K3 Business Technology Group is raising £2.7m through a placing of new shares to existing and new institutional investors. The money is earmarked to reduce its borrowings and contribute to working capital.
The company has had a tough year with a decline in its UK retail business, while simultaneously pumping significant investment into the development of a retail platform based around the Microsoft AX ERP suite - £2.15m so far (see K3 falls on retail and investment double punch). This is a major strategic move for the company because it will add a further line of business, within which it will act as an ISV rather than just a reseller. But with further investment planned, the first commercial release due in H2 and the full product a year away, the new platform is a long way from delivering revenue.
The placing shows that investors are backing K3 and its multiple business lines and there are positive indicators e.g. K3’s proven retail experience and Microsoft now positioning AX as the lead Dynamics ERP platform (although that wasn’t always the case) and wanting to go to market with a retail partner. On the technology front the core modules of the new offering will be multi tenant so it is hooking into the SaaS and cloud growth areas. Retail will remain a tough market for some time yet we expect, but vendors can do well with the right target market and product set such multi channel support including online sales, and a cloud offering as Cybertill, one of our Little British Battlers demonstrates (see Cybertill breaks through retail doldrums).