Supply chain and retail IT services specialist K3 has secured new funding after delaying the posting of its annual financial results last month. The listed firm is also offloading its loss-making Microsoft Dynamics services unit by putting it into administration. In an announcement to the London Stock Exchange today (1 April), K3 said it had secured additional cash funding of £6m by way of loans from two major shareholders and Barclays Bank Plc.
“The cash funding will strengthen the group's liquidity position during this period of unprecedented disruption caused by the coronavirus pandemic,” said the already debt-laden group.
Barclays is extending its existing loan facilities to K3 by £3m to a maximum of £13m in total. The terms of the loan facilities, including their duration, are similar to existing facilities which expire on 31 March 2021.
Investors Kestrel (which has now appointed Oliver Scott to the board as a non-executive director) and existing non-executive Johan Claesson are providing an unsecured term loan of £3m until 30 June 2021, split equally.
It is intended that other major institutional shareholders of K3 will be offered the opportunity to participate in further lending of up to £2m, said the firm.
The group's UK Dynamics subsidiary, K3 Business Technologies Limited, which is a reseller of Microsoft Dynamics CRM solutions, generated an operating loss of over £3m on turnover of £21m for the 12 months to 30 November 2019.
“Given the current uncertainties created by the coronavirus crisis, this UK subsidiary is expected to generate further significant negative EBITDA and cash outflows in the year to 30 November 2020,” the company said.
That company will now be put into administration, with the aim of either selling it as an ongoing concern or selling what assets it has – which will be a long-shot in the current economic climate.
The group will continue to sell Microsoft Dynamics services through its practices outside the UK.
It says it will focus on growing the group's core profitable business units and accelerating the transition towards its own IP, in particular its flagship Imagine product - as it has repeatedly said in the past.
Adalsteinn Valdimarsson, CEO of K3 Technology Group plc, said: "The securing of this additional finance demonstrates commitment to K3 and belief in our growth strategy and prospects. The additional liquidity puts us in a much stronger financial position and gives us the headroom to undertake any required restructuring, as well as further investment to support our growth strategy."
