recurring revenues through 
annual software licence and support 
renewals, with income at £7.35m (2013: 
£6.96m). The major part of this income 
is recognised at the annual renewal 
date in October, giving the first half in 
this division a significant weighting 
compared to the second half. We will be 
investing in new resources over the next 
year to underpin longer term continuity 
within our professional services team and 
to take advantage of new technologies 
that will improve our own IP products, 
maintaining our competitive advantage.
After a slow start to the year as it 
reorganised its delivery and support 
functions and recruited a new Sales 
Director (ex-Sage), our K3 Sage operation 
enjoyed an extremely good second half 
year. In total, we signed 87 deals worth 
£3.7m over the year (2013: 60 deals 
worth £2.05m). The second half year was 
very strong for Sage’s new X3 Enterprise 
level solution and we closed 12 deals 
worth £1.85m. We have an extremely 
popular standard template X3 model 
that allows us to deliver an ERP solution 
in less than 60 man days, which is almost 
unheard of for a relatively functionally 
rich ERP product. The X3 product is also 
sold in a premium version for larger 
implementations and this is a market that 
we are gradually moving into. 
Our other business units in the Division 
have customers who can be offered 
upgrade opportunities to our Enterprise 
level solutions and hosting. These 
businesses contributed £3.58m (2013: 
£3.24m) of sales in the year. £2.50m of the 
income is recurring (2013: £2.52m). 
The pipeline of prospects for the Division 
totalled £17.0m (2013: £14.8m) after 
significant wins in the final quarter of the 
financial year.
“ W e signed  
87 deals worth 
£3.7m over  
the year”
Results 2014 2013
Revenue (£’000) 26,017 25,377
Recurring revenue (£’000) 15,112 15,981
Percentage of recurring revenue 58% 63%
Gross margin percentage 63% 62%
Adjusted profit from operations
*13
 (£’000) 5,070 5,580
SYSPRO and Sage Division
The pipeline of prospects for the Division 
totalled £17.0m (2013: £14.8m) after 
significant wins in the final quarter £26.0m
Revenue 2014 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
16 *See note 30 on page 80 for further details
The Managed Services Division offers  
a range of application solutions 
delivered on-premises, hosted or via 
‘Software as a Service’ using hosting 
centres in Philadelphia, London, 
Edinburgh and Toronto. 
Revenue over the year rose by 27% 
to £8.15m (2013: £6.41m) and moved 
back into profit, generating £0.43m 
of adjusted profit from operations
*14 
(2013: adjusted loss
*14
 of £0.56m). 
The move back into profitability was 
achieved through a combination of 
increased revenues and lower operating 
costs. At the beginning of the year we 
recruited a small team of “operating 
system” consultants, who are delivering 
managed services for a number of our 
retail clients who were reported in 
our Microsoft UK division. Prior year 
comparatives for divisional results have 
not been restated as the impact is not 
material to the Group.
The run rate of recurring income at the 
year-end showed a 16% increase year-on-
year to £5.30m (2013: £4.55m). Hosting 
represented £2.75m (2013: £2.78m) of 
this recurring revenue, having lost a 
major contract in the second half year 
with an external customer. 
We have focused very strongly on 
widening the product offering to include 
“network as a service” , “platform as a 
service” and “infrastructure as a service” , 
in addition to our traditional “ERP as a 
service” model. Our ability to host multi-
site overseas customers offers significant 
growth opportunities with deal wins of 
this nature in both AX and SYSPRO. We 
also expect to benefit from the marked 
improvement in new order wins in the 
Microsoft UK division in due course.
The pipeline of demand for hosting has 
increased to £4.1m (2013: £3.37m). 
Results 2014 2013
Revenue (£’000) 8,152 6,412
Recurring revenue (£’000) 5,572 4,553
Percentage of recurring revenue 68% 71%
Gross margin percentage 51% 49%
Adjusted profit (loss) from operations
*14
 (£’000) 432 (555)
Managed Services Division
Our ability to host multi-site overseas 
customers offers significant growth 
opportunities in both AX and SYSPRO
£8.2m
Revenue 2014 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
17
Overview Strategic Report Governance Financial Statements Other
*See note 30 on page 80 for further details
Central costs
*15
 for the year were £0.39m (2013: 
£0.53m). These costs included Directors’ costs, group 
human resources, accounting and legal personnel, 
and costs associated with the Plc including financing. 
The costs are stated net of recovery of elements 
recharged to the operating units. The costs have 
fallen year on year due to changes in management 
implemented in the second half year.
Change in  
reporting structure
It should be noted that in future the 
Board intends to report the Group’s 
performance by reference to its 
industry sectors (retail, manufacturing 
and distribution) and its global 
intellectual property.
Outlook
The investments we have made 
over the last two years in Microsoft 
technology are starting to yield real 
benefits for the Group. We believe that 
there is significant long term potential 
to accelerate and widen sales for our 
new enhanced Microsoft Dynamic 
AX solution. The route is via further 
development of our global partner 
channel, which also brings margin 
benefits, and the launch of additional 
Dynamics AX products over the next 
few years, tailoring our existing “ax|is” 
template with IP for various retail market 
segments. Our deepening relationship 
with Microsoft is another positive step 
forward as we seek to scale the growth.
Whilst there are further costs to growth, 
we are also concentrating on driving 
margins and expect to see these improve 
progressively over the near term.
Overall, we continue to remain very 
encouraged by growth prospects  
and look forward to another year  
of progression. 
David Bolton
Chief Executive
“Overall, we continue to remain 
very encouraged by growth 
prospects and look forward to 
another year of progression”
Head Office Division K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
18 *See note 30 on page 80 for further details
Financial Review
“Revenue for the year was £71.95m 
compared to £63.51m for the year to  
30 June 2013. The increase of 13% is largely 
as a result of the improved performance 
of the Microsoft-based activities” 
Trading results
Revenue for the year was £71.95m 
compared to £63.51m for the year to 
30 June 2013. The increase of 13% 
is largely as a result of the improved 
performance of the Microsoft-based 
activities, in particular our new Microsoft 
Dynamics AX-based solutions, “ax|is” . 
The Group registered an adjusted profit 
from operations
*16
 of £7.30m for the year 
ended 30 June 2014 (2013: £5.09m). 
Profit from operations for the year was 
£2.59m (2013: £1.19m).
Exceptional reorganisation costs were 
£1.72m (2013: £0.73m) which related 
primarily to changes in the business 
structure to facilitate improvements in 
operating performance and also some 
changes to senior management and 
restructuring of acquisitions made in 
recent years.
The amortisation of intangible assets 
was £2.99m (2013: £3.18m). Finance 
costs were £0.71m (2013: £0.73m). The 
resulting profit for the year was £2.56m 
(2013: £1.24m).
Earnings per share and dividends
Adjusted earnings per share
*17
 was 
18.6p (2013: 14.0p). Earnings per share 
was 8.2p (2013: 4.3p).
The directors propose to pay a dividend 
of 1.25p per share (2013: 1.0p).
Cash flow and net debt
The net cash position at 30 June 2014 
was a net overdraft of £3.00m (2013: 
£0.83m). There were bank and other 
loans of £14.28m (2013: £14.08m). 
Repayments against bank and other 
loans during the year were £3.37m 
(2013: £3.64m). New loans of £1.08m 
were obtained during the year. £0.13m 
was paid to vendors of acquisitions 
made in prior years compared to £1.94m 
in the previous year. 
The Group’s net cash outflow in the 
year was £2.17m (2013: £0.99m). The 
Group’s inflow from operations in the 
period was £5.33m compared to £8.02m 
in the previous year, largely as a result 
of the exceptional costs incurred in the 
year and the increased working capital 
required for the growing level  
of business. 
Taxation
There was a tax credit for the year of 
£0.68m (2013: £0.78m) comprising a 
charge of £0.22m (2013: credit of £0.13m) 
of current taxation and a credit of £0.89m 
(2013: £0.65m) of deferred taxation, of 
which £1.04m (2013: £0.91m) related to 
the amortisation of intangible assets. 
This credit for deferred tax in the year 
includes £0.40m following the reduction 
of the tax rate in the UK from 23% to 20%. 
The charge for current taxation is net of 
a credit for an adjustment in respect of 
prior periods of £0.38m arising from the 
recognition of research and development 
credits recognised only as claims are 
agreed with tax authorities. The effective 
tax rate was 16.4% (2013: 15.7%) due to 
the inclusion of profits from overseas 
subsidiaries which are taxed at lower 
rates. The effective tax rate is determined 
by applying the tax rate in each tax 
jurisdiction to the profits arising there.
Brian Davis
Chief Financial Officer K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
19
There are a number of potential risks 
and uncertainties, which could have 
a material impact on the Group’s 
performance and could cause actual 
results to differ materially from expected 
and historical results. The Group’s risk 
management policies and procedures to 
deal with operational risk are included 
in the Corporate Governance report on 
pages 21 and 22. The principal business 
risks which the Group faces can be 
categorised as follows: 
Strategic
Changes in the business environment 
influence the Group’s development 
in terms of the strategies which it 
pursues and the products and services 
it offers. These changes may stem 
from market competition or economic 
and technological advancement. The 
directors regularly review the Group’s 
strategic progress and obtain market 
information to assist in strategic 
decisions around products, competitors 
and potential acquisitions. We recognise 
that acquisitions have played a key 
role in the growth of the business as 
illustrated by the major acquisitions 
made since 2003, and may do so in the 
future. We also recognise that the ability 
to integrate acquisitions and derive 
synergies is key and, to this end, we have 
a strong central management team to 
ensure that strategic objectives and 
targets are reached. 
We see the ownership of intellectual 
property as being critical to the future 
of the business, both in terms of full 
systems and innovative add-ons 
to third party products. We see the 
development of our Retail software IP 
into the Dynamics AX product set as 
being a key strategic business driver 
over the next year. 
Business environment
The Group’s customer base is 
mainly in the retail, distribution and 
manufacturing sectors, primarily in 
the United Kingdom and Europe. The 
environment in which the Group offers 
its products and services is, therefore, 
dependent on the economic and other 
circumstances affecting these business 
sectors including competitor behaviour. 
Over the years we have developed 
a creative, innovative, competitive 
culture and a reputation for advanced 
functionality and product quality. The 
Group has made significant investment 
in its library of IP which protects the 
business from competition and increases 
the barrier to entry in our specialists 
markets. This has enabled the Group to 
build high levels of predictable income 
from its existing customer base, both in 
the UK and in its overseas markets. We 
anticipate that the Group will develop a 
presence in the USA in the coming years.
Relationships
The Group benefits from a number of 
close commercial relationships with 
key suppliers and customers. Damage 
to or loss of these relationships could 
have a direct and detrimental effect 
on the Group’s results. The key Group 
supplier relationships are secured by 
commercial agreements lasting for up 
to 8 years and management participate 
in regular product and strategy reviews 
with the supplier. On an annual basis 
our customers commit to maintenance 
and support agreements that facilitate 
availability of product upgrades and 
business support.
Overview Strategic Report Governance Financial Statements Other
Principal Risks and Uncertainties K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
20
Delivery
Our products and services operate in 
business critical areas for our customers 
and any failure to meet contractual 
commitments and client expectations 
could damage our reputation and 
impact upon our financial position. 
To mitigate this risk we monitor our 
performance continuously against 
contractual commitments and 
expectations and deploy a wide range 
of experienced technical specialists 
and project managers to evaluate 
performance. High risk projects are 
monitored at Divisional board level, 
meetings of which are attended by main 
Board executive directors.
Financial
Whilst all risks may be considered 
to have a financial impact, the 
management of the Group’s financial 
resources represents a key area of focus. 
Financial risks are faced in ensuring 
sufficient funds are available to meet 
financial commitments as and when 
they fall due and protecting the Group’s 
financial strength against adverse 
movements in financial markets. Further 
details are provided in note 19.
• Credit risk – The Group’s credit risk 
is primarily attributable to its trade 
receivables. The amounts presented 
in the statement of financial position 
are net of allowances for doubtful 
debts, estimated by the Group’s 
management based on prior 
experience and their assessment of 
the current economic environment. 
The Group operates in three key 
markets and hence the credit risk is 
concentrated on retail, manufacturing 
and distribution customers. The Group 
manages credit risk by ensuring that 
outlays by the Group are matched 
with receipts from customers where 
possible and by tight control over 
contractual terms.
• Currency risk – The Group’s currency 
risk is primarily attributable to its trade 
receivables where certain customers 
are billed in US Dollars or Euros 
where these are not the functional 
currency of the Group company. 
Where possible the risk is hedged by 
amounts payable in those currencies.
• Price risk – The Group does not have 
any financial instruments which are 
exposed to price risk.
• Liquidity and cash flow – The Group 
has deferred contingent consideration 
and a bank loan with set payment 
dates. The Group ensures that it has 
sufficient funds to meet its obligations 
or commitments associated with its 
financial instruments by monitoring 
cash flow as part of its day-to-
day control procedures and also, 
more strategically, to ensure that 
financing is in place with manageable 
repayment periods and that 
appropriate facilities are available to 
be drawn upon when the need arises. 
The facilities from the Group’s bankers 
require the Group to meet certain 
covenants throughout the term of 
the loans and the Group’s forecasts 
indicate that the Group will remain 
within the set parameters.
• Interest rate – Interest rate risk arises 
from the extent to which the Group 
holds interest rate sensitive assets  
or is exposed to interest rate  
sensitive liabilities.  K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
21
Acquisition History
In pursuing our strategy, we have completed a number of acquisitions to create what is today a major 
ERP system and service provider to the retail, manufacturing and distribution sectors. 
2001:
• Business reversed onto AIM.
2001 to 2007:
• Acquired five businesses providing maintenance bases and 
key software distribution agreements with Microsoft and 
SYSPRO in the UK retail and manufacturing markets.
2007 included three major acquisitions:
• Acquired McGuffie Brunton Ltd (“MBL”) to make K3 the 
exclusive distributor of SYSPRO in UK;
• Acquired Landsteinar Nederland BV (“Landsteinar”) 
– essentially the sister company to our UK Microsoft 
Dynamics NAV software business. The acquisition expanded 
the K3 presence into Europe, the Middle East, the Far East 
and Australasia;
• Acquired Index Computer Systems Limited and with it 
the distribution rights to Microsoft Dynamics AX and 
complementary modules to support food and process 
manufacturing.
2010: 
• Acquired DigiMIS Limited and with it cloud computing 
services. It provides us with hosting capabilities which 
significantly enhances our managed services offering and 
enables K3 to move into other product areas;
• Acquired the trade and certain assets of Pebblestone 
Netherlands which is a leading European provider of 
Microsoft Dynamics ERP solutions for the fashion industry. 
The business has been integrated with our existing Dutch 
retail solutions business.
• Acquired the IP and international sales channel and 
customers from the Pebblestone Group, thereby 
strengthening our presence in Europe and adding to our 
growing library of IP .
2011:
• Acquired Panacea, a major Sage supplier with a significant 
Managed Services base and a small number of Dynamics 
NAV contracts;
• Acquired FDS Sage 200, purchased from Fifth Dimension 
Systems Limited, focused primarily on the Sage 200 product;
• Acquired Sense Enterprise Solutions, a provider of Microsoft 
Dynamics AX into similar markets to K3, with a significant 
maintenance base; and
• Acquired Clarita Solutions Limited, a competitor in the 
Retail and Distribution markets selling Microsoft Dynamics 
NAV solutions.
2012:
• Acquired Azurri Retail, which provides additional 
maintenance income in the Retail sector; 
• Acquired Fifth Dimension Systems Limited, a Sage Enterprise 
and E Commerce system provider with a significant 
maintenance base;
• Acquired Unisoft, a leading provider of retail point of sale 
solutions in Holland and Scandinavia;
• Acquired RSG, one of the leading providers of Microsoft 
Dynamics ‘RMS’ to retailers in the UK and Ireland, which 
brings us a software suite more suitable for smaller retailers; 
and 
• Acquired IBS, a business with a substantial maintenance base.
The acquisitions are in line with K3’s strategy to build recurring 
revenues and acquire profitable user bases with significant 
cross-selling opportunities, in particular for its hosting and 
managed services offering.
We continue to look for selective opportunities that will add 
additional or complementary products, IP and skills, together 
with customer bases that we can grow through our managed 
services and cloud capability.
During 2013 and 2014, we have concentrated on developing 
and investing in our own IP rather than on acquisitions.
Since the year end, we have acquired Retail Technology 
Limited, a Microsoft Dynamics based EPOS provider to 
smaller retailers.
This Strategic Report is signed on behalf of the Board
DJ Bolton
Director
14 September 2014
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
22
The Board supports the principles of good governance. In fulfilling their responsibilities, the 
directors believe that they govern the company in the best interests of the shareholders, whilst 
having due regard to the interests of the stakeholders in the group including, in particular, 
customers, employees and suppliers. The UK Corporate Governance Code, applies to companies 
of the main list of the London Stock Exchange, and the Quoted Companies Alliance’s 2010 
Corporate Governance Guidelines for Smaller Companies is applied to companies outside 
the main list. Although as a company quoted on AIM it is not required to comply with the UK 
Corporate Governance Code and does not give a statement of compliance, the directors have 
sought to apply certain provisions of the UK Corporate Governance Code in so far as they 
consider it appropriate having regard to the size and nature of the group. 
The Board
The group is headed by an effective 
board which meets on a bi-monthly 
basis. All meetings in the period 
were attended by all the directors. It 
is supplied in a timely manner with 
information of a quality to enable it 
to discharge its duties. The board has 
determined those matters which are 
retained for board sanction and those 
matters which are delegated to the 
executive management of the business. 
Day to day management of the business 
is dealt with by the Chief Executive 
Officer who has an Operational Board 
reporting to him which includes senior 
management from each of the divisions 
together with the Chief Financial Officer 
and Operations Director. 
The types of decisions which are to be 
taken by the Board are:
• approval of the financial statements 
and profit plans for the group;
• approval of any unbudgeted plans  
in accordance with prescribed 
authority levels;
• approval of all shareholders’ circulars 
and announcements;
• approval of the appointment or 
termination of advisors to the group;
• the purchase or sale of any business 
or subsidiary;
• any new borrowings, facilities and 
related guarantees;
• any asset purchase or lease, hire 
purchase facility or rental agreement 
over prescribed authority limits;
• any donation to a political party,  
or any charitable donation  
exceeding £250.
The Board has established three standing 
sub-committees to assist in the discharge 
of corporate governance responsibilities. 
They are the nominations committee, 
remuneration committee and audit 
committee. The roles of each of the 
committees, their members and activities 
during the period are covered separately 
within this report.
During the year the Board comprised 
the Chairman, two executive (until 24 
January 2014 when Mr NA Makeham 
left the Board) and two non-executive 
directors until 29 May 2014 when  
Mr PC Morland joined the Board as a 
third non-executive director. Details of 
the Board are included on page 28. The 
composition of the Board is designed 
to provide an appropriate balance of 
group, industry and general commercial 
experience and is reviewed as required 
to ensure that it remains appropriate to 
the nature of the group’s activities. 
The roles of the Chairman and Chief 
Executive are distinct. The office of 
Chairman is held by Mr TA Milne. Since 
24 January 2014, the office of Chief 
Executive is held by Mr DJ Bolton. Prior to 
that it was held by Mr NA Makeham. 
Appointments to the Board are the 
responsibility of the Nominations 
Committee.
Corporate Governance K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
23
Overview Strategic Report Governance Financial Statements Other
Nominations Committee
During the year the Nominations 
Committee comprised the Chairman, 
Mr TA Milne, and one of the non-
executive directors, Mr PJ Claesson, 
and was chaired by the Chairman. 
Mr NA Makeham was a member of 
the committee until 24 January 2014. 
Meetings are arranged as necessary 
and one meeting was held during the 
year. The committee is responsible for 
nominating candidates (both executive 
and non-executive) for the approval of 
the Board to fill vacancies or appoint 
additional persons to the Board. 
Its terms of reference are available 
upon request and are placed on the 
company’s website.
All directors receive induction on 
joining the Board covering the group’s 
operations, goals and strategy, and 
their responsibilities as directors of 
the group. The company supports the 
directors in developing their knowledge 
and capabilities.
The directors have established a 
procedure, agreed by the Board, for 
directors in the furtherance of their duties 
to take independent professional advice, 
if necessary, at the company’s expense.
All directors are subject to election by 
shareholders at the first opportunity 
after their appointment. In accordance 
with the Articles of Association, all 
directors are required to retire by 
rotation and shall be eligible for re-
election. The terms and conditions of 
appointment of the non-executive 
director are available for inspection 
upon request.
Remuneration Committee
During the year the Remuneration 
Committee comprised the Chairman,  
Mr TA Milne, and one of the non-
executive directors, Mr PJ Claesson, 
and was chaired by the Chairman. 
It reviews the remuneration and 
contractual arrangements of the 
executive directors. The remuneration 
of the Chairman and the non-executive 
directors is determined by the Board 
as a whole, based on a review of the 
current practices in other companies. 
The committee met once during the year 
and the meeting was attended by both 
members of the committee. The terms of 
reference are available upon request and 
are placed on the company’s website.
Accountability and audit
Financial reporting
The Board recognises its responsibility to 
present a balanced and understandable 
assessment of the group’s position 
and prospects, both within its half year 
and annual financial statements and in 
other price-sensitive public reports. The 
statement of the directors’ responsibility 
in preparing the financial statements is 
made on page 26.
Going concern
After making enquiries, the directors 
have formed a judgement, at the time 
of approving the financial statements, 
that there is a reasonable expectation 
that the group has adequate resources 
to continue in operational existence for 
the foreseeable future. For this reason 
the directors continue to adopt the 
going concern basis in preparing the 
financial statements.
Internal control
The Board recognises its ultimate 
accountability for maintaining an 
effective system of internal control which 
is appropriate in relation to both the 
scope and nature of the group’s activities. 
The system covers all controls including:
• financial;
• operational;
• compliance; and
• risk management.
The responsibility for managing 
risks on a day to day basis lies with 
the Operational Board. The principle 
business risks and the actions to mitigate 
the risks are included in the Strategic 
Report on pages 17 and 18. Details of 
operational risks are included below.
Operational
These risks, which are inherent in all 
business activities, are those which 
mainly result from the potential 
breakdown of individual business units 
or the group’s control of its human, 
physical and operating resources. The 
potential financial or reputational loss 
arising from failures in internal controls, 
flaws or malfunctions in computer 
systems and poor product design or 
delivery all fall within this category.
There is an ongoing process for 
identifying, evaluating and managing 
the significant issues faced by the group 
which has been in place throughout the 
period and up to 14 September 2014. It 
has been regularly reviewed by the Board 
and it accords with the Turnbull guidance. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
24
The Board and senior management have 
a clear and consistent understanding of 
the key risks facing the business. Whilst 
they recognise that it is not possible 
to eliminate risk completely, they have 
established an infrastructure of controls, 
systems, staff and processes which 
aim to minimise the likelihood of risks 
occurring or reduce the impact should 
they do so. The key elements of this 
infrastructure which enable the Board to 
review the effectiveness of the system of 
internal controls are as follows:
• establishment of a formal 
management structure, including the 
specification of matters reserved for 
decision by the Board;
• setting and reviewing the strategic 
objectives of the group;
• Board involvement in the setting and 
review of the annual budget;
• the regular review of the group’s 
performance compared with budget 
and forecasts;
• pre and post investment appraisal of 
capital expenditure;
• integrity and competence of 
personnel as part of the control 
environment; and 
• group reporting instructions and 
procedures including delegation of 
authority and authorisation levels, 
segregation of duties and other 
control procedures, and standardised 
accounting policies.
The Board and senior management are 
aware that any significant operational 
matters which raise cause for concern 
may have arisen because of or give rise to 
material internal control issues. There is a 
process in place whereby any member of 
management who becomes aware of an 
internal control issue can bring this to the 
attention of the Chief Financial Officer. 
There were no such issues raised during 
the period under review.
The Board acknowledges its responsibility 
for the group’s system of internal control 
and for reviewing its effectiveness. 
The Board is committed to operating 
comprehensive processes to manage 
the key risks which face the business. 
They have established a framework of 
policies, systems and procedures to 
ensure that the nature and extent of 
the risk undertaken is commensurate 
with the commercial returns and, where 
necessary, to ensure prudent risk-taking 
to protect shareholder value. Such a 
system is designed to manage rather 
than eliminate the risk of failure to 
achieve business objectives and can 
provide only reasonable but not absolute 
assurance against material misstatement 
or loss. 
 
Audit Committee 
The Audit Committee comprises the 
Chairman, Mr TA Milne, and the  
non-executive directors, Mr PJ Claesson, 
Mr PJ Cookson and Mr PG Morland, 
and is chaired by the Chairman. The 
committee met twice during the year. 
The role of the Audit Committee is 
to consider the appointment of the 
auditors, audit fees, scope of audit work 
and any resultant findings. It reviews 
external audit activities, monitors 
compliance with statutory requirements 
for financial reporting and reviews the 
interim and full year financial statements 
before they are presented to the Board 
for approval. The Chief Executive, Chief 
Financial Officer and external auditors 
attend meetings of the Audit Committee 
by invitation. The committee is also 
required to review the effectiveness of 
the group’s internal control systems, to 
review the group’s statement on internal 
control systems prior to endorsement by 
the Board and to consider, from time to 
time, the need for a “risk sub-committee” 
to assist in monitoring the group’s 
internal control systems. Its terms of 
reference are available upon request and 
are placed on the company’s website.
The Audit Committee considers and 
determines relevant action in respect 
of any control issues raised by the 
auditors. Given the size of the group 
and the close day to day control 
exercised by the Operational Board, 
no formal internal audit department is 
considered necessary. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
25
Relations with shareholders
The company seeks to maintain good 
communication with shareholders. 
The Group Chief Executive Officer 
together with members of the senior 
management team make presentations 
to institutional shareholders covering 
the interim and full year results. 
Whilst most shareholder contact 
is with Chief Executive Officer and 
Chief Financial Officer, the Chairman 
and the non-executive directors are 
available to meet major shareholders if 
requested to do so. The views of major 
shareholders are obtained through 
direct face-to-face contact and analysts’ 
or brokers’ briefings. 
The Board considers the AGM to be an 
important opportunity to communicate 
with shareholders and encourages their 
participation. The company despatches 
the notice of AGM, with explanatory 
notes describing items of special 
business, at least 21 working days 
before the meeting. All shareholders 
have the opportunity formally or 
informally to put questions to the 
company’s AGMs. All directors attend 
the AGM and the Chairman of the 
Audit, Remuneration and Nominations 
Committees is available to answer 
questions from shareholders. At each 
AGM the Chairman advises shareholders 
of the proxy voting details on each of 
the resolutions which is dealt with on a 
show of hands.
Auditors’ remuneration
Fees for services provided by the 
auditors have been as follows:
 2014 2013
 £’000 £’000
Audit services
 • Statutory audit 118 109
Further assurance  
services:
Tax services
 •  Advisory services 14 14
 • Overseas tax advice 26 21
Other services
 •  Other services 1 1
   159 166
During the year, the auditors provided 
non-audit services in relation to 
consultation on interim results and 
taxation advice on potential overseas 
activities. The Board considered the 
proposed non-audit services in advance 
to ensure that it was satisfied that 
neither the nature nor the scale of the 
non-audit services would impair the 
auditors’ objectivity and independence.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
26
The salaries of the executive directors are determined after giving full consideration to the best practice 
provisions and after a review of the performance of the individual. It is the aim to reward directors 
competitively; consideration is, therefore, given to the median remuneration paid to senior management 
of comparable public companies. No director is involved in deciding his own remuneration. 
 Year to 30 June 2014 2013
 Fees/basic Taxable Annual Compensation for Pension Gains on
 salary benefits bonuses loss of office contributions exercise of options Total Total
 £ £ £ £ £ £ £ £
Chairman
TA Milne 297,577 – – – – – 297,577 80,000
Executive
NA Makeham 115,180 1,487 – 393,636 10,993 84,250 605,546 261,904
DJ Bolton 227,067 2,179 – – 22,331 25,500 277,077 253,237
Non-executive
PJ Claesson 15,000 – – – – – 15,000 15,000
PJ Cookson 15,000 – – – – – 15,000 –
PG Morland 1,667 – – – – – 1,667 –
Aggregate emoluments 671,491 3,666 – 393,636 33,324 109,750 1,211,867 610,141
During the year Mr TA Milne provided additional consultancy services in relation to the future strategy of the group’s products 
and markets.
Each of the executive directors has a service contract providing 12 months’ notice.
Directors’ pension entitlements
The company makes contributions to defined contribution schemes for each of the executive directors. There are no pension 
entitlements for the non-executive director.
Directors’ indemnity cover
All directors benefit from qualifying third-party indemnity provisions in place during the financial period and at the date of 
this report.
Directors holding office
The directors who held office during the year ended 30 June 2014 were:
TA Milne  
NA Makeham (resigned 24 January 2014) 
DJ Bolton  
PJ Claesson  
PJ Cookson (appointed 11 July 2013) 
PG Morland  (appointed 29 May 2014) 
Remuneration Report K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
27
Directors’ share options and warrants
Mr PJ Claesson is interested in warrants for 25p ordinary shares held by companies associated with him as follows:
Company Number of warrants Exercise price
CA Fastigheter AB 200,000 90p
CA Fastigheter AB 500,000 123.5p
Johan & Marianne Claesson AB 400,000 90p
Details of exercise periods of both the share options and the warrants are given in note 22 to the consolidated financial statements.
The market price of the ordinary shares at 30 June 2014 was 209.5p and the range during the period was 101.0p to 230.0p.
Aggregate emoluments do not include any amounts for the value of options to acquire ordinary shares in the company granted 
to or held by the directors. Details of the options are as follows:
 1 July    30 June  Gains on Gains on
Name of Director 2013 Granted Exercised Lapsed 2014 Exercise price exercise 2014 exercise 2013
NA Makeham 60,000 – (60,000) – – 100p 25,500 –
NA Makeham 50,000 – (50,000) – – 94p 58,750 –
DJ Bolton 60,000 – (60,000) – – 100p 25,500 –
DJ Bolton 50,000 – – – 50,000 94p – –
The options for each of the above directors are exercisable as follows:
DJ Bolton Exercise Price Growth in eps is at least
12,500 94p 15%
12,500 94p 20%
25,000 94p 25%
The three year period for the options exercisable at 94p was that ended on 31 December 2007 and these options are exercisable. 
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
28
Principal activities
The principal activities of the group 
and the company are the supply of 
computer software and consultancy, 
and managed services.
The subsidiary undertakings principally 
affecting the profits or net assets of the 
group in the period are listed in note 13 
to the consolidated financial statements.
Business review
The consolidated results of the period are 
shown on page 31.
Further details of the group’s 
performance during the period, including 
the Companies Act 2006 requirements 
regarding KPIs, and expected future 
developments are contained in the 
Strategic Report on pages 4 to 15.
The group’s financial risk management 
objectives and policies are disclosed in 
the Strategic Report on page 18 and in 
note 19 to the consolidated financial 
statements. Details of the use of financial 
instruments are given in note 20.
During the year, the group capitalised 
£3.99m (2013: £3.56m) of the 
development costs. Further details are 
given in note 11.
Results and dividends
The audited financial statements for the 
year ended 30 June 2014 are set out on 
pages 31 to 80. The group’s profit for the 
year was £2.56m (2013: £1.24m).
The directors propose a net dividend of 
1.25p per share (2013: 1.0p). No interim 
dividend was paid during either year.
Directors
The directors who served during the 
year were as follows:
DJ Bolton
PJ Claesson
NA Makeham (resigned 24 January 2014)
TA Milne
PJ Cookson (appointed 11 July 2013)
PG Morland (appointed 29 May 2014)
Mr PJ Claesson retires by rotation and 
offers himself for re-election.
Statement of directors’ responsibilities 
for the financial statements
The directors are responsible for 
preparing the directors’ report,  
strategic report and financial  
statements in accordance with 
applicable law and regulations.
Company law requires the directors 
to prepare financial statements for 
each financial year. Under that law 
the directors have elected to prepare 
the group financial statements 
in accordance with International 
Financial Reporting Standards (IFRSs) 
as adopted by the European Union 
and the company financial statements 
in accordance with United Kingdom 
Generally Accepted Accounting Practice 
(United Kingdom Accounting Standards 
and applicable law). Under company 
law the directors must not approve 
the financial statements unless they 
are satisfied that they give a true and 
fair view of the state of affairs of the 
group and company and of the profit 
or loss of the group for that period. The 
directors are also required to prepare 
financial statements in accordance with 
the rules of the London Stock Exchange 
for companies trading securities on the 
Alternative Investment Market.
 
In preparing these financial statements, 
the directors are required to:
• select suitable accounting policies 
and then apply them consistently;
• make judgements and accounting 
estimates that are reasonable and 
prudent;
• state whether they have been 
prepared in accordance with IFRSs 
as adopted by the European Union, 
subject to any material departures 
disclosed and explained in the 
financial statements;
• prepare the financial statements on 
the going concern basis unless it is 
inappropriate to presume that the 
company will continue in business.
The directors are responsible for keeping 
adequate accounting records that 
are sufficient to show and explain the 
company’s transactions and disclose 
with reasonable accuracy at any time 
the financial position of the company 
and enable them to ensure that the 
financial statements comply with the 
requirements of the Companies Act 
2006. They are also responsible for 
safeguarding the assets of the company 
and hence for taking reasonable steps 
for the prevention and detection of 
fraud and other irregularities.
Supplier payment policy
The company’s policy, which is also 
applied by the group, is to agree terms 
of payment with suppliers when setting 
the terms of each transaction, ensure 
that suppliers are made aware of the 
terms of payment and abide by the 
terms of payment. Trade creditors of 
the company at 30 June 2014 were 
equivalent to 63 (2013: 58) days’ 
purchases, based on the average daily 
amount invoiced by suppliers during 
the period.
Directors’ Report K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
29
Overview Strategic Report Governance Financial Statements Other
Charitable and political contributions
Charitable contributions during the 
year amounted to £2,944 (2013: £2,753). 
There were no political contributions 
during the year.
Substantial shareholdings
On 14 September 2014, the company 
had been notified, in accordance with 
section 793 of the Companies Act 2006, 
of the following interests in the ordinary 
share capital of the company.
Name of holder Number Percentage
  Held
PJ Claesson 5,977,755 18.8%
Hargreave Hale 4,260,100 13.4%
Kestrel Partners 3,859,651 12.2%
Investec
Asset Management 1,774,154 5.6%
Herald Investment
Management 1,393,792 4.4%
Miton
Asset Management 1,186,000 3.7%
DJ Bolton 973,800 3.1%
Disabled employees
Applications for employment by 
disabled persons are always fully 
considered, bearing in mind the 
aptitudes of the applicant concerned. In 
the event of members of staff becoming 
disabled every effort is made to ensure 
that their employment with the group 
continues and that appropriate training 
is arranged. It is the policy of the group 
that the training, career development 
and promotion of disabled persons 
should, as far as possible, be identical 
with that of other employees.
Employee consultation
The group places considerable value on 
the involvement of its employees and 
has continued to keep them informed 
on matters affecting them as employees 
and on the various factors affecting 
the performance of the group. This is 
achieved through informal discussions 
between management and other 
employees at a local level.
Directors’ indemnity cover
All directors benefit from qualifying 
third-party indemnity provisions in place 
during the financial period and at the 
date of this report.
Environmental matters
The directors recognise that whilst the 
group’s business activities as a developer 
and supplier of software applications 
have minimal direct environmental 
impact, they acknowledge that the 
group’s actions may have an impact on 
the environment through its day to day 
activities and through its wider network. 
They acknowledge a commitment to 
the protection of the environment and 
the group’s environmental policy aims 
to raise awareness of environmental 
matters and to establish standards. 
The group’s intention is to establish 
a paperless working environment 
wherever appropriate. This is supported 
through the automation of a number of 
internal management and administrative 
processes such as timesheets and 
performance appraisals. The group also 
encourages staff to minimise unnecessary 
travel by using web exchange, telephone 
conferencing and working from home in 
appropriate circumstances.
Events after the reporting date
These are detailed in note 28 to the 
consolidated financial statements.
Website publication
The directors are responsible for 
ensuring the annual report and the 
financial statements are made available 
on a website. Financial statements are 
published on the company’s website in 
accordance with legislation in the United 
Kingdom governing the preparation and 
dissemination of financial statements, 
which may vary from legislation in other 
jurisdictions. The maintenance and 
integrity of the company’s website is 
the responsibility of the directors. The 
directors’ responsibility also extends to 
the ongoing integrity of the financial 
statements contained therein.
Auditors
All of the current directors have taken 
all of the steps that they ought to have 
taken to make themselves aware of  
any information needed by the 
company’s auditors for the purposes 
of their audit and to establish that the 
auditors are aware of the information. 
The directors are not aware of any 
relevant audit information of which the 
auditors are unaware.
The Notice of Annual General Meeting 
contains a resolution to re-appoint  
BDO LLP as auditors for the ensuing year.
Baltimore House
50 Kansas Avenue
Manchester
M50 2GL
By order of the Board
BS Davis
Secretary
14 September 2014 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
30
Thomas Adam Milne (Chairman) age 67
Tom was appointed as Executive Chairman on 24 May 2006. He has substantial experience in the retail software sector and in 
developing successful software companies in this sector. He was the founder director of Riva Group plc, one of the first true 
Microsoft Windows retail software houses in the UK. He assumed the role of Non-executive chairman of the group on 21 June 
2007, following the successful conclusion of his executive role within K3’s retail software division.
Per Johan Claesson (non-executive) age 63
Johan was appointed a director in March 2001. He is a Swedish national whose principal business interests are in property 
development and real estate and is a director of a number of listed companies. He has a controlling interest in and is chairman of 
Claesson and Anderzen AB (“C&A”).
David John Bolton FCA (Chief Executive Officer) age 63
David was appointed Chief Finance Officer of the group in September 1998. Having qualified as a chartered accountant in the 
mid-1970s with Ernst and Young, he has held various finance positions in quoted and unquoted companies, most notably BTR 
where he spent 12 years. He was appointed as Chief Executive Officer in January 2014.
Peter John Cookson (non-executive) age 68
Peter was appointed a director in July 2013. He is a chartered accountant with many years’ experience in senior management 
and finance roles, especially in the technology and retail sectors. He is a non–executive of a number of companies, including 
Hasgrove plc, the digital and communications services business, and Riliance software, which provides risk and compliance 
software. He has had significant experience with leading the expansion of growing businesses. In his early career, he was Finance 
Director of Timpson Group, the retail chain, and Gateway food markets, the supermarket chain. He trained as a chartered 
accountant with Binders (now part of Deloitte LLP) and is a member of the Association of Corporate Treasurers.
Paul Gilmer Morland (non-executive) age 54
Paul was appointed a director in May 2014. His background is in securities research where he has been consistently highly 
ranked as a technology analyst throughout his career. Paul was latterly UK technology analyst at Peel Hunt LLP and prior to 
that, over a period of some 15 years he covered the software and IT services sector at a number of securities houses, including 
Arbuthnot Securities, Societe Generale and Deutsche Bank AG. The early part of his career in investment banking was at Schroder 
Investment Management initially as an analyst and then as a fund manager. Paul has also spent approximately seven years in 
industry, including as Finance Director at netdecisions, an IT services and consultancy company now trading as Agilisys, divisional 
Finance Director at Serco plc and Group Accountant at David S. Smith plc, a leading European packaging company. Paul qualified 
as a chartered accountant with Price Waterhouse in 1985.
Board of Directors Overview Strategic Report Governance Financial Statements Other
Mission critical 
business software*
for the supply  
chain industry
15 year lifespan
is typical for a software system 
– drives recurring income
(via licence renewals / maintenance contracts)
Sector Focus
Retail
Manufacturing  
& Distribution
No.1
Microsoft 
Dynamics UK 
supplier
SYSPRO European 
supplier
Sage European 
mid-market
partner
Own IP
tailors  
software  
products
3,100
‘sticky’
customers
30 countries
Core 
product 
offering
based on  
Microsoft,
SYSPRO  
& Sage  
solutions
*Enterprise Resource Planning (“ERP”)
The K3 Business K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
32
We have audited the financial statements 
of K3 Business Technology Group plc 
for the year ended 30 June 2014 which 
comprise the consolidated income 
statement, the consolidated statement of 
comprehensive income, the consolidated 
statement of financial position, the 
consolidated statement of cash flows, 
the consolidated statement of changes 
in equity, the company balance sheet 
and the related notes. The financial 
reporting framework that has been 
applied in the preparation of the group 
financial statements is applicable law 
and International Financial Reporting 
Standards (IFRSs) as adopted by the 
European Union. The financial reporting 
framework that has been applied in 
preparation of the parent company 
financial statements is applicable 
law and United Kingdom Accounting 
Standards (United Kingdom Generally 
Accepted Accounting Practice).
This report is made solely to the 
company’s members, as a body, in 
accordance with sections Chapter 3 of 
Part 16 of the Companies Act 2006. Our 
audit work has been undertaken so 
that we might state to the company’s 
members those matters we are required 
to state to them in an auditor’s report 
and for no other purpose. To the fullest 
extent permitted by law, we do not 
accept or assume responsibility to 
anyone other than the company and 
the company’s members as a body, for 
our audit work, for this report, or for the 
opinions we have formed.
Respective responsibilities of directors 
and auditors
As explained more fully in the 
statement of directors’ responsibilities, 
the directors are responsible for the 
preparation of the financial statements 
and for being satisfied that they give 
a true and fair view. Our responsibility 
is to audit and express an opinion on 
the financial statements in accordance 
with applicable law and International 
Standards on Auditing (UK and Ireland). 
Those standards require us to comply 
with the Financial Reporting Council’s 
(FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial 
statements
A description of the scope of an audit of 
financial statements is provided on the 
FRC’s website at 
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion: 
• the financial statements give a true 
and fair view of the state of the 
group’s and the parent company’s 
affairs as at 30 June 2014 and of the 
group’s profit for the year then ended;
• the group financial statements have 
been properly prepared in accordance 
with IFRSs as adopted by the 
European Union;
• the parent company’s financial 
statements have been properly 
prepared in accordance with United 
Kingdom Generally Accepted 
Accounting Practice; and
• the financial statements have been 
prepared in accordance with the 
requirements of the Companies Act 
2006.
Opinion on other matters prescribed 
by the Companies Act 2006
In our opinion the information given 
in the strategic report and directors’ 
report for the financial year for which 
the financial statements are prepared is 
consistent with the financial statements. 
Matters on which we are required to 
report by exception
We have nothing to report in respect 
of the following matters where the 
Companies Act 2006 requires us to 
report to you if, in our opinion:
• adequate accounting records have 
not been kept by the parent company, 
or returns adequate for our audit have 
not been received from branches not 
visited by us; or
• the parent company financial 
statements are not in agreement with 
the accounting records and returns; or
• certain disclosures of directors’ 
remuneration specified by law are not 
made; or
• we have not received all the 
information and explanations we 
require for our audit.
Philip Storer (senior statutory auditor)
For and on behalf of BDO LLP ,  
statutory auditor
Manchester
14 September 2014
BDO LLP is a limited liability partnership 
registered in England and Wales (with 
registered number OC305127).
Independent Auditors’ Report 
to the Shareholders 
of K3 Business Technology Group plc K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
33
Overview Strategic Report Governance Financial Statements Other
  2014  2013
 Notes £’000 £’000
Revenue 2 71,950 63,513
Cost of sales  (32,990) (30,375)
Gross profit  38,960 33,138
Administrative expenses  (36,370) (31,953)
Profit from operations before amortisation of acquired intangibles and exceptional costs  7,301 5,094
Amortisation of acquired intangibles 11 (2,989) (3,182)
Exceptional reorganisation costs 3 (1,722) (727)
Profit from operations  3 2,590 1,185
Finance income 6 3 2
Finance expense 6 (708) (725)
Profit before taxation  1,885 462
Tax income  7 675 780
Profit for the period  2,560 1,242
All of the profit for the period is attributable to equity shareholders of the parent.
Earnings Per Share
Basic 9 8.2p 4.3p
Diluted 9 8.1p 4.2p
The notes on pages 36 to 80 form part of these financial statements.
Consolidated  
Income Statement
for the year ended 30 June 2014 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
34
Consolidated Statement 
of Comprehensive Income
for the year ended 30 June 2014
  2014 2013
  £’000 £’000
Profit for the period  2,560 1,242
Other comprehensive (expense) income
Exchange differences on translation of foreign operations  (1,099) 692
Net investment hedge  31 (148)
Other comprehensive (expense) income, net of tax  (1,068) 544
Total comprehensive income for the period  1,492 1,786
All of the total comprehensive income is attributable to equity holders of the parent. All of the other comprehensive income will 
be reclassified subsequently to profit or loss when specific conditions are met. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
35
Consolidated Statement 
of Financial Position
as at 30 June 2014
  2014 2013
 Notes £’000 £’000
ASSETS
Non-current assets
Property, plant and equipment 10 2,439 2,927
Goodwill 11/12 43,952 44,610
Other intangible assets 11 20,040 21,040
Deferred tax assets 21 538 723
Available-for-sale investments 14 98 98
Total non-current assets  67,067 69,398
Current assets
Trade and other receivables 15 28,888 25,251
Cash and cash equivalents  647 272
Total current assets  29,535 25,523
Total assets  96,602 94,921
LIABILITIES
Non-current liabilities
Long-term borrowings 17 14 32
Other non-current liabilities 18 554 225
Deferred tax liabilities 21 3,151 4,267
Total non-current liabilities  3,719 4,524
Current liabilities
Trade and other payables 16 26,002 25,081
Current tax liabilities  15 140
Short-term borrowings 17 14,261 14,051
Total current liabilities  40,278 39,272
Total liabilities  43,997 43,796
EQUITY
Share capital 22 7,930 7,859
Share premium account 23 9,412 9,183
Other reserves 23 10,448 10,448
Translation reserve 23 229 1,297
Retained earnings 23 24,586 22,338
Total equity attributable to equity holders of the parent  52,605 51,125
Total equity and liabilities  96,602 94,921
The financial statements on pages 31 to 80 were approved and authorised for issue by the Board of Directors on  
14 September 2014 and were signed on its behalf by:
DJ Bolton 
Director
The notes on pages 36 to 80 form part of these financial statements.
Overview Strategic Report Governance Financial Statements Other
Registered number: 2641001 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
36
Consolidated Statement 
of Cash Flows
for the year ended 30 June 2014
  2014 2013
 Notes £’000 £’000
Cash flows from operating activities
Profit for the period  2,560 1,242
Adjustments for:
Share-based payments charge  27 70
Depreciation of property, plant and equipment  962 932
Amortisation of intangible assets and development expenditure  4,560 4,347
Loss (profit) on sale of property, plant and equipment   2 (19)
Finance income  (3) (2)
Finance expense  708 725
Tax income  (675) (780)
(Increase) decrease in trade and other receivables   (4,625) 6,395
Increase (decrease) in trade and other payables  1,836 (4,888)
Cash generated from operations 29 5,352 8,022
Finance expense paid  (851) (822)
Income taxes received (paid)  290 (1,217)
Net cash generated from operating activities  4,791 5,983
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 29 (129) (531)
Acquisition of other business units 29 – (1,410)
Development expenditure capitalised  (3,985) (3,563)
Purchase of property, plant and equipment   (502) (1,050)
Proceeds from sale of property, plant and equipment  – 24
Finance income received  3 2
Net cash absorbed by investing activities  (4,613) (6,528)
Cash flows from financing activities
Net proceeds from issue of share capital  277 2,677
Proceeds from long-term borrowings  1,077 842
Payment of long-term borrowings  (3,369) (3,641)
Payment of finance lease liabilities  (16) (35)
Dividends paid  (316) (286)
Net cash absorbed by financing activities  (2,347) (443)
Net change in cash and cash equivalents  (2,169) (988)
Cash and cash equivalents at start of period 29 (833) 21
Exchange gains on cash and cash equivalents  5 134
Cash and cash equivalents at end of period 29 (2,997) (833)
The notes on pages 36 to 80 form part of these financial statements. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
37
Consolidated Statement 
of Changes in Equity
for the year ended 30 June 2014
  Share Share Other Translation Retained Total
  capital premium reserves reserve earnings equity
  £’000 £’000 £’000 £’000 £’000 £’000
At 30 June 2012  7,120 7,239 10,448 753 21,345 46,905
Changes in equity for year
ended 30 June 2013
Share-based payment credit  – – – – 43 43
Issue of shares for cash  712 1,897 – – – 2,609
Options exercised  27 47 – – – 74
Movement in own shares held  – – – – (6) (6)
Dividends to equity holders  – – – – (286) (286)
Profit for the year  – – – – 1,242 1,242
Other comprehensive income for the year  – – – 544 – 544
At 30 June 2013  7,859 9,183 10,448 1,297 22,338 51,125
Changes in equity for year
ended 30 June 2014
Share-based payment credit  – – – – 27 27
Options exercised  71 229 – – – 300
Movement in own shares held  – – – – (23) (23)
Dividends to equity holders  – – – – (316) (316)
Profit for the year  – – – – 2,560 2,560
Other comprehensive income for the year  – – – (1,068) – (1,068)
At 30 June 2014  7,930 9,412 10,448 229 24,586 52,605
The amount included in retained earnings of £2.56m (2013: £1.24m) represents profit attributable to owners of the  
parent company. 
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
38
Notes forming part of the  
Financial Statements
for the year ended 30 June 2014
1 Accounting policies for the consolidated financial statements
Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and 
IFRIC interpretations) as endorsed by the European Union (“endorsed IFRS”) and with those parts of the Companies Act 2006 
applicable to companies preparing their accounts under endorsed IFRS. The company has elected to prepare its parent company 
financial statements in accordance with UK GAAP; these are presented on pages 81 to 94. 
Basis of preparation
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have 
been consistently applied to all the periods presented, unless otherwise stated. The consolidated financial statements have been 
prepared under the historical cost basis, except for the revaluation of certain derivative financial instruments which have been 
valued in accordance with IAS 39.
Adoption of new and revised standards
The following standards and interpretations were effective in 2014 but have not had a material impact on the group::
IFRS 13 Fair Value Measurement
The following standards, amendments and interpretations to published standards are not yet effective:
New standard EU Mandatory effective date 
or interpretation endorsement status (periods beginning)
IFRS 15 Revenue from contracts with customers Expected Q2 2015 1 January 2017
IFRS 9 Financial Instruments To be confirmed 1 January 2018
The Directors anticipate that the adoption of these Standards in future periods may have an impact on the results and net assets 
of the group, however, it is too early to quantify this. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
39
Overview Strategic Report Governance Financial Statements Other
1 Accounting policies for the consolidated financial statements (continued)
Adoption of new and revised standards (continued)
IFRS 10 Consolidated Financial Statements Endorsed 1 January 2014
IFRS 11 Joint Arrangements Endorsed 1 January 2014
IFRS 12 Disclosure of Interests in Other Entities Endorsed 1 January 2014
IAS 27 Separate Financial Statements Endorsed 1 January 2014
IAS 28 Investments in Associates and Joint Ventures Endorsed 1 January 2014
Amendments to IFRS 10, IFRS 11 and IFRS 12 – Consolidated Financial Statements, 
Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance Endorsed 1 January 2014
Amendments to IAS 32 – Offsetting Financial Assets and Financial Liabilities Endorsed 1 January 2014
Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment entities  Endorsed 1 January 2014
Amendments to IAS36 – Recoverable amounts disclosures for non-financial assets  Endorsed 1 January 2014
Amendments to IAS39 – Novation of Derivatives and Continuation of Hedge Accounting  Endorsed 1 January 2014
Amendments to IAS 19 – Defined Benefit Plans: Employee Contributions Expected Q4 2014 1 July 2014
Annual improvements to IFRSs 2010 – 2012 Cycle Expected Q4 2014 1 July 2014
Annual improvements to IFRSs 2011 – 2013 Cycle Expected Q4 2014 1 July 2014
IFRS 14 Regulatory Deferral Accounts To be confirmed 1 January 2016
Amendments to IFRS 11 – Accounting for Acquisitions of Interests in Joint Operations Expected Q1 2015 1 January 2016
Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of 
Depreciation and Amortisation Expected Q1 2015 1 January 2016
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will only have a material 
impact on the presentation in the financial statements of the Group.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into 
the Group.
Revenue comprises the value of sales to third party customers of software licences, customised software, hardware and fees 
derived from installation, consultancy, training, support and managed services. It is stated exclusive of value added tax and net of 
trade discounts and rebates.
Revenue on the sale of software licences is recognised where there is persuasive evidence of an agreement with a customer 
(contract and/or binding purchase order), delivery of the software has taken place and the customer has the ability to use the 
software, collectability is probable and the fee is fixed and determinable. If significant post-delivery obligations exist, revenue is 
deferred until no significant obligations remain. Where the Group acts as an agent, commission income is recognised at the point 
the customer has placed an order and the Group’s obligations have been fulfilled. Revenue on the sale of customised software, 
hardware and installation is recognised on delivery to a customer or on completion of contractual milestones. Revenue from 
training and consultancy is recognised as the contract progresses. Revenue from support and managed services is generally 
invoiced in advance, termed “deferred revenue” , and taken to revenue in equal monthly instalments over the relevant period. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
40
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
1 Accounting policies for the consolidated financial statements (continued)
Profit from operations
Profit from operations is stated after charging all operating costs including those separately disclosed by virtue of their size or 
unusual nature or to facilitate a more helpful understanding of the group’s results. It is stated before finance income and costs.
Principles of consolidation
The consolidated financial statements present the results of the company and its subsidiaries (“the group”) as if they formed a single 
entity. Intra-group transactions, including sales, profits, receivables and payables, have been eliminated in the group consolidation.
Subsidiaries are entities controlled by the group. Control exists when the group has the power, directly or indirectly, to govern the 
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights 
that presently are exercisable or convertible are taken into account. 
Business combinations
All business combinations are accounted for by applying the purchase method. On acquisition, all of the subsidiaries’ assets and 
liabilities that exist at the date of acquisition are recorded at their fair values reflecting their condition at that date. The results of 
subsidiaries acquired in the period are included in the income statement from the date on which control is obtained. 
Goodwill
Goodwill represents the excess of the fair value of the consideration paid on acquisition of a business over the fair value of the 
assets, including any intangible assets identified, liabilities and contingent liabilities acquired. Goodwill is not amortised but 
is measured at cost less impairment losses. In determining the fair value of consideration, the fair value of equity issued is the 
market value of equity at the date of completion, and the fair value of contingent consideration is based upon the present value 
of the expected future cash flows based on whether the directors believe performance conditions will be met and thus the 
extent to which further consideration will be payable. 
As permitted by IFRS 1, goodwill arising on acquisitions before 1 January 2006 (date of transition to IFRS) has been frozen at 
the UK GAAP amounts subject to being tested for impairment at that date. Goodwill is tested for impairment at least annually. 
The group performs its impairment reviews at the cash-generating unit level. Any impairment is recognised immediately in the 
income statement and is not subsequently reversed.
On disposal of a subsidiary, the attributable net book value of goodwill is included in the determination of the profit or loss  
on disposal. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
41
1 Accounting policies for the consolidated financial statements (continued)
Impairment charges of non-financial assets (excluding deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken at the financial 
period end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate 
that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the 
higher of its fair value less costs to sell and its value in use (effectively the expected cash to be generated from using the asset in 
the business)), the asset is written down accordingly. 
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the 
asset’s cash-generating unit (i.e. the lowest group of assets in which the asset belongs for which there are separable identifiable 
cash flows that are largely independent of the cash flows from the other assets or groups of assets). Goodwill is allocated 
on initial recognition to each of the group’s cash-generating units that are expected to benefit from the synergies of the 
combination giving rise to the goodwill.
The estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market 
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not 
been adjusted. 
Impairment charges are included in administrative expenses in the consolidated income statement, except to the extent they 
reverse gains previously recognised in total comprehensive income. An impairment loss recognised for goodwill is not reversed.
Foreign currency translation
Transactions entered into by group entities in a currency other than the currency of the primary economic environment in 
which they operate (the “functional currency”) are translated at the rates ruling at the dates of transactions. Monetary assets 
and liabilities denominated in foreign currencies at the reporting date are translated at the rates ruling at that date. Exchange 
differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the 
income statement except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation, in 
which case exchange differences are recognised in a separate component of equity. 
On consolidation, results of overseas subsidiaries are translated using the average exchange rate for the period. The balance 
sheets of overseas subsidiaries are translated using the closing period end rate. Exchange differences arising, if any, are taken to 
a separate component in equity (the translation reserve). Such translation differences are recognised as income or as expenses in 
the period in which the operation is disposed of. 
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the 
foreign entity and translated at the closing rate. The group has elected to treat goodwill and fair value adjustments arising on 
acquisitions before the date of transition to IFRS as sterling denominated assets and liabilities.
Exchange differences recognised in the income statement of group entities’ separate financial statements on the translation of 
long-term monetary items forming part of the group’s net investment in the overseas operation concerned are reclassified to the 
translation reserve on consolidation.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
42
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
1 Accounting policies for the consolidated financial statements (continued)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker. The chief operating decision-maker has been identified as the Operational Board.
Financial assets
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset 
was acquired. The Group has not classified any of its financial assets as held to maturity.
Financial assets are recognised at fair value on the group’s statement of financial position when the group becomes a party to the 
contractual provisions of the instrument.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They 
arise principally through the provision of goods and services to customers, e.g. trade receivables. Trade receivables do not carry 
any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the 
counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the 
terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value 
of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such 
provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the 
income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written 
off against the associated provision.
The group’s loans and receivables comprise trade and other receivables and cash and cash equivalents.
Cash and cash equivalents include cash in hand, deposits held at call and overdrafts with banks. 
Fair value through profit or loss
This category comprises only in-the-money derivatives (see Financial liabilities section for out-of-money derivatives). They are 
carried in the statement of financial position at fair value with changes in fair value recognised in the consolidated income 
statement in finance income or expense line. Other than derivative financial instruments which are not designated as a hedging 
instrument, the group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair 
value through profit or loss.
Available-for-sale
Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise principally 
the Group’s strategic investments in entities not qualifying as subsidiaries or associates. They are carried at fair value with 
changes in fair value generally recognised in other comprehensive income and accumulated in an available-for-sale reserve. 
Where there is a significant or prolonged decline in the fair value of an available-for-sale financial asset (which constitutes 
objective evidence of impairment), the full amount of impairment, including any amount previously recognised in other 
comprehensive income, is recognised in profit or loss. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
43
1 Accounting policies for the consolidated financial statements (continued)
Financial liabilities
The group classifies its financial liabilities into one of two categories, depending on the purpose for which it was acquired. 
Other than financial liabilities in a qualifying hedging relationship (see below), the group’s accounting policy for each category 
is as follows:
Fair value through profit or loss
This category comprises only out-of-the-money derivatives (see financial assets for in-the-money derivatives) and contingent 
consideration. They are carried in the statement of financial position at fair value with changes in fair value recognised in the 
consolidated income statement. 
Other financial liabilities
Other financial liabilities include the following items:
• Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the 
instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate 
method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the 
liability carried in the statement of financial position. Interest expense in this context includes initial transaction costs and 
premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding; 
• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried 
at amortised cost using the effective interest method.
Fair value measurement hierarchy
IFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value 
using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement (see note 19). 
The fair value hierarchy has the following levels:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly  
(i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and
(c) inputs from the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the basis 
of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in 
their entirety into only one of the three levels.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
44
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
1 Accounting policies for the consolidated financial statements (continued)
Hedge accounting
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured 
at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a 
hedging instrument, and if so, the nature of the item being hedged. The group designates certain derivatives as hedges of a net 
investment in a foreign operation (net investment hedge).
The group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as 
well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its 
assessment, both at hedge inception and on an on-going basis, of whether the derivatives that are used in hedging transactions 
are highly effective in offsetting changes in cash flows of hedged items.
Hedges of a net investment in a foreign operation 
Where the group has foreign currency borrowings to hedge changes in the net investment of foreign operations arising from 
movements in the forward exchange rate, to the extent that the hedge is effective, gains and losses arising on the foreign 
currency borrowings are recognised directly in equity. The ineffective portion of such hedges is recognised in the consolidated 
income statement.
Equity instruments
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs.
Pension contributions
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as 
incurred. The group has no defined benefit arrangements in place.
Share-based payments
The group issues equity-settled share-based payments to certain employees, that is, share options and warrants. Equity-settled 
share-based payments are measured at fair value at the date of grant. Fair value is measured by use of a trinomial lattice model. 
The expected life used in the model has been adjusted, based on the group’s best estimate for the effects of non-transferability, 
exercise restrictions and behavioural considerations.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the group’s 
estimate of the number of shares that will eventually vest. Non-market vesting conditions are taken into account by adjusting 
the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised 
over the vesting period is based on the amount that eventually vest. Market vesting conditions are factored into the fair value of 
the options and warrants granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether 
the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to meet a market vesting condition.
The group has applied the exemption available under IFRS 2, to apply its provisions only to those options and warrants granted 
after 7 November 2002 and which were outstanding at 1 January 2006. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
45
1 Accounting policies for the consolidated financial statements (continued)
Leased assets
Leases for which the group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets 
held under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their expected 
useful lives. The amount initially recognised as an asset is the lower of the fair value of the leased asset and the present value of 
the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. 
Lease payments are analysed between capital and interest. The interest element of leasing payments represents a constant 
proportion of the capital balance outstanding and is charged to the income statement over the period of the lease. The capital 
element reduces the balance owed to the lessor.
All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a 
straight-line basis over the lease term.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their 
useful economic lives. The amortisation expense is included within administrative expenses in the consolidated income statement.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other 
contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see 
section related to critical estimates and judgements below).
The significant intangibles recognised by the group, their estimated useful economic lives and the methods used to determine the 
cost of intangibles acquired in business combinations are as follows:
Intangible asset Estimated useful economic life Valuation method
Software distribution agreements 5-9 years Estimated royalty stream if the rights were to be licensed
Contractual customer relationships 5-15 years Estimated discounted cash flow
Intellectual property rights 6-10 years Estimated royalty stream if the rights were to be licensed
Internally generated intangible assets (research and development costs)
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated 
intangible asset arising from the group’s software development is recognised only if all of the following conditions are met:
• it is technically feasible to develop the product for it to be sold;
• adequate resources are available to complete the development;
• there is an intention to complete and sell the product;
• the group is able to sell the product;
• sale of the product will generate future economic benefits; and
• expenditure on the project can be measured reliably.
The expenditure capitalised represents the cost of direct labour incurred in developing the software product. 
Capitalised development costs are amortised on a straight-line basis over their useful lives commencing from the date of first 
income recognition. The estimated useful lives for development expenditure are estimated to be in a range of between three and 
seven years. The amortisation expense is included within administrative expenses in the consolidated income statement. Where 
no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period 
in which it is incurred.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
46
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
1 Accounting policies for the consolidated financial statements (continued)
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income 
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes 
items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted 
or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and 
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted 
for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences 
and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which 
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises 
from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction 
that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised on intangible assets and other 
temporary differences recognised in business combinations.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, 
except where the group is able to control the reversal of the temporary difference and it is probable that the temporary 
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer 
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is 
realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly 
to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current tax assets and 
liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• the same taxable group company; or
• different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets 
and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities 
are expected to be settled or recovered. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
47
1 Accounting policies for the consolidated financial statements (continued)
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. The cost of items of property, plant and equipment is its 
purchase cost, together with any incidental costs of acquisition. As well as the purchase price, cost includes directly attributable 
costs of bringing the asset into use.
Depreciation is calculated so as to write off, on a straight-line basis over the expected useful economic lives of the asset 
concerned, the cost of property, plant and equipment, less estimated residual values, which are adjusted, if appropriate, at each 
reporting date. The principal economic lives used for this purpose are:
• Long leasehold buildings Period of lease
• Leasehold improvements Period of lease
• Plant, fixtures and equipment Three to five years
• Motor vehicles Four years
Provision is made against the carrying value of items of property, plant and equipment where impairment in value is deemed to 
have occurred.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. The group considers all highly liquid investments with 
original maturity dates of three months or less to be cash equivalents. Bank overdrafts that are repayable on demand and form 
an integral part of the group’s cash management system are included as a component of cash and cash equivalents for the 
purpose of the statement of cash flows.
Employee share ownership plans
As the company is deemed to have control of its ESOP trust, it is treated as a subsidiary and consolidated for the purposes of the 
group accounts. The material assets, liabilities, income and costs of the K3 Business Technology Group plc Share Incentive Plan 
are included in the financial statements. Until such time as the group’s own shares vest unconditionally with employees, the 
consideration paid for the shares is deducted in equity shareholders’ funds. 
Provisions
A provision is recognised in the statement of financial position when the group has a present legal or constructive obligation as a 
result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions 
are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date, and are 
discounted to present value where the effect is material.
Provisions are reviewed on a regular basis and released to income statement where changes in circumstances indicate that a 
provision is no longer required.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
48
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
1 Accounting policies for the consolidated financial statements (continued)
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and 
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The 
nature of the group’s business is such that there can be unpredictable variation and uncertainty regarding its business. The 
estimates and associated assumptions are based on historical experience and various other factors that are believed to be 
reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of 
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The key 
sources of estimation that have a significant impact on the carrying value of assets and liabilities are discussed below:
Impairment of goodwill and other intangibles
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill 
has been allocated. The value in use calculation requires an entity to estimate the future cash flows expected to arise from the cash 
generating unit and a suitable discount rate in order to calculate present value. An impairment review has been performed at the 
reporting date and no impairment has been identified. More details including carrying values are included in notes 11 and 12.
Capitalised development expenditure and subsequent amortisation 
Where such expenditure meets the relevant criteria the group is required to capitalise development expenditure. In order to assess 
whether the criteria is met the Board is required to make estimates in relation to likely income generation and financial and technical 
viability of the relevant development projects and the period over which the group is likely to benefit from such expenditure.
Useful economic lives of intangible assets 
Intangible assets are amortised over their useful economic lives. Useful lives are based on management’s estimates of the 
period over which the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to 
estimates can result in changes in the carrying values and hence amounts charged to the income statement in particular periods 
which could be significant. More details including carrying values are included in note 11.
2 Revenue
 2014 2013
 £’000 £’000
The group’s revenue comprises:
Sale of software and hardware 16,355 11,720
Provision of consultancy services 20,180 17,256
Support and maintenance 35,415 34,537
Revenue 71,950 63,513
Finance income 3 2
Total revenue 71,953 63,515 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
49
3 Profit from operations
 2014 2013
 £’000 £’000
This has been arrived at after charging/(crediting):
Staff costs (see note 4) 33,293 29,500
Depreciation of property, plant and equipment 962 932
Amortisation of acquired intangible assets 2,989 3,182
Amortisation of development costs 1,571 1,165
Reorganisation costs (see below) 1,722 727
Foreign exchange differences 143 59
Operating lease expenses
 – Plant and machinery 1,263 1,118
 – Property 1,159 1,363
Audit fees for the group 118 109
Fees paid to the company’s auditors for non-audit services provided to the Company and UK subsidiaries 41 36
Loss (profit) on disposal of fixed assets 2 (19)
During the year, further reorganisation costs have been incurred to implement major changes in the business structure 
to facilitate improvements in operating performance and also some changes to senior management and restructuring of 
acquisitions made in recent years at a cost of £1.72m (2013: £0.73m).
An analysis of fees paid to the Company’s auditors for non-audit services is as follows:
 2014 2013
 £’000 £’000
Tax services:
 – Advisory services 40 35
Other services:
 – Other services 1 1
  41 36
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
50
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
4 Staff costs
 2014 2013
 £’000 £’000
Staff costs (including directors) comprise:
Wages and salaries 30,134 27,000
Short-term non-monetary benefits 1,852 1,744
Defined contribution pension cost 1,252 945
Share-based payment expense (see note 26) 27 70
Employers national insurance contributions and similar taxes 3,354 3,118
  36,619 32,877
Of the above staff costs, £3,326,000 (2013: £3,377,000) has been capitalised within development costs (see note 11).
 2014 2013
 Number Number
The average number of employees during the period was
Consultants and programmers 460 457
Sales and distribution 61 60
Administration 91 90
 612 607
Directors and key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the 
activities of the group, including the Directors of the company listed on page 104 and the divisional directors.
 2014 2013
 £’000 £’000
Key management personnel remuneration consists of:
Remuneration 1,923 1,465
Compensation for loss of office 640 38
Company contributions to defined contribution pension schemes 112 110
Share-based payment expense (note 26) 4 29
  2,679 1,642 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
51
4 Staff costs (continued)
 2014 2013
 £’000 £’000
Directors’ remuneration consists of:
Emoluments 675 483
Compensation for loss of office 394 –
Gains on exercise of share options 110 90
Contributions to personal pension schemes 33 37
 1,212 610
 2014 2013
 £’000 £’000
Remuneration in respect of the highest paid director :
Aggregate emoluments 117 194
Compensation for loss of office 394 –
Pension contributions 11 18
Gains on exercise of share options 84 50
 606 262
There were 2 directors in the company’s defined contribution pension scheme (2013: 2).
Note that the directors’ emoluments include amounts attributed to benefits-in-kind on which directors are assessed for tax 
purposes. This may differ to the cost to the group of providing those benefits included in note 4.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
52
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
5 Segment information
IFRS 8 requires identification of operating segments on the basis of internal reports that are regularly reviewed by the entity’s 
chief operating decision maker (‘CODM’) in order to allocate resources to the segment and assess its performance. The CODM has 
been determined to be the Operational Board as they are principally responsible for evaluating operating segment performance 
and deciding how to allocate resources to operating segments.
The reporting of results to the CODM reflects four trading divisions: Microsoft UK, International, SYSPRO and Sage, and Managed 
Services, together with Head Office costs. These five segments represent the group’s reportable segments under IFRS 8. Each 
reportable segment has a segment manager who is directly accountable to, and maintains regular contact with, the CODM.
Whilst there are several operating units within each reportable segment, the results of these operating units have been 
aggregated into one reportable segment as they exhibit similar economic characteristics and have one overall manager.
The Head Office segment comprises head office and other centrally incurred costs which are recharged to the units through a 
central management charge. 
The activities and products and services of the operating segments are detailed in the Strategic Report on pages 10 to 15. 
The CODM primarily assesses the performance of the operating segments based on adjusted operating profit. This is a measure 
of divisional operating profit less an allocation of head office costs. Adjusted operating profit is profit before interest, tax, 
amortisation of acquired intangibles and exceptional costs.
The segment results for the year ended 30 June 2014 and for the year ended 30 June 2013, reconciled to profit before taxation as 
included in the consolidated income statement, are as follows: 
 Year ended 30 June 2014
   Microsoft  Managed SYSPRO
   UK International Services and Sage Head Office Total
   £’000 £’000 £’000 £’000 £’000 £’000
Total segment revenue   25,658 12,653 8,152 26,287 – 72,750
Inter-segment revenue   (403) (127) – (270) – (800)
External revenue   25,255 12,526 8,152 26,017 – 71,950
Cost of sales   (13,176) (6,216) (3,970) (9,628) – (32,990)
Gross profit   12,079 6,310 4,182 16,389 – 38,960
Depreciation   (138) (118) (408) (280) (18) (962)
Amortisation of development costs   (852) (373) (171) (193) – (1,589)
Administrative expenses   (9,653) (4,061) (3,195) (9,753) (2,446) (29,108)
Divisional operating profit (loss)   1,436 1,758 408 6,163 (2,464) 7,301
Management charges   (789) (221) 24 (1,093) 2,079 –
Adjusted profit (loss) from operations   647 1,537 432 5,070 (385) 7,301
Amortisation of intangibles   (366) (531) (301) (1,791) – (2,989)
Exceptional reorganisation costs   (411) (307) (237) (177) (590) (1,722)
Profit (loss) from operations   (130) 699 (106) 3,102 (975) 2,590
Interest*   – (71) (12) (3) (619) (705)
Profit (loss) before tax*   (130) 628 (118) 3,099 (1,594) 1,885 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
53
5 Segment information (continued)
 Year ended 30 June 2013
   Microsoft  Managed SYSPRO
   UK International Services and Sage Head Office Total
   £’000 £’000 £’000 £’000 £’000 £’000
Total segment revenue   19,029 12,938 6,412 25,447 – 63,826
Inter-segment revenue   (169) (74) – (70) – (313)
External revenue   18,860 12,864 6,412 25,377 – 63,513
Cost of sales   (10,631) (6,774) (3,257) (9,713) – (30,375)
Gross profit   8,229 6,090 3,155 15,664 – 33,138
Depreciation   (180) (87) (384) (269) (12) (932)
Amortisation of development costs   (617) (254) (135) (159) – (1,165)
Administrative expenses   (8,363) (3,285) (3,215) (8,662) (2,422) (25,947)
Divisional operating profit (loss)   (931) 2,464 (579) 6,574 (2,434) 5,094
Management charges   (732) (206) 24 (994) 1,908 –
Adjusted profit (loss) from operations   (1,663) 2,258 (555) 5,580 (526) 5,094
Amortisation of intangibles   (600) (580) (172) (1,830) – (3,182)
Exceptional reorganisation costs   (105) (46) (30) (273) (273) (727)
Profit (loss) from operations   (2,368) 1,632 (757) 3,477 (799) 1,185
Interest*   (3) (35) (9) 4 (680) (723)
Profit (loss) before tax*   (2,371) 1,597 (766) 3,481 (1,479) 462
*Interest expense is reported net of interest income as this is how it is reported to the CODM. Interest income is not sufficiently 
material to disclose separately. Tax expense is reviewed by the CODM for the Group in total. According, no disclosure of the tax 
expense for individual segments has been made.
Segment assets and segment liabilities are reviewed by the CODM in a consolidated statement of financial position. Accordingly, 
this information is replicated in the group consolidated statement of financial position on page 33. As no measure of assets or 
liabilities for individual segments is reviewed regularly by the CODM, no disclosure of total assets or liabilities has been made, in 
accordance with the amendment to paragraph 23 of IFRS 8.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting 
policies. Transactions between segments are accounted for at cost. 
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
54
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
5 Segment information (continued)
The Group’s revenue does not rely on any single major customer.
Analysis of the group’s external revenues (by customer location) and non-current assets by geographical location are  
detailed below: 
 External revenue Non-current assets
 2014 2013 2014 2013
 £’000 £’000 £’000 £’000
United Kingdom 54,531 45,925 49,183 51,985
Netherlands 8,963 7,306 13,100 14,798
Ireland 1,875 3,774 4,784 2,615
Rest of Europe 1,967 3,023 – –
USA 833 406 – –
Rest of World 3,781 3,079 – –
 71,950 63,513 67,067 69,398
6 Finance income and expense
 2014 2013
 £’000 £’000 £’000 £’000
Finance income
Bank interest received (1)  (2)
On tax balances (2)  –
  (3)  (2)
Finance expense
Bank borrowings 742  729
Finance leases 13  9
On related party balances 54  54
On tax balances –  11
Foreign exchange 144  (96)
Other  953  707
Unwinding of discount on provisions  –  18
Changes in fair values of contingent consideration  (245)  –
  708  725
Net finance expense  705  723
Of which from financial instruments:
Cash and cash equivalents  722  436
Financial liabilities at amortised cost  –  48
Financial liabilities at fair value through profit or loss  (245)  –
Loan fee amortisation  228  239
  705  723 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
55
7 Tax income/expense
 2014 2013
 £’000 £’000 £’000 £’000
Current tax income/expense
UK corporation tax and income tax of overseas operations
on profits for the period 601  346
Adjustment in respect of prior periods (383)  (478)
  218  (132)
Deferred tax income/expense
Origination and reversal of temporary differences  (491)  (465)
Effect of change in rate of deferred tax (402)  (183)
  (893)  (648)
Total tax income  (675)  (780)
The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the UK 
applied to profits for the period are as follows:
 2014 2013 
 £’000 £’000
Profit before tax 1,885 462
Expected tax charges based on the standard rate of corporation tax in the UK of 22.5% (2013: 23.75%) 424 110
Expenses not deductible for tax purposes (62) 16
Effect of tax reliefs (41) (7)
Utilisation of losses (19) (54)
Different tax rates applied in overseas jurisdictions (178) (279)
Effect of change in rate for deferred tax (402) (183)
Adjustment for over provision in prior periods (397) (383)
Total tax income (675) (780)
None of the items within other comprehensive income in the Consolidated Statement of Comprehensive Income have resulted 
in a tax expense or tax income.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
56
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
8 Dividends
 2014 2013
 £’000 £’000
Final dividend of 1.0p (2013: 1.0p) per ordinary share
proposed and paid during the year relating to the previous period’s results 316 286
A dividend in respect of the year ended 30 June 2014 of 1.25p per share, amounting to a total dividend of £397,000 is to be 
proposed at the annual general meeting on 26 November 2014. These financial statements do not reflect this dividend payable.
9 Earnings per share
The calculations of earnings per share are based on the profit for the period and the following numbers of shares.
 2014 2013
 Number of Number of
 shares shares
Denominator
Weighted average number of shares used in basic EPS 31,417,736 29,216,238
Effects of:
Employee share options and warrants 339,261 312,488
Weighted average number of shares used in diluted EPS 31,756,998 29,528,726
Certain employee options and warrants have not been included in the calculation of diluted EPS because their exercise is contingent 
on the satisfaction of certain criteria that had not been met at the end of the period. 
The alternative earnings per share calculations have been computed because the directors consider that they are useful to 
shareholders and investors. These are based on the following profits and the above number of shares.
 2014 2013
  Per share Per share  Per share Per share
  amount amount  amount amount
 Earnings Basic Diluted Earnings Basic Diluted
 £’000 p p £’000 p p
Numerator
Earnings per share 2,560 8.2 8.1 1,242 4.3 4.2
Add back:
Amortisation of acquired intangibles (net of tax) 1,952 6.2 6.1 2,273 7.7 7.7
Exceptional reorganisation costs (net of tax) 1,335 4.2 4.2 580 2.0 2.0
Adjusted EPS 5,847 18.6 18.4 4,095 14.0 13.9 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
57
10 Property, plant and equipment
 Long  Plant,
 leasehold  fixtures
 land and Leasehold and Motor
 buildings improvements equipment vehicles Total
 £’000 £’000 £’000 £’000 £’000
Cost
At 30 June 2012 750 574 3,433 57 4,814
Additions – 27 1,058 37 1,122
Disposals – (204) (850) (46) (1,100)
Effects of movements in foreign exchange rate – – 45 2 47
At 30 June 2013 750 397 3,686 50 4,883
Additions – 14 488 – 502
Disposals – – (182) – (182)
Effect of movements in foreign exchange rate – – (58) (2) (60)
At 30 June 2014 750 411 3,934 48 5,143
Accumulated depreciation
At 30 June 2012 52 33 1,676 31 2,092
Depreciation charge 10 44 863 15 932
Disposals – (204) (850) (42) (1,096)
Effect of movements in foreign exchange rate – – 27 1 28
At 30 June 2013 62 173 1,716 5 1,956
Depreciation charge 10 46 887 19 962
Disposals – – (180) – (180)
Effect of movements in foreign exchange rate – – (33) (1) (34)
At 30 June 2014 72 219 2,390 23 2,704
Net book value
At 30 June 2012 698 241 1,757 26 2,722
At 30 June 2013 688 224 1,970 45 2,927
At 30 June 2014 678 192 1,544 25 2,439
Bank borrowings are secured on certain assets of the group including property, plant and equipment. There is a fixed charge over 
the long leasehold property.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
58
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
10 Property, plant and equipment (continued)
The net carrying amount of property, plant and equipment includes the following amounts in respect of assets held under 
finance leases (see note 24):
 2014 2013
 £’000 £’000
Plant, fixtures and equipment 51 32
Motor vehicles 34 34
 85 66
11 Intangible assets
   Contractual
   and
   non-contractual  Intellectual
  Development customer Distribution property
 Goodwill costs relationships agreements rights Total
 £’000 £’000 £’000 £’000 £’000 £’000
Cost or valuation
At 30 June 2012 43,540 6,209 18,196 10,499 960 79,404
Additions – internally developed – 3,563 – – – 3,563
Acquired through business combinations 12 – 284 – – 296
Measurement period adjustments 457 – – – – 457
Effects of movements in 
foreign exchange rate 601 131 341 121 36 1,230
At 30 June 2013 44,610 9,903 18,821 10,620 996 84,950
Additions – internally developed – 3,985 – – – 3,985
Disposals – (175) – – – (175)
Effects of movements in
foreign exchange rate (658) (300) (395) (131) (39) (1,523)
At 30 June 2014 43,952 13,413 18,426 10,489 957 87,237 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
59
11 Intangible assets (continued)
   Contractual
   and
   non-contractual  Intellectual
  Development customer Distribution property
 Goodwill costs relationships agreements rights Total
 £’000 £’000 £’000 £’000 £’000 £’000
Accumulated amortisation
At 30 June 2012 – 2,731 4,659 6,994 225 14,609
Amortisation charge – 1,165 1,941 1,103 138 4,347
Effect of movements in foreign exchange rate – 31 181 122 10 344
At 30 June 2013 – 3,927 6,781 8,219 373 19,300
Amortisation charge – 1,571 1,909 908 172 4,560
Disposals – (175) – – – (175)
Effect of movements in foreign exchange rate – (61) (235) (128) (16) (440)
At 30 June 2014 – 5,262 8,455 8,999 529 23,245
Net book value
At 30 June 2012 43,540 3,478 13,537 3,505 735 64,795
At 30 June 2013 44,610 5,976 12,040 2,401 623 65,050
At 30 June 2014 43,952 8,151 9,971 1,490 428 63,992
All intangible assets, other than goodwill which has an indefinite life, have a useful life economic life of between 0.5 and 12 
years. The remaining useful life of development costs is between 1 and 7 years, for contractual and non-contractual customer 
relationships is between 0.5 and 12 years, for distribution agreements is between 0.5 and 3 years and for intellectual property 
rights is between 5 and 9 years. 
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
60
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
12 Goodwill and impairment
Goodwill acquired in business combinations is allocated at acquisition to the cash generating units (“CGUs”) that are expected to 
benefit from that business combination. Details of goodwill allocated to each CGU are as follows:
 Goodwill carrying amount
 2014 2013
 £’000 £’000
Walton 1,555 1,555
Syspro  14,505 14,117
Business Solutions 3,591 3,591
Retail 6,460 6,847
Dynamics International 8,713 9,280
IP 371 398
Sage  6,108 6,108
Retail Systems Group (RSG) 1,103 1,103
Unisoft 776 841
Integrated Business Solutions (IBS) 770 770
 43,952 44,610
Cash generating units are identified as the smallest group of assets that generate cash inflows that are largely independent of the 
cash inflows from other assets or groups of assets and have been changed this year to reflect management’s current day-to-day 
operation of the business.
The recoverable amounts of the CGUs are determined from value in use calculations, derived from the present value of future 
cash flows generated by the CGUs. There are a number of assumptions and estimates involved in calculating the present value of 
the future cash flows, including but not restricted to the following:
• growth rates applied to profit from operations used as the basis for the future cash flows;
• the discount rate applied to the cash flows to calculate their present value.
Although the directors are satisfied that the assumptions used are appropriate to the current circumstances of the group, 
changes to these key assumptions or estimates could significantly affect the result of the impairment calculation. The basis of the 
assumptions used is as follows:
• management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of 
money and the risks specific to the business. The growth rates are based on management forecasts for the markets in which 
each CGU operates.
• the group prepares pre-tax cash flow forecasts derived from the most recent financial forecasts approved by the directors 
for the next three years and extrapolates cash flows for a further two years at growth rates of between 2% and 5% with 
exception of the Walton and IBS CGUs. These CGUs relates to small systems and a gradual attrition of income is expected, 
and an attrition rate of 5% has been applied. The most recent financial forecasts have been prepared on the assumption 
that gross margins will be consistent with those generated historically and that overheads are in line with any changes in 
the level of revenues forecast. The growth rates are based on industry growth rates, management’s view of the observable 
markets as well as historical and estimated requirement by customers for the products and services. 
• the rate used to discount the forecast pre-tax cash flows is 14% and represents the directors’ current best estimate of the 
weighted average cost of capital (“WACC”).
As a result of the impairment testing carried out on the basis of these estimates and assumptions, no impairment provisions are 
considered necessary. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
61
13 Subsidiaries
The principal subsidiaries of K3 Business Technology Group plc, all of which have been included in these consolidated financial 
statements, are as follows:
  Proportion of ownership interest
Name Country of incorporation and ordinary share capital held
K3 Syspro Limited  UK 100%
K3 Business Solutions BV Netherlands 100%
K3 Software Solutions BV Netherlands 100%
K3 Solutions BV Netherlands 100%
K3 Holdings BV Netherlands 100%
K3 AX Limited  UK 100%
K3 Retail and Business Solutions Limited Ireland 100%
Integrated Manufacturing Software Limited Ireland 100%
K3 Hosting Limited (formerly K3 Managed Services Limited)  UK 100%
K3 Partner Network (International) Limited
(formerly K3 Managed Services (International) Limited) Ireland 100%
K3 FDS Limited (formerly K3 Panacea Limited) UK 100%
K3 Business Solutions Limited  UK 100%
K3 Business Technology Group Trustees Company Limited UK 100%
Fifth Dimension Systems Limited UK 100%
FDS Technology Systems Limited Ireland 100%
Retail Systems Group Limited UK 100%
Intelligent Solutions Consultancy Limited UK 100%
K3 Business Solutions Pte Ltd Singapore 100%
K3 Business Solutions ehf Iceland 100%
Colne Investments Limited UK 100%
K3 Systems Support Limited UK 100%
K3 BTG Limited UK 100%
K3 CRM Limited UK  100%
The principal activity of all the subsidiary undertakings is the supply of computer software and consultancy with the exception 
of the following: K3 Hosting Limited, K3 Partner Network (International) Limited, K3 FDS Limited and K3 Systems Support Limited 
which are hosting and managed services providers; K3 Business Technology Group Trustees Company Limited which is the 
trustee for the group’s employee share ownership plan.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
62
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
14 Available-for-sale investments
 2014 2013
 £’000 £’000
At the beginning and end of period 98 98
All amounts included above are non-current assets. There were no impairment provisions on available-for-sale financial assets in 
the year ended 30 June 2014. 
Available-for-sale financial assets include the following:
 2014 2013
 £’000 £’000
Unquoted:
Equity Securities – UK 98 98
The fair value of the unquoted securities is based on the expected cash flows discounted using a rate based on the market interest 
rate and the risk premium specific to the unlisted security of 9.5%.
The Group’s strategic investment is a 10% interest in Cyntergy Limited. 
15 Trade and other receivables
 2014 2013
 £’000 £’000
Trade receivables 16,359 17,306
Less: provision for impairment of trade receivables (594) (1,433)
Trade receivables – net 15,765 15,873
Current taxes 338 908
Other receivables 509 1,058
Accrued income 8,850 4,231
Prepayments 3,426 3,181
 28,888 25,251
The fair value of trade and other receivables approximates to book value at 30 June 2014 and 30 June 2013.
Of the above, trade receivables of £0.33m (2013: £0.50m) and accrued income of £1.25m (2013: £0.17m) is due after more than 
one year.
The group is exposed to credit risk with respect to trade receivables due from its customers. The group has over 3,000 customers 
spread across various industries, although predominantly in the retail, manufacturing and distribution sectors, and hence 
the concentration of credit risk is limited due to the large and diverse customer base. The group assesses the credit rating for 
new customers to minimise the credit risk. Provisions for bad and doubtful debts are made based on management’s objective 
assessment of the risk taking into account the age of the debt and items considered to be in dispute with customers. Given that 
the large number of customers limits the concentration of credit risk, the directors consider that no further credit provision is 
required other than the provision for impairment of £0.59m (2013: £1.43m).  K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
63
15 Trade and other receivables (continued)
As at 30 June 2014 trade receivables of £2.62m (2013: £3.46m) were past due but not impaired. They relate to the customers against 
whom no provision is considered necessary. The ageing analysis of these receivables is as follows:
 2014 2013
 £’000 £’000
Up to 3 months overdue 378 653
3 to 6 months overdue 1,144 1,624
6 to 12 months overdue 765 565
Over 12 months overdue 336 622
 2,623 3,464
As at 30 June 2014 trade receivables of £0.59m (2013: £1.43m) were past due, impaired and provided against. There are no 
individually significant receivables included within this provision. The group takes a prudent view in assessing the risk of non-
payment and considers provision for all debts more than three months in arrears unless there are specific circumstances to 
indicate that there is little or no risk of non-payment of these older debts.
The carrying amounts of the group’s trade and other receivables are denominated in the following currencies:
 2014 2013
 £’000 £’000
Pound Sterling 23,057 18,711
Euro 5,555 6,404
US Dollar 80 104
Canadian Dollar 179 –
Singapore Dollar 17 32
 28,888 25,251
Movements on the group provision for impairment of trade receivables are as follows:
 2014 2013
 £’000 £’000
At beginning of period 1,433 1,155
Provided during the period 339 968
Utilised during the period (1,077) (690)
Unused amounts released (101) –
At end of period 594 1,433
The movement on the provision for impaired receivables has been included in administrative expenses in the consolidated 
income statement.
Other classes of financial assets included within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable set out above. 
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
64
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
16 Trade and other payables – current
 2014 2013
 £’000 £’000
Trade payables 7,203 5,702
Other payables 801 555
Accruals 5,820 5,728
Total financial liabilities, excluding loans and borrowings,
classified as financial liabilities measured at amortised cost 13,824 11,985
Contingent consideration (see note 19) 18 392
Other tax and social security taxes 2,468 2,135
Deferred revenue 9,692 10,569
  26,002 25,081
The fair value of contingent consideration was based on the present value of cash flows.
To the extent trade and other payables are not carried at fair value in the consolidated balance sheet, book value approximates to 
fair value at 30 June 2014 and 30 June 2013.
Maturity analysis of the financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised 
cost, is as follows:
 2014 2013
 £’000 £’000
Up to 3 months 12,722 10,266
3 to 6 months 299 311
6 to 12 months 803 1,408
  13,824 11,985 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
65
17 Loans and borrowings
 2014 2013
 £’000 £’000
Non-current
Bank loans (secured) – –
Finance lease creditors (note 24) 14 32
 14 32
Current
Bank overdrafts 3,644 1,105
Bank loans (secured) 9,959 12,290
Finance lease creditors (note 24) 18 16
Loans from related parties (note 27) 640 640
 14,261 14,051
Total borrowings 14,275 14,083
Principal terms and the debt repayment schedule of the group’s loans and borrowings are as follows:
 Currency Nominal rate % Year of maturity Security
Secured bank loan GBP 2.95% over LIBOR 2014 See below
Loans from related parties GBP 8.5% 2014 Unsecured
Finance lease creditors (note 24) GBP 14% 2016 Secured
The above split between non-current and current loans and borrowings reflects the situation as at 30 June 2014.
In August 2014 the Group agreed the extension of existing facilities through to August 2017 on substantially the same terms.
Finance lease creditors are secured on the assets to which they relate.
Maturity analysis of loans and borrowings:
 2014 2013
 £’000 £’000
In less than one year 14,385 14,151
In more than one year but not more than two years 9 20
In more than two years but not more than five years 7 17
  14,401 14,188
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
66
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
17 Loans and borrowings (continued)
Bank borrowings
The bank loans are secured by a fixed charge over the group’s long leasehold property and floating charges over the remaining 
assets of the group.
The group has undrawn committed borrowing facilities available at 30 June 2014 of £1.36m (2013: £3.76m) for which all 
conditions have been met. It is a Revolving Credit Facility on which interest is charged at a floating rate linked to LIBOR and, 
following the renegotiation since the year end, now expires in August 2017.
The currency profile of the group’s loans and borrowings is as follows:
 2014 2013
 £’000 £’000
Pound Sterling 13,979 11,500
Euro 296 2,583
 14,275 14,083
The Euro loan was fully repaid during the year. At the previous year end, the Euro loan was re-valued with a loss on the translation 
of the loan of £0.10m. 
18 Other non-current liabilities
 2014 2013
 £’000 £’000
Accruals 554 225 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
67
19 Financial instruments
Risk management
The group is exposed through its operations to one or more of the following financial risks:
• Market price risk
 – Fair value or cash flow interest rate risk
 – Foreign currency risk
• Liquidity risk
• Credit risk
Policy for managing these risks is set by the Board following recommendations from the Chief Financial Officer. Certain risks 
are managed centrally, while others are managed locally following guidelines communicated from the centre. The policy for 
each of the above risks is described in more detail below. Further quantitative information in respect of these risks is presented 
throughout these financial statements.
There have been no substantive changes from previous periods in the group’s exposure to financial instrument risks, its 
objectives, policies and processes for managing those risks or methods used to measure them.
Principal financial instruments
The principal financial instruments used by the group, from which financial risk arises, are as follows:
• Trade receivables
• Cash at bank
• Trade and other payables
• Floating-rate bank loans
• Loans from related parties
• Forward currency contracts.
Market risk
Market risk arises from the group’s use of interest bearing, tradable and foreign currency financial instruments. It is the risk that 
the fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), 
foreign exchange rates (currency risk) or other market factors (other price risk).
Fair value and cash flow interest rate risk
The group has fixed interest loans in respect of finance leases with a net book value of £0.03m (2013: £0.05m) and loans from 
related parties of £0.64m (2013: £0.64m). The fixed rates applicable are 14% and 8.5% respectively.
Bank debt totalling £10.0m (2013: £12.29m) is held under floating rates linked to quarterly LIBOR. 
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
68
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
19 Financial instruments (continued)
Foreign currency risk
Foreign exchange risk arises because the group has operations located in Europe whose functional currency is not the same 
as the group’s primary functional currency (sterling). The net assets from overseas operations are exposed to currency risk 
giving rise to gains or losses on retranslation into sterling. The group has hedged its net investments in overseas operations by 
denominating a proportion of its bank loans in Euros so that the cash flow risk created from such hedging techniques reduces 
the volatility in consolidated net assets. Following the repayment of the Euro denominated borrowings in March 2014, the net 
investment hedge was not in place at the end of the financial year.
Foreign exchange risk also arises when individual group operations enter into transactions denominated in a currency other than 
their functional currency. It is group policy that such transactions should be hedged by entering into forward contracts where 
it is considered the risk to the group is significant. This policy is managed centrally by group treasury entering into a matching 
forward contract with a reputable bank.
It is group policy that transactions between group entities are always denominated in the selling entity’s functional currency 
thereby giving rise to foreign exchange risk in the income statement of both the purchasing group entity and the group. No 
external hedge is entered into as there is no exposure to consolidated net assets from intra-group transactions.
Other market price risk
Where the group has generated a significant amount of surplus cash it invests in money market over-night deposits. The 
directors believe that the exposure to market price risk from this activity is acceptable in the group’s circumstances.
Liquidity risk
The liquidity risk of each group entity is managed centrally by the group treasury function comparing to budgets and 
quarterly forecasts. 
All surplus cash is held centrally to maximise the returns on deposits through economies of scale. The type of cash instrument 
used and its maturity date will depend on the group’s forecast cash requirements. The group maintains a revolving credit 
facility with a major banking corporation to manage any unexpected short-term cash shortfalls. The facilities from the Group’s 
bankers require the Group to meet certain covenants throughout the term of the loans and the group’s forecasts indicate that 
the group will remain within the set parameters.
The principle terms of the group’s borrowings are set out in note 17.
Credit risk
Credit risk is the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the group. The 
group is mainly exposed to credit risk from credit sales. It is group policy, implemented locally, to assess the credit risk of new 
customers before entering contracts. Such credit ratings, taking into account local business practices, are then factored into any 
contractual arrangements.
The group does not have any significant credit risk exposure to any single customer. The carrying amount of financial assets 
recorded in the financial statements, which is net of impairment losses, represents the group’s maximum exposure to credit risk.
Further details, including quantitative information, are included in note 15. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
69
19 Financial instruments (continued)
Capital disclosures
The group monitors “adjusted capital” which comprises all components of equity (i.e. share capital, share premium, retained 
earnings and other reserves) other than amounts in the translation reserve. Other reserves comprise a merger relief reserve.
 2014 2013
 £’000 £’000
Total equity 52,605 51,125
Less: amounts in translation reserve (229) (1,297)
  52,376 49,828
The group’s objective when maintaining capital is to safeguard the company’s ability to continue as a going concern so that it 
can continue to provide returns to shareholders and benefits for other stakeholders. In order to maintain the capital structure, 
the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell 
assets to reduce debt.
Sensitivity analysis
Whilst the group takes steps to minimise its exposure to cash flow interest rate risk and foreign exchange risk as described above, 
changes in interest and foreign exchange rates will have an impact on profit.
The directors consider a 0.75% movement in the interest rate to be reasonably possible as at the reporting date. The annualised 
effect of a 0.75% increase or decrease in the interest rate at the reporting date on the variable rate debt carried at that date 
would, all other variables being held constant, in the directors’ opinion, be immaterial. 
The group’s foreign exchange risk is dependent on the movement in the Euro to sterling exchange rate. Following the repayment 
of the Euro loan in March 2014, there will be no impact on the annualised interest arising from movements in the Euro to sterling 
exchange rate. 
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
70
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
19 Financial instruments (continued)
Financial instruments by category
The carrying value of the Group’s financial instruments (together with non-financial assets/liabilities for reconciling purposes) are 
analysed as follows:
At 30 June 2014
   Loans and Available- Amortised At Non financial
  Notes receivables for-sale cost FVTPL instruments Total
  £’000 £’000 £’000 £’000 £’000 £’000 £’000
Assets
Non current assets  – – – – 66,969 66,969
Available-for-sale  – 98 – – – 98
Trade and other receivables:
 Trade receivables 15 15,765 – – – – 15,765
 Other non derivative
 financial assets 15 509 – – – – 509
 Non financial instruments 15 – – – – 12,276 12,276
Current tax assets 15 – – – – 338 338
Cash and cash equivalents  647 – – – – 647
Total assets  16,921 98 – – 79,583 96,602
Liabilities
Borrowings:
 Current 17 – – (14,261) – – (14,261)
 Non-current 17 – – (14) – – (14)
Deferred tax liabilities 21 – – – – (3,151) (3,151)
Other non current liabilities 18 – – (554) – – (554)
Trade and other payables:
 Trade payables 16 – – (7,203) – – (7,203)
 Contingent consideration 16 – – – (18) – (18)
 Other non derivative
 financial liabilities 16 – – (6,621) – – (6,621)
 Non financial instruments 16 – – – – (12,160) (12,160)
Current tax liabilities  – – – – (15) (15)
Total liabilities  – – (28,653) (18) (15,326) (43,997)
Net assets  16,921 98 (28,653) (18) 64,257 52,605 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
71
19 Financial instruments (continued)
Financial instruments by category (continued)
At 30 June 2013
   Loans and Available- Amortised At Non financial
  Notes receivables for-sale cost FVTPL instruments Total
   £’000 £’000 £’000 £’000 £’000 £’000
Assets
Non current assets   – – – – 69,300 69,300
Available-for-sale   – 98 – – – 98
Trade and other receivables:
 Trade receivables  15 15,873 – – – – 15,873
 Other non derivative
 financial assets  15 1,058 – – – – 1,058
 Non financial instruments  15 – – – – 7,412 7,412
Current tax assets   – – – – 908 908
Cash and cash equivalents   272 – – – – 272
Total assets   17,203 98 – – 77,620 94,921
Liabilities
Borrowings:
 Current  17 – – (14,051) – – (14,051)
 Non-current  17 – – (32) – – (32)
Deferred tax liabilities  21 – – – – (4,267) (4,267)
Other non current liabilities  18 – – (225) – – (225)
Trade and other payables:
 Trade payables  16 – – (5,702) – – (5,702)
 Contingent consideration  16 – – – (392) – (392)
 Other non derivative
 financial liabilities  16 – – (6,283) – – (6,283)
 Non financial instruments  16 – – – – (12,704) (12,704)
Current tax liabilities   – – – – (140) (140)
Total liabilities   – – (26,293) (392) (17,111) (43,796)
Net assets   17,203 98 (26,293) (392) 60,509 51,125
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
72
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
19 Financial instruments (continued)
Financial instruments measured at fair value
 Fair value measurements Fair value measurements
 at 30 June 2014 at 30 June 2013
 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
 £’000 £’000 £’000 £’000 £’000 £’000
Financial assets
Equity investments – – 98 – – 98
Financial liabilities
Derivative financial liabilities – – – – – –
Contingent consideration – – (18) – – (392)
Level 3 fair value measurements
 Unlisted available-for-sale investments Contingent consideration
 2014 2013 2014 2013
 £’000 £’000 £’000 £’000
Opening balance 98 98 (392) (2,029)
Payments – – 129 1,431
Measurement period adjustments – – – 156
Gain in income statement – – 245 50
Closing balance 98 98 (18) (392)
The fair value of the unlisted securities is based on expected cash flows discounted using a rate based on the market interest rate 
and the risk premium specific to the unlisted security of 13% (2013: 13%). Were the risk premium adjustments to be increased by 
2%, the fair value of the level 3 asset would have been reduced by £nil (2013: £nil). K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
73
20 Derivative financial instruments
Hedge of net investment in foreign entity
The group had Euro denominated borrowings which expired in March 2014 which were designated as a hedge of the net assets 
in the Group’s Dutch subsidiary K3 Business Solutions B.V. The fair value of the borrowing at 30 June 2014 was £nil (2013: £0.91m). 
The foreign exchange profit of £0.01m on translation of the borrowing to the presentational currency at the reporting date is 
recognised in the Translation reserve (note 23).
21 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2013: 23%).
The movement on net deferred tax is as shown below:
 2014 2013
 £’000 £’000
At 30 June 2013 (3,544) (4,195)
Credit to income statement 893 647
On business combinations – 72
Credit to equity – re share options _ (27)
Effect of movements in foreign exchange rates 38 (41)
At 30 June 2014 (2,613) (3,544)
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax 
assets where the directors believe it is probable that these assets will be recovered.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
74
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
21 Deferred tax (continued)
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by 
IAS12) during the period are shown below.
Deferred tax assets
 Accelerated Other temporary Business  Total 
 capital allowances differences combinations gross assets
 £’000 £’000 £’000 £’000
At 30 June 2012 141 182 387 710
Charge (credit) to income statement 25 169 (291) (97)
Credit to equity – (27) – (27)
On business combinations – – 137 137
At 30 June 2013 166 324 233 723
Charge (credit) to income statement 58 (42) (192) (176)
Credit to equity – – – –
At 30 June 2014 224 282 41 547
There are no unrecognised deferred tax assets. Deferred tax assets on business combinations relate to those arising on fair 
value adjustments.
Deferred tax liabilities
 Other  Total 
 temporary Business gross
 differences combinations liabilities
 £’000 £’000 £’000
At 30 June 2012 (591) (4,314) (4,905)
On business combinations – (65) (65)
(Charge) credit to income statement  (167) 911 744
Effects of movements in foreign exchange rates – (41) (41)
At 30 June 2013 (758) (3,509) (4,267)
Credit to income statement  31 1,044 1,075
Effects of movements in foreign exchange rates – 41 41
At 30 June 2014 (727) (2,424) (3,151)
Deferred tax liabilities on business combinations relate to those arising on separately identifiable intangibles.
No deferred tax has been provided on temporary differences of £1.75m (2013: £1.72m) relating to the unremitted earnings of 
foreign subsidiaries. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
75
22 Share capital
 Issued and fully paid
 2014 2014 2013 2013
 Number £’000 Number £’000
Ordinary shares of 25p each
At beginning of the period 31,434,025 7,859 28,478,054 7,120
Other issued for cash during the period – – 2,848,184 712
Employee share options exercised 287,457 71 107,787 27
At end of the period 31,721,482 7,930 31,434,025 7,859
All shares have equal voting rights and there are no restrictions on the distribution of dividends or repayment of capital.
 2014 2013
 Number Number
Own shares held 127,075 114,761
Own shares are held by a subsidiary undertaking, K3 Business Technology Group Trustees Company Limited, as trustee of the 
group’s employee share ownership plan.
In connection with the loan made by CA Fastigheter AB to the company to assist it with the acquisition of Alpha Landsteinar, the 
company issued 200,000 warrants for ordinary shares of 25p each. These are exercisable at £0.90. The warrants are exercisable 
until the date on which the loan is repaid. The loan is currently outstanding. In addition, 500,000 warrants for ordinary shares 
of 25p each were issued to CA Fastigheter AB during 2007 in recognition of the reduction in its security following the increase 
in borrowings from the bank to fund the acquisition of McGuffie Brunton Limited. The warrants are exercisable at 123.5p and 
until the date on which the loan to CA Fastigheter AB is repaid upon meeting the following conditions: 300,000 of the warrants 
are exercisable when the company’s share price reaches £2.50; 100,000 are exercisable when it reaches £3.25; 100,000 have no 
conditions attached to them. 
In connection with a loan made by Johan and Marianne Claesson AB to the company to assist it with the acquisition of IEG, the 
company issued 400,000 warrants for the ordinary shares of 25p each. These are exercisable at £0.90. The warrants are exercisable 
until the date on which the loan to CA Fastigheter AB is repaid.
Options have been granted under the K3 Business Technology Group Plc Executive Share Option Scheme 2000 to subscribe for 
ordinary shares of the company as follows:
Number of Subscription
shares under price
option per share Exercise conditions Exercise period
71,500 94p ¼ on achievement of growth in earnings per share Between 21 June 2008 and
  over the three year period ending 31 December 2007 20 June 2015
  of 15% and 20%; ½ on growth of at least 25%
192,500 options were exercised during the year. No options lapsed unexercised during the year. 94,957 options under the SAYE 
scheme were exercised during the year in accordance with the scheme rules. No options were granted during the year.
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
76
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
23 Reserves
The following describes the nature and purpose of each reserve within shareholders’ equity.
Reserve Description and purpose
Share premium Amount subscribed for share capital in excess of nominal value.
Other reserve Merger relief reserve for amount in excess of nominal value on issue of shares in relation to 
 business combinations. 
Translation Gains/losses arising on retranslating the net assets of overseas operations into sterling and 
 currency movements on loans treated as part of the effective hedge of the net investment 
 in foreign entities.
Retained earnings Cumulative net gains and losses recognised in the consolidated income statement and 
 credits to equity in relation to share-based payments. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
77
24 Leases
Finance leases
The group leases a small proportion of its office equipment and motor vehicles (net carrying value £0.09m). Such assets are 
generally classified as finance leases as the rental period approximates to the estimated useful economic life of the assets 
concerned and often the group has the right to purchase the assets outright at the end of the minimum lease term by paying a 
nominal amount.
Future lease payments are due as follows:
 2014
  Minimum
  lease  Present
  payments Interest value
  £’000 £’000 £’000
Not later than one year  20 (2) 18
Later than one year and not later than five years  16 (2) 14
  36 (4) 32
 2013
  Minimum
  lease  Present
  payments Interest value
  £’000 £’000 £’000
Not later than one year  20 (4) 16
Later than one year and not later than five years  38 (6) 32
  58 (10) 48
The present values of future lease payments are analysed as follows:
 2014 2013
 £’000 £’000
Current liabilities   18 16
Non-current liabilities   14 32
   32 48
Operating leases
With the exception of the property in Manchester, the group leases all of its properties. The terms of property leases vary, although 
they all tend to be tenant repairing with rent reviews every 2 to 5 years and many have break clauses. In addition, the group leases 
the majority of its motor vehicles which are generally 3 year contracts.
The total future value of minimum lease payments is due as follows:
 2014 2013
 £’000 £’000
Not later than one year   2,092 1,948
Later than one year and not later than five years   2,474 2,308
Later than five years   513 686
   5,079 4,942
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
78
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
25 Retirement benefits
The group operates a defined contribution scheme and also makes contributions to personal pension schemes of certain senior 
employees and directors.
Pension costs for defined contribution schemes in the period to 30 June 2014 are £1.25m (2013: £0.95m).
26 Share-based payments
As disclosed in note 22, K3 Business Technology Group plc operates an equity-settled share-based remuneration scheme for 
employees: an Executive Share Option Scheme for certain senior management including executive directors. Under the scheme 
there are two types of share options: those where the options vest based on the achievement of a share price target and those 
where the options vest on the achievement of target growth in adjusted earnings per share, i.e. adjusted for amortisation of 
acquired intangibles, cost of share-based payments and exceptional items and with the tax charge being 30% of the operating 
profit so adjusted. All options are subject to the employee having completed three years service from the date of grant.
 2014 2013
 Weighted  Weighted
 average  average
 exercise  exercise
 price Options price Options
 (pence) (number) (pence) (number)
Outstanding at beginning of the period 107.86 532,509 103.36 1,847,928
Granted during the period – – – –
Exercised during the period 104.70 (287,457) 68.57 (107,787)
Lapsed during the period 118.80 (40,957) 89.13 (1,207,632)
Outstanding at the end of the period 110.11 204,095 107.86 532,509
The exercise price of options outstanding at the end of the period ranged between 94.0p and 118.8p (2013: 94.0p and 118.8p) and 
their weighted average contractual life was 5.09 years (2013: 4.54 years).
Of the total number of options outstanding at the end of the period, 73,015 (2013: 264,000) had vested and were exercisable at the 
end of the period at an average exercise price of 94.51p (2013: 96.73p).
The weighted average share price (at the date of exercise) of options exercised during the period was 104.70p (2013: 68.57p).
No options were granted during either year.
 2014 2013
 £’000 £’000
The share-based remuneration expense (note 4) comprises:
Equity-settled schemes   27 70
The group did not enter into any share-based payment transactions with parties other than employees during the current or 
previous period. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
79
Overview Strategic Report Governance Financial Statements Other
27 Related party transactions
Details of directors and key management compensation are given in the Remuneration Report on pages 24 and 25 and note 4. 
Other than their remuneration and participation in the group’s share option schemes, there are no transactions with key 
management personnel. Other related party transactions are as follows:
Included within other loans due to related parties are loans of £0.64m (2013: £0.64m) from CA Fastigheter AB, a company 
connected with Mr PJ Claesson, a director of the Company. An initial loan of £0.75m was made in connection with the acquisition of 
Alpha Landsteinar in October 2004. The loan was repayable in twelve equal quarterly instalments commencing on 31 March 2006 
subject to earlier repayments from proceeds from a future placing or from new bank loans raised. No repayments have been made 
during the current or previous period. Interest is charged at 8.5% per annum and the accrual at the year-end amounted to £14,000 
and is included in accruals (2013: £14,000). In connection with the loan, the company issued 200,000 warrants for ordinary shares of 
25p. These are exercisable at £0.90 and until the date upon which the loan is repaid. As the loan remains outstanding, the warrants 
remain exercisable. In addition, 500,000 warrants for ordinary shares of 25p each were issued to CA Fastigheter AB during 2007 in 
recognition of the reduction in its security following the increase in borrowings from the bank to fund the acquisition of McGuffie 
Brunton Limited. The warrants are exercisable at 123.5p and until the loan is repaid upon meeting the following conditions: 300,000 
of the warrants are exercisable when the company’s share price reaches £2.50; 100,000 are exercisable when it reaches £3.25; 
100,000 have no conditions attached to them. 
On 23 June 2005 the company received a loan of £1m from Johan and Marianne Claesson AB, a company connected with  
Mr PJ Claesson, a director of the company. The loan was made in connection with the acquisition of Information Engineering Group 
Limited in June 2005 and was repaid during 2005. In connection with the loan, the company issued 400,000 warrants for ordinary 
shares of 25p. These are exercisable at an exercise price of £0.90. The warrants are exercisable until the date on which the loan due to 
CA Fastigheter AB is repaid. 28 Events after the reporting date
In August 2014 the Group agreed the extension of existing bank facilities through to August 2017 on substantially the same terms.
In September 2014 the Board announced a proposed dividend of 1.25p per share to shareholders on the record on 12 December 
2014. Subject to shareholder approval at the forthcoming annual general meeting the dividend will be paid on 16 January 2015.
Retail Technology Limited
On 27 July 2014 the Company acquired Retail T echnology Limited. The initial consideration was £0.69m satisfied on completion in 
cash. Deferred consideration of £0.05m is payable over the next two years.
The following table sets out the provisional fair values of the identifiable assets and liabilities acquired:
    Provisional
    fair value
    £’000
Assets
Other intangible assets    613
Trade receivables    16
Other current assets    21
Cash and cash equivalents    236
Liabilities
Trade and other payables    (135)
Deferred tax liabilities    (123)
Net assets    628
Consideration
Initial cash consideration    694
Deferred cash consideration    50
    744
Goodwill    116
Acquisition costs to be charged to the income statement    4
The intangible assets recognised in the adjustments relate to customer relationships. £0.12m of the deferred tax liability 
recognised relates to these intangible assets. The goodwill is attributable to those intangibles such as the workforce which are 
not recognised separately. 
K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
80
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
81
Overview Strategic Report Governance Financial Statements Other
29 Notes to the cash flow statement
Cash generated from operations is stated after payments to regularise liabilities that were significantly outside normal statutory 
due dates and commercial terms at the date of acquiring companies, that the directors consider to be a cost of acquisition. In 
addition, cash flows from operations include acquisition costs and exceptional reorganisation costs arising as a result of 
acquisitions during the year. The adjusted cash generated from operations has been computed because the directors consider it 
more useful to shareholders and investors in assessing the underlying operating cash flow of the Group. The adjusted cash 
generated from operations is calculated as follows:
 2014 2013
 £’000 £’000
Cash generated from operating activities   5,352 8,022
Add:
Exceptional reorganisation costs   1,722 637
Adjusted cash generated from operations   7,074 8,659
Acquisition of subsidiaries and other business units, net of cash acquired comprises:
 2014 2013
 £’000 £’000
Initial consideration   – (10)
Contingent and deferred consideration   (129) (1,931)
   (129) (1,941)
Cash and cash equivalents comprise:
 2014 2013
 £’000 £’000
Cash available on demand   647 272
Overdrafts   (3,644) (1,105)
   (2,997) (833) K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
82
Notes forming part of the  
Financial Statements (continued)
for the year ended 30 June 2014
*1 Calculated before amortisation of acquired intangibles of 
£2.99m (2013: £3.18m) and exceptional reorganisation 
costs of £1.72m (2013: £0.73m).
*2 Calculated before amortisation of acquired intangibles of 
£2.99m (2013: £3.18m) and exceptional reorganisation 
costs of £1.72m (2013: £0.73m).
*3 Calculated before amortisation of acquired intangibles of 
£1.28m (2013: £1.37m) and exceptional reorganisation 
costs of £1.14m (2013: £0.22m).
*4 Calculated before amortisation of acquired intangibles 
(net of tax) of £1.95m (2013: £2.27m) and exceptional 
reorganisation costs (net of tax) of £1.34m (2013: £0.58m).
*5 Calculated before cash flows in respect of exceptional 
reorganisation costs of £1.72m (2013: £0.64m).
*6 Calculated before amortisation of acquired intangibles of 
£2.99m (2013: £3.18m) and exceptional reorganisation 
costs of £1.72m (2013: £0.73m).
*7 Calculated before cash flows in respect of exceptional 
reorganisation costs of £1.72m (2013: £0.64m).
*8 Calculated before amortisation of acquired intangibles 
(net of tax) of £1.95m (2013: £2.27m) and exceptional 
reorganisation costs (net of tax) of £1.34m (2013: £0.58m).
*9 Calculated before amortisation of acquired intangibles of 
£0.90m (2013: £1.18m) and exceptional reorganisation 
costs of £0.72m (2013: £0.15m).
*10 Calculated before amortisation of acquired intangibles of 
£0.37m (2013: £0.60m) and exceptional reorganisation 
costs of £0.41m (2013: £0.11m).
*11 Calculated before amortisation of acquired intangibles of 
£0.36m (2013: £0.60m) and exceptional reorganisation 
costs of £0.08m (2013: £0.09m).
*12 Calculated before amortisation of acquired intangibles of 
£0.53m (2013: £0.58m) and exceptional reorganisation 
costs of £0.31m (2013: £0.05m).
*13 Calculated before amortisation of acquired intangibles of 
£1.79m (2013: £1.83m) and exceptional costs of £0.18m 
(2013: £0.27m).
*14 Calculated before amortisation of acquired intangibles of 
£0.30m (2013: £0.17m) and exceptional costs of £0.24m 
(2013: £0.03m).
*15 Calculated before exceptional costs of £0.59m  
(2013: £0.27m).
*16 Calculated before amortisation of acquired intangibles of 
£2.99m (2013: £3.18m) and exceptional reorganisation 
costs of £1.72m (2013: £0.73m).
*17 Calculated before amortisation of acquired intangibles (net 
of tax) of £1.95m (2013: £2.27m) and exceptional 
reorganisation costs (net of tax) of £1.36m (2013: £0.58m).
30 Notes to the Strategic Report K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
83
Overview Strategic Report Governance Financial Statements Other
Company Balance Sheet
as at 30 June 2014
  2014 2013
 Notes £’000 £’000
Fixed assets
Development costs 5 1,672 1,637
Goodwill 5 – 930
Intangible fixed assets  1,672 2,567
Tangible assets 6 228 207
Investments 7 38,530 40,830
  40,430 43,604
Current assets
Debtors 8 22,539 20,058
Cash at bank and in hand  1 1
  22,540 20,059
Creditors: Amounts falling due within one year 9 (22,358) (25,617)
Net current assets (liabilities)  182 (5,558)
Total assets less current liabilities  40,612 38,046
Creditors: Amounts falling due after more than one year 10 (230) (51)
Provisions for liabilities and charges 11 (353) (178)
Net assets  40,029 37,817
Capital and reserves
Called-up share capital 12 7,930 7,859
Share premium account 13 9,412 9,183
Other reserve 13 10,324 10,324
Profit and loss account 13 12,363 10,451
Equity shareholders’ funds 15 40,029 37,817
The financial statements on pages 81 to 94 were approved and authorised for issue by the Board of Directors on  
14 September 2014 and were signed on its behalf by:
DJ Bolton
Director
The notes on pages 82 to 94 form part of these financial statements. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
84
Notes forming part of the  
Company Financial Statements
for the year ended 30 June 2014
1 Accounting policies for the company financial statements
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the 
preceding year.
Basis of accounting
The financial statements have been prepared under the historical cost convention and in accordance with applicable United 
Kingdom accounting standards. 
Intangible assets – goodwill
The group has previously hived up the trade and assets of a subsidiary undertaking into the parent undertaking at book 
value. This results in the investment in a subsidiary which has no trade and hence provision would normally be made against 
that investment under UK GAAP . The company has however transferred an amount equal to the accounting impairment from 
investments to goodwill. The Board feels that this more accurately reflects the fact that in substance there has been no loss of 
value to the company. Had the investment been written down in strict accordance with UK GAAP , this would have resulted in a 
provision, in the parent undertaking only, of £nil (2013: £221,000) which has now been amortised over its useful economic life of 
five years. 
Goodwill arising on the acquisition of trade and assets is the difference between the value of the consideration paid and the 
value of the net assets acquired. It is amortised over the period during which the company is expected to benefit, which is 
between 9 to 10 years. Provision is made for any impairment.
Intangible assets – research and development
Research expenditure is written off as incurred. Development expenditure is also written off, except where the directors are 
satisfied as to the technical, commercial and financial viability of individual projects. In such cases, the identifiable expenditure is 
deferred and amortised over the period during which the company is expected to benefit. This period is between three and six 
years. Provision is made for any impairment. The directors do not consider the capitalised development costs are a realised loss as 
their carry forward is justifiable under the provisions of SSAP 13.
Tangible fixed assets
Tangible fixed assets are stated at cost, net of depreciation and any provision for impairment. Depreciation is provided on all 
tangible fixed assets, at rates calculated to write off the cost of each asset on a straight-line basis over its expected useful life, 
as follows:
Leasehold improvements Period of lease
Plant and machinery, office equipment and fixtures 20-33% per annum
Motor vehicles 25% per annum
Impairment of fixed assets and goodwill
The need for any fixed asset impairment write-down is assessed by comparison of the carrying value of the asset against the 
higher of realisable value and value in use. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
85
Overview Strategic Report Governance Financial Statements Other
1 Accounting policies for the company financial statements (continued)
Investments
Fixed asset investments are shown at cost less provision for impairment except for foreign currency investments where the 
company has applied net investment hedging. Where net investment hedging is applied, the revaluation is recorded in reserves. 
For investments in subsidiaries acquired for consideration including the issue of shares qualifying for merger relief, cost is 
measured either by reference to the nominal value or the fair value of the shares where appropriate. Any premium is ignored 
when the nominal value is used.
Taxation
Current tax, including UK corporation tax, is provided at the amounts expected to be paid (or recovered) using the tax rates and 
laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date 
where transactions or events that resulted in an obligation to pay more tax in the future or a right to pay less tax in the future 
have occurred at the balance sheet date. Timing differences are differences between the group’s taxable profits and its results as 
stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from 
those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it 
can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying 
timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the period in which the timing differences are 
expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. 
Deferred tax is measured on a non-discounted basis.
Turnover
Turnover is calculated net of value added tax and represents the total amount receivable by the company in respect of the sale 
of software licences, customised software, hardware and fees derived from installation, consultancy, training and support.
Income on the sale of software licences is recognised where there is persuasive evidence of an agreement with a customer 
(contract and/or binding purchase order), delivery of the software has taken place and the customer has the ability to use the 
software, collectability is probable and the fee is fixed and determinable. If significant post-delivery obligations exist, income is 
deferred until no significant obligations remain. Where the company acts as an agent, commission income is recognised at the 
point the customer has placed an order and the company’s obligations have been fulfilled. Income on the sale of customised 
software, hardware and installation is recognised on delivery to a customer or on completion of contractual milestones. Income 
from training and consultancy is recognised as the contract progresses. Income from support is generally invoiced in advance, 
termed “deferred revenue” , and taken to income in equal monthly instalments over the relevant period. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
86
Notes forming part of the  
Company Financial Statements (continued)
for the year ended 30 June 2014
1 Accounting policies for the company financial statements (continued)
Pension costs
For defined contribution schemes the amount charged to the profit and loss account in respect of pension costs and other 
post-retirement benefits is the contributions payable in the period. Differences between contributions payable in the period and 
contributions actually paid are shown as either accruals or prepayments in the balance sheet.
Foreign currency
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction or, if hedged, at the forward 
contract rate. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the 
rates of exchange prevailing at that date or, if appropriate, at the forward contract rate.
Where the company enters into foreign currency borrowings to hedge changes in the net investment of foreign subsidiaries 
arising from movements in the forward exchange rate, gains and losses arising on the foreign currency borrowings are 
recognised directly in equity. 
Leases
Assets held under finance leases and other similar contracts, which confer rights and obligations similar to those attached to 
owned assets, are capitalised as tangible fixed assets and are depreciated over the shorter of the lease terms and their useful 
lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the 
profit and loss account over the period of the lease to produce a constant rate of charge on the balance of capital repayments 
outstanding. Hire purchase transactions are dealt with similarly, except that assets are depreciated over their useful lives.
Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on 
such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight-line 
basis over the lease term, except where the period to the review date on which the rent is first expected to be adjusted to the 
prevailing market rate is shorter than the full lease term, in which case the shorter period is used.
Share-based payment
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the profit and 
loss account over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity 
instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting 
period is based on the amount that eventually vest. Market vesting conditions are factored into the fair value of the options 
granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting 
conditions are satisfied. The cumulative expense is not adjusted for failure to meet a market vesting condition.
When the terms and conditions of the options are modified before they vest, the increase in the fair value of the options, 
measured immediately before and after the modification, is also charged to the profit and loss account over the remaining 
vesting period.
Fair value is measured by use of a trinomial lattice model. The expected life used in the model has been adjusted, based on the 
directors’ best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.  K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
87
Overview Strategic Report Governance Financial Statements Other
2 Profit attributable to the Company
As permitted under section 408 of the Companies Act 2006, no separate profit and loss account is presented in respect of the 
parent company.
The profit for the year dealt with in the financial statements of the parent company was £2,224,000 (2013: £31,000).
3 Staff numbers
The average monthly number of employees (including executive directors) was:
  2014 2013
  Number Number
Consultants and programmers   137 123
Sales and distribution   11 10
Administration   30 25
   178 158
Their aggregate remuneration comprised:
  2014 2013
 £’000 £’000
Wages and salaries   10,764 8,541
Social security costs   1,179 1,033
Other pension costs (see note 17)   396 182
   12,339 9,756 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
88
Notes forming part of the  
Company Financial Statements (continued)
for the year ended 30 June 2014
4 Directors’ remuneration, interests and transactions
Aggregate remuneration
The total amounts for directors’ remuneration and other benefits were as follows:
  2014 2013
 £’000 £’000
Emoluments   675 483
Compensation for loss of office   394 –
Gains on exercise of share options   110 90
Contributions to personal pension schemes   33 37
   1,212 610
The aggregate emoluments of the highest paid director (including compensation for loss of office of £393,636) were £605,546 
(2013: £243,628) and company pension contributions of £10,993 (2013: £18,276) were made to a defined contribution scheme on 
his behalf.
  2014 2013
Retirement benefits are accruing to the following number of directors under:
Defined contribution schemes   2 2
Directors’ share options are disclosed in the Remuneration Report on pages 24 and 25. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
89
Overview Strategic Report Governance Financial Statements Other
5 Intangible fixed assets
 Development
 costs Goodwill Total
 £’000 £’000 £’000
Cost
At 1 July 2013  3,718 6,670 10,388
Additions  693 – 693
Intra – group transfers  – (1,150) (1,150)
At 30 June 2014  4,411 5,520 9,931
Amortisation
At 1 July 2013  2,081 5,740 7,821
Charge for the year  658 – 658
Intra – group transfers  – (220) (220)
At 30 June 2014  2,739 5,520 8,259
Net book value
At 30 June 2014  1,672 – 1,672
At 30 June 2013  1,637 930 2,567
The intra group transfer relates to the goodwill arising on the acquisition of the trade and certain assets of Azurri Retail which 
was transferred to K3 Systems Support Limited, a subsidiary, on 1 July 2013. 
Since the year end, all of the development costs and goodwill have been transferred to K3 Retail Solutions Limited, a subsidiary, 
on 1 July 2014. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
90
Notes forming part of the  
Company Financial Statements (continued)
for the year ended 30 June 2014
6 Tangible fixed assets
   Plant, office
  Leasehold  equipment
  improvements and fixtures Total
  £’000 £’000 £’000
Cost
At 1 July 2013  48 301 349
Additions  – 166 166
Disposals  – (47) (47)
At 30 June 2014  48 420 468
Depreciation
At 1 July 2013  48 94 142
Charge for the year  – 145 145
Disposals  – (47) (47)
At 30 June 2014  48 192 240
Net book value
At 30 June 2014  – 22 228
At 30 June 2013  – 207 207
7 Fixed asset investments
  2014 2013
  £’000 £’000
Subsidiary undertakings   38,530 40,830 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
91
Overview Strategic Report Governance Financial Statements Other
7 Fixed asset investments (continued)
Subsidiary undertakings
The parent company has investments in the following subsidiary undertakings. To avoid a statement of excessive length, details 
of investments which are not significant have been omitted.
Subsidiary Country of Registration
+ K3 Syspro Limited UK
+ K3 Business Solutions BV Netherlands
K3 Software Solutions BV  Netherlands
K3 Solutions BV  Netherlands
+ K3 Holdings BV Netherlands
K3 AX Limited UK
+ K3 Retail and Business Solutions Limited Ireland
Integrated Manufacturing Software Limited Ireland
+ K3 Hosting Limited UK
+ K3 Partner Network (International) Limited (formerly K3 Managed Services (International) Limited) Ireland
+ K3 FDS Limited (formerly K3 Panacea Limited) UK
+ K3 Business Solutions Limited UK
+ K3 Business Technology Group Trustees Company Limited UK
Fifth Dimension Systems Limited UK
FDS Technology Systems Limited Ireland
+ Retail Systems Group Limited UK
Intelligent Solutions Consultancy Limited UK
K3 Singapore Pte Ltd Singapore
K3 Business Solutions ehf Iceland
+ Colne Investments Limited UK
+ K3 Systems Support Limited UK
+ K3 BTG Limited UK
K3 CRM Limited UK
+ K3 Retail and Business Solutions Holdco Limited UK
+ K3 Business Systems Holdco Limited UK
+ K3 Managed Services Holdco Limited UK
The principal activity of all the subsidiary undertakings is the supply of computer software and consultancy, with the exception 
of K3 Hosting Limited, K3 Partner Network (International) Limited, K3 FDS Limited and K3 Systems Support Limited which are 
hosting and managed services providers; and K3 Business Technology Group Trustees Company Limited is the trustee for the 
group’s employee share ownership plan.
All subsidiary undertakings are wholly owned and all shares consist of ordinary shares only.
+ Held directly by K3 Business Technology Group plc
Since the year end, the group has undertaken a reorganisation and the majority of the subsidiaries listed above are now held 
indirectly by K3 Business Technology Group Plc.  K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
92
Notes forming part of the  
Company Financial Statements (continued)
for the year ended 30 June 2014
7 Fixed asset investments (continued)
 £’000
Cost
At 1 July 2013 41,528
Adjustments
Revaluation of investment in foreign subsidiaries (31)
Additions 952
Disposals (3,221)
At 30 June 2014 39,228
Amounts written off
At 1 July 2013 and 30 June 2014 698
Net book value
At 30 June 2014 38,530
At 30 June 2013 40,830
The additions of £952,000 relate to the capitalisation of inter-company balances with K3 Solutions BV. The disposals in the year 
relates to the transfer of the company’s investments in K3 AX Limited to K3 Business Solutions Limited and Intelligent Solutions 
Consultancy Limited to K3 FDS Limited, both subsidiaries of the company. 
8 Debtors
 2014 2013
 £’000 £’000
Amounts falling due within one year:
Trade debtors 3,129 4,129
Amounts owed by subsidiary undertakings 13,597 12,971
Other debtors 66 67
Corporation tax 1,251 1,405
Prepayments and accrued income 4,496 1,486
 22,539 20,058
Of the above amounts, £705,000 of amounts due from subsidiary undertakings (2013: £1,095,000) falls due after more than 
one year. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
93
Overview Strategic Report Governance Financial Statements Other
9 Creditors: Amounts falling due within one year
 2014 2013
 £’000 £’000
Bank loans and overdrafts 12,400 16,720
Other loans due to related parties (note 18) 640 640
Trade creditors 1,486 1,485
Amounts owed to subsidiary undertakings 3,530 2,245
Taxation and social security 515 375
Other creditors 381 373
Deferred consideration – 360
Accruals 2,038 1,689
Deferred income 1,368 1,730
 22,358 25,617
The bank loans and overdrafts are secured by a fixed and floating charge over the assets of the group. 
10 Creditors: Amounts falling due after more than one year
 2014 2013
 £’000 £’000
Accruals 230 51
At the year end, other borrowings were repayable as follows:
 2014 2013
 £’000 £’000
Bank overdrafts
On demand or within one year 2,441 4,430
Bank loans
Between one and two years – –
Between two and five years – –
 – –
On demand or within one year 9,959 12,290
 9,959 12,290
Other loans due to related parties
On demand or within one year 640 640 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
94
Notes forming part of the  
Company Financial Statements (continued)
for the year ended 30 June 2014
11 Deferred taxation
 2014 2013
 £’000 £’000
Accelerated capital allowances 43 43
Other timing differences 1 (367)
Losses (397) 146
Deferred tax liability (353) (178)
The movements in deferred tax assets (liabilities) during the period are:
 Accelerated Other
 capital timing
 allowances differences Losses Total
 £’000 £’000 £’000 £’000
At 1 July 2013 43 (367) 146 (178)
Charged to profit and loss – (30) (145) (175)
At 30 June 2014 43 (397) 1 (353)
The company has no unrecognised tax losses in either period. The deferred tax assets have been recognised as they are expected to 
be recoverable against future taxable profits.
12 Called-up share capital
 2014 2013
 £’000 £’000
Allotted, called-up and fully-paid
31,721,482 ordinary shares of 25p each (2013: 31,434,025) 7,930 7,859
See note 22 to the consolidated financial statements for details of the movements in called-up share capital and of 
outstanding warrants. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
95
Overview Strategic Report Governance Financial Statements Other
13 Reserves
 Share  Profit and
 premium Other loss
 account reserve account
 £’000 £’000 £’000
At 1 July 2013 9,183 10,324 10,451
Retained profit for the year – – 2,224
Dividends to equity shareholders – – (316)
Credit to equity for equity-settled share-based payments – – 27
Movement in own shares held – – (23)
Share capital issued 229 – –
At 30 June 2014 9,412 10,324 12,363
Of the above reserves, the directors only consider the profit and loss account to be distributable.
The own shares are held by a wholly-owned subsidiary, K3 Business Technology Group Trustees Company Limited, as trustee of 
the group’s employee share ownership plan. The own shares represent 127,075 shares held under an employee share ownership 
plan which will be issued to the employees when they choose to withdraw them. The current market value of these shares as at 
30 June 2014 was £266,000.
14 Share-based payment
K3 Business Technology Group plc operates an equity-settled share-based remuneration scheme for employees: an Executive Share 
Option Scheme for certain senior management including executive directors. See note 26 to the consolidated financial statements 
for details regarding share-based payments.
15 Reconciliation of movements in shareholders’ funds
 2014 2013
 £’000 £’000
Profit for the financial period 2,224 31
Issue of share capital 300 2,683
Dividends to equity shareholders (316) (286)
Credit to equity for equity-settled share-based payments 27 70
Purchase of own shares (23) (6)
Net addition to shareholders’ funds 2,212 2,492
Opening shareholders’ funds 37,817 35,325
Closing shareholders’ funds 40,029 37,817 K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
96
Notes forming part of the  
Company Financial Statements (continued)
for the year ended 30 June 2014
16 Financial commitments
There were no capital commitments at the end of either financial period.
Annual commitments under non-cancellable operating leases are as follows:
 2014 2013
 Land and  Land and 
 buildings Other buildings Other
 £’000 £’000 £000 £’000
Expiry date
 – within one year – 22 – 28
 – between two and five years 357 84 357 66
  357 106 357 94
Leases of land and buildings are typically subject to rent reviews at specified intervals and provide for the lessee to pay all insurance, 
maintenance and repair costs.
17 Pension arrangements
The company operates a defined contribution scheme and also makes contributions to personal pension schemes of certain senior 
employees and directors for which the total pension cost charge for the year amounted to £396,000 (2013: £182,000).
18 Related party transactions
The company has taken advantage of the exemption conferred by Financial Reporting Standard 8, ‘Related party disclosures’ , not to 
disclose transactions with subsidiary companies of the group headed by K3 Business Technology Group plc on the grounds that all 
subsidiaries are wholly owned.
Related party transactions are disclosed in note 27 to the consolidated financial statements. There were no other transactions with 
related parties during the year.
19 Contingent liability
The company has entered into a cross-guarantee with fellow group undertakings in relation to liabilities with Barclays Bank plc. At 
the year end the liabilities covered by this guarantee totalled £13,604,000.
20 Post balance sheet events
On 1 July 2014, the trade and assets of the Retail division was transferred to K3 Retail Solutions Limited, a subsidiary. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
97
 Year ended 30 June
*1
 2014 2013 2012 2011 2010
 £’000 £’000 £’000 £’000 £’000
Revenue 71,950 63,513 67,961 52,800 43,842
Adjusted profit from operations
•2
 7,301 5,094 11,333 9,581 7,572
Profit from operations 2,590 1,185 7,352 5,813 5,492
Profit before tax 1,885 462 6,043 4,908 4,643
Profit after tax 2,560 1,242 5,724 4,480 3,648
Adjusted basic earnings per share
*3 
(pence) 18.6 14.0 30.2 27.5 20.5
Basic earnings per share (pence) 8.2 4.3 20.3 17.5 14.6
Cash and cash equivalents (2,997) (833) 21 113 (571)
Gross debt
*4
 14,275 14,083 17,778 16,300 11,351
Net debt
*5
 13,628 13,811 15,682 15,486 10,982
Adjusted cash flow from operations
*6
 7,074 8,659 8,767 8,275 6,856
Net cash flow from operations 5,352 8,022 7,284 5,640 6,856
*1
 The financial period ended 30 June 2010 was an 18 month period following the change of the year end from 31 December 
to 30 June. However, the unaudited financial information for the 12 months ended 30 June 2010 has been shown in the five 
year summary as the directors consider it more useful to shareholders and investors.
*2
 Adjusted profit from operations is calculated before amortisation of acquired intangibles, acquisition costs, exceptional 
reorganisation costs and exceptional income.
*3
 Calculated before amortisation of acquired intangibles, acquisition costs, exceptional reorganisation costs, and profit/loss on 
sale of disposal groups, all net of attributable taxation. Prior to 2011, the adjusted earnings per share included an adjustment 
for the cost of share-based payments (net of tax). This is no longer included as the directors consider the amounts to be 
immaterial and therefore not useful to shareholders and investors. The comparatives have been adjusted accordingly. 
*4
 Gross debt includes bank loans and overdrafts, finance lease creditors and loans from related parties.
*5
 Net debt is gross debt net of cash and cash equivalents.
*6
 Adjusted cash flow from operations is calculated before payments which the directors consider to be costs of acquisitions, 
including payments to regularise liabilities, acquisition costs and exceptional reorganisation costs. See note 29 to the 
consolidated financial statements.
Unaudited Five Y ear Summary
Overview Strategic Report Governance Financial Statements Other K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
98
Notice of Annual General Meeting
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to what action you should take, you are recommended to seek your own financial advice from your 
stockbroker or other independent adviser authorised under the Financial Services and Markets Act 2000.
If you have sold or transferred all of your shares in K3 Business Technology Group plc, please forward this document, together 
with the accompanying documents, as soon as possible either to the purchaser or transferee or to the person who arranged the 
sale or transfer so they can pass these documents to the person who now holds the shares.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the Company will be held at the Company’s offices at Baltimore House, 
50 Kansas Avenue, Manchester M50 2GL on 26 November 2014 at 10.30am at which the following business will be transacted.
You will be asked to consider and vote on the resolutions below. Resolutions 1 to 6 will be proposed as ordinary resolutions and 
resolutions 7 and 8 will be proposed as special resolutions.
Ordinary Business
To consider and, if thought fit, pass the following resolutions which will be proposed as ordinary resolutions:
1. To receive the directors’ and auditors’ reports and the financial statements for the year ended 30 June 2014.
2. To re-elect Mr PJ Claesson as a director in accordance with Article 96 of the Articles of Association.
3. To appoint Mr PG Morland as a director of the company, who was appointed by the Board since the last annual  
general meeting.
4. To re-appoint BDO LLP as auditors of the Company to hold office from the conclusion of this meeting until the conclusion of 
the next annual general meeting at which financial statements are laid before the Company and to authorise the directors to 
fix their remuneration.
5. To declare a final dividend for the year ended 30 June 2014 of 1.25p per ordinary share of 25 pence each in the issued share 
capital of the Company.
6. That the directors of the Company be and they are generally and unconditionally authorised in accordance with section 
551 of the Companies Act 2006 (“the Act”), to exercise all powers of the Company to allot shares in the Company or grant 
rights to subscribe for or to convert any security into shares in the Company (“Rights”) up to an aggregate nominal amount 
of £2,648,917 (being approximately one-third of the issued share capital of the Company at the date of this resolution) 
provided that this authority shall unless previously revoked or varied by the Company in general meeting expire five years 
from the date of this resolution, save that the Company may before such expiry make an offer or agreement which would 
or might require shares to be allotted or Rights to be granted after such expiry and the directors of the Company may allot 
shares or grant Rights in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. This 
authority is in substitution for all previous authorities conferred upon the directors pursuant to section 551 of the Act, but 
without prejudice to the allotment of any shares already made or to be made pursuant to such authorities. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
99
Overview Strategic Report Governance Financial Statements Other
To consider and, if thought fit, pass the following resolutions, which will be proposed as special resolutions:
Disapplication of pre-emption rights
7. That subject to and conditional on the passing of resolution 6 above, the directors of the Company be and they are 
empowered pursuant to section 570(1) of the Companies Act 2006 (“the Act”) to allot equity securities (as defined in section 
560(1) of the Act) for cash pursuant to the authority conferred by resolution 6 above as if section 561(1) of the Act did not 
apply to such allotment, provided that this power shall be limited to the allotment of equity securities:
7.1 in connection with an offer of such securities by way of rights to holders of ordinary shares in proportion (as nearly as may 
be practicable) to their respective holdings of such shares, but subject to such exclusions or other arrangements as the 
directors of the Company may deem necessary or expedient in relation to fractional entitlements or any legal or practical 
problems under the laws of any territory, or the requirements of any regulatory body or stock exchange; and
7.2 otherwise than pursuant to sub-paragraph 7.1 above, up to an aggregate nominal amount of £794,675 (being approximately 
one-tenth of the issued share capital of the Company at the date of this resolution); 
and, unless previously renewed, revoked or varied by the Company in general meeting, shall expire five years from the 
date of this resolution, or if earlier the date of the next annual general meeting of the Company, save that the Company 
may before such expiry make an offer or agreement which would or might require equity securities to be allotted or equity 
securities held as treasury shares to be sold after such expiry and the directors of the Company may allot equity securities 
and/or sell equity securities held as treasury shares in pursuance of any such offer or agreement notwithstanding that the 
power conferred by this resolution has expired. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
100
Notice of Annual General Meeting (continued)
Special Business
Authority to Repurchase Ordinary Shares
8. That the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the 
Companies Act 2006 (“the Act”) to make one or more market purchases (within the meaning of section 693(4) of the Act) of 
ordinary shares of 25 pence each in the capital of the Company (“Shares”), provided that:
(a) the maximum aggregate number of Shares authorised to be purchased is 4,764,871 (representing approximately 
14.99% of the issued share capital of the Company at the date of the notice convening the meeting at which this 
resolution is proposed);
(b) the minimum price (exclusive of expenses) which may be paid for a Share is 25 pence;
(c) the maximum price (exclusive of expenses) which may be paid for a Share is an amount equal to the greater of (i) 105% 
of the average of the middle market quotations for a Share for the five business days immediately preceding the day on 
which that Share is purchased and (ii) the higher of the price of the last independent trade and the highest then current 
independent bid for any number of the Shares on the Alternative Investment Market of the London Stock Exchange;
(d) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company to be 
held in 2015 or, if earlier, on the expiry of 15 months from the date of passing of this resolution unless such authority is 
renewed prior to such time; and
(e) the Company may make one or more contracts to purchase Shares under this authority before the expiry of such 
authority which will or may be executed wholly or partly after the expiration of such authority, and may make a 
purchase of Shares in pursuance of any such contract.
Registered Office      Dated 20 October 2014
K3 Business Technology Group plc    By order of the Board
Baltimore House
50 Kansas Avenue      BS Davis
Manchester M50 2GL     Company Secretary K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
101
Overview Strategic Report Governance Financial Statements Other
Notes to the Notice of Annual General Meeting
Please refer to notes 7 to 20 relating to entitlement to attend and vote at the meeting and the appointment of proxies.
1. Mr PJ Claesson was appointed as a non-executive director of the Company in March 2001. Biographical details of  
Mr PJ Claesson are set out on page 28 to these financial statements.
2. Mr PG Morland was appointed by the Board as a non-executive director on 29 May 2014. Biographical details of  
Mr PG Morland are set out on page 28 to these financial statements.
3. The payment of a dividend requires approval of the shareholders and that approval is sought in Resolution 5.
4. Resolution 6 would empower the directors to allot shares for any reason up to an aggregate nominal amount of  
£2,648,917 representing approximately one-third of the issued share capital of the Company at the date of the notice of 
Annual General Meeting. 
5. Resolution 7 would empower the directors to allot equity securities for cash other than to existing shareholders pro rata 
to their existing holdings. Such power would be limited to the situations referred to in sub-paragraphs 7.1 and 7.2 of that 
resolution. Sub-paragraph 7.1 refers to rights issues and similar issues, where difficulties arise in offering relevant securities 
to certain overseas shareholders or where fractional entitlements arise. Sub-paragraph 7.2 permits allotments for cash (other 
than rights issues or similar) of ordinary shares up to an aggregate nominal amount of £794,675 representing approximately 
one-tenth of the current issued ordinary share capital of the Company. The resolution is proposed so as to give the directors 
greater flexibility to take advantage of business opportunities as they arise. The directors have no present intention of 
exercising the authority.
6. Resolution 8 seeks authority for the Company to make market purchases of its own ordinary shares and is proposed as a 
special resolution. If passed, the resolution gives authority for the Company to purchase up to 4,764,871 of its ordinary 
shares, representing approximately 14.99 per cent of the Company’s issued ordinary share capital (excluding treasury shares) 
as at 20 October 2014. The resolution specifies the minimum and maximum prices which may be paid for any ordinary 
shares purchased under this authority. The authority will expire on the earlier of the Company’s 2015 annual general 
meeting and the date 15 months after the resolution.
The directors will only exercise the authority to purchase ordinary shares where they consider that such purchases will be in 
the best interests of shareholders generally and will result in an increase in earnings per ordinary share.
The Company may either cancel any shares it purchases under this authority or transfer them into treasury (and 
subsequently sell or transfer them out of treasury or cancel them).
7. On a show of hands every shareholder present in person has one vote, on a poll every shareholder has one vote for each 
share held by him. The necessary quorum at this meeting is two members present in person or by proxy and entitled to vote 
upon the business to be transacted. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
102
Notice of Annual General Meeting (continued)
Notes to the Notice of Annual General Meeting (continued)
8. The Company specifies that only those members registered on the Company’s register of members at:
 • 6.00pm on 24 November 2014; or,
 • if this Meeting is adjourned, at 6.00pm on the day two days prior to the adjourned meeting,
shall be entitled to attend and vote at the Meeting.
Issued shares and total voting rights
9. As at 5.00pm on 20 October 2014, the Company’s issued share capital comprised 31,786,997 ordinary shares of 25 pence 
each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number 
of voting rights in the Company as at 5.00pm on 20 October 2014 is 31,786,997.
Documents on display
10. The following documents will be available for inspection at Baltimore House, 50 Kansas Avenue, Manchester M50 2GL from 
the date of the notice of the Annual General Meeting until the time of the Meeting and for at least 15 minutes prior to the 
Meeting and during the Meeting:
 • Copies of the service contracts of executive directors of the Company.
 • Copies of the letters of appointment of the non-executive directors of the Company.
Appointment of proxies
11. If you are a member of the Company at the time set out in note 8 above, you are entitled to appoint a proxy to exercise all 
or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of 
meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
12. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to 
appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the 
proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy 
(not the Chairman) and give your instructions directly to them.
13. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. 
You may not appoint more than one proxy to exercise rights attached to any one share. Further copies of this form may be 
obtained by photocopying this form. Please indicate in the box next to the proxy’s name the number of shares in relation to 
which he/she is authorised to act as your proxy. Please also indicate by ticking the box provided if the proxy instruction is 
one of multiple instructions being given. All forms must be signed and should be returned in the same envelope. 
14. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against 
the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy 
will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
103
Overview Strategic Report Governance Financial Statements Other
Appointment of proxy using hard copy proxy form
15. The notes to the proxy form explain how to direct your proxy to vote on each resolution or withhold their vote.
 To appoint a proxy using the proxy form, the form must be:
 • completed and signed;
 • sent to Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU or delivered to Capita Asset Services at 
 The Registry, 34 Beckenham Road, Beckenham Road, Kent BR3 4TU; and
 • received by Capita Asset Services no later than 10.30am on 24 November 2014.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf 
by an officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or 
authority) must be included with the proxy form.
Proxy voting using the Registrar’s share portal
16. You may also submit your proxy vote electronically using the Share Portal service at www.capitashareportal.com. If not 
already registered for the Share Portal, you will need your Investor Code as shown on a recent dividend tax voucher or 
recent share certificate. For an electronic proxy vote to be valid, your appointment must be received by no later than  
10.30am on 24 November 2014.
CREST proxy voting (uncertificated shareholders)
17. (a) CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may 
do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored 
members and those CREST members who have appointed a voting service provider(s), should refer to their CREST 
sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf.
(b) In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST 
message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland 
Limited’ (formerly CRESTCo’s) specifications and must contain the information required for such instructions, as 
described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or an 
amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so 
as to be received by the issuers’ agent (ID RA10) by the latest time for receipt of proxy appointments specified in this 
notice. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to 
the message by the CREST Applications Host) from which the registrars are able to retrieve the message by enquiry 
to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through 
CREST should be communicated to the appointee through other means. CREST members and, where applicable, their 
CREST sponsors or voting service provider(s) should note that Euroclear UK & Ireland Limited does not make available 
special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in 
relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if 
the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), 
to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that 
a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members 
and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections 
of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as 
invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities 
Regulations 2001. K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
104
Notes to the Notice of Annual General Meeting (continued)
Appointment of proxy by joint members
18. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment 
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint 
holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior).
Changing proxy instructions
19. To change your proxy instructions simply submit a new proxy appointment using the method set out above. Note that the 
cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended 
proxy appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another 
hard-copy proxy form, please contact Capita Asset Services on 0871 664 0300. Calls cost 10 pence per minute plus network 
extras. Lines are open 8.30am to 5.30pm Monday to Friday.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of 
proxies will take precedence. If the Company is unable to determine which of more than one valid proxy appointment was 
deposited or delivered last in time, none of them shall be treated as valid in respect of the share(s) to which they relate.
Termination of proxy appointments
20. In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly 
stating your intention to revoke your proxy appointment to Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, 
Kent BR3 4TU. In the case of a member which is a company, the revocation notice must be executed under its common seal 
or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other 
authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included 
with the revocation notice.
The revocation notice must be received by Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU no 
later than 10.30am on 24 November 2014.
Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a 
proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.
Notice of Annual General Meeting (continued) K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
105
Overview Strategic Report Governance Financial Statements Other
Dividend mandates
If you wish to have dividends paid directly into a bank or building society account, you should contact our registrar, Capita Asset 
Services, on 0871 664 0300 (calls cost 10p per minute plus network extras. Lines are open 8.30am – 5.30pm Monday – Friday) or 
visit the shareholder portal at www.capitashareportal.com where you can set up or amend a dividend mandate. This method of 
payment removes the risk of delay or loss of dividend cheques in the post and ensures your account is credited on the due date.
Enquiring about your shareholding
If you want to ask, or need information, about your shareholding, please contact our registrar, Capita Asset Services, on  
0871 664 0300 (calls cost 10p per minute plus network extras. Lines are open 8.30am – 5.30pm Monday – Friday). Alternatively, 
if you have internet access, you can access the shareholder portal at www.capitashareportal.com where you can, amongst other 
things, view details of your shareholding, set up or amend a dividend mandate and update your address details.
Electronic communications
You can elect to receive shareholder communications electronically by writing to our registrar, Capita Asset Services, 
Freepost RLYX-GZTU-KRRG, SAS, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 9ZA. This will save on printing and 
distribution costs, creating environmental benefits. When you register, you will be sent a notification to say when shareholder 
communications are available on our website and you will be provided with a link to that information.
Information for Shareholders K3 Business Technology Group plc Annual Report and Financial Statements for the year ended 30 June 2014
106
Officers and Advisors
Directors: DJ Bolton TA Milne (Chairman)
 PJ Claesson (non-executive) PG Morland (non-executive)
 PJ Cookson (non-executive)
Company secretary: BS Davis
Registered office: Baltimore House, 50 Kansas Avenue, Manchester M50 2GL
Country of incorporation
of parent company: England and Wales
Company number: 2641001
Legal form: Public limited liability company
Auditors: BDO LLP , 3 Hardman Street, Spinningfields, Manchester M3 3AT
Solicitors: Squire Patton Boggs LLP , Trinity Court, 16 John Dalton Street, Manchester M60 8HS
Nominated Advisor: finnCap Limited, Cardinal Place, 60 New Broad Street, London EC2M 1JJ
Bankers: Barclays Bank plc, 1
st
 Floor, 3 Hardman Street, Spinningfields, Manchester M3 3HF
Registrars: Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Financial PR: KTZ Communications, No.1 Cornhill, London EC3V 3ND
Designed and produced by Mears Ash Limited
Telephone 020 7736 6408 www.mearsash.com  K3 Business Technology Group plc
Baltimore House, 50 Kansas Avenue, Manchester M50 2GL
www.k3btg.com