It is testament to CEO Andy Makeham’s keen eye for a good deal– and knowing what to do with it – that mid-market buy-and-build ERP firm, K3 Business Technology Group boosted operating margins (from 18.4% to 18.9%) despite its hectic acquisition record. That said, it was only acquisitions that kept K3 growing in H1 (to 31st Dec.), with revenues up 5% to £23.5m as reported, but just under flat like-for-like. The results report was scattered through with comments such as “background of new deal slippage”, “more challenging trading conditions”, “new software sales have proved difficult”, and “large deals remain in negotiation”, which rather sums up what just about everybody is seeing too!
K3 is becoming somewhat of a Hydra, as the ‘business of six halves’ (see K3 and its business of six halves) grew a couple more operating units and has just added yet another with the acquisition of Nottingham-based mid-market ERP software firm, Sense Enterprise Solutions. Sense seems to fit K3’s typical acquisition profile, being a Microsoft Dynamics shop with vertical tweaks – in its case, manufacturing and distribution.
But the real focus of Makeham’s strategy is to move as much of his client base as possible into managed services. K3 generated £1.7m from managed services in the first half, but last November’s Panacea acquisition (see K3 seeks Panacea for hosting relief) and last month’s global hosting arrangement with Syspro (see K3 takes Syspro ‘SaaS’ global) look set to see growth (and hopefully margins, which slipped to 9%) improve.