Sale of subsidiary

AIM: KBT

K3 BUSINESS TECHNOLOGY GROUP PLC

("K3" or "the Company" or "the Group")

Sale of Starcom Technologies Limited for £14.7m cash

K3, which provides mission‐critical business software, cloud solutions and managed services, is pleased to announce the sale of its managed services unit, Starcom Technologies Limited ("Starcom"), to Node4 Ltd, the UK-based infrastructure and services company backed by private equity investment firm, Bowmark Capital. The total consideration for the disposal was £14.7 million, including £0.5m cash on the balance sheet, paid entirely in cash on completion.

The transaction generates a significant profit on disposal, in excess of £10 million, which will be accounted for as an exceptional contribution to results in the current financial year to 30 November 2021.

In the unaudited results of the financial year to 30 November 2020, Starcom generated £10.2 million in revenues and pre-tax profits of £1.2 million. Its Group net assets at that date stood at £2.5 million.

The management team and staff of Starcom have transferred with the sale of the business together with its 280 customers.  Under the terms of a transitional services agreement Starcom will continue to provide K3 and its customers with managed services for at least three years.

The disposal proceeds significantly strengthen K3's balance sheet eliminating net debt. At 30 November 2020, net debt (including shareholder loans of £3.0m (2019: £nil)) stood at £2.3m (2019: £2.4m), reflecting a seasonal low point  following strong cash receipts from annual renewals between September and the financial year end, and, in 2020, also benefitting from HMRC deferrals of £2.0, which will unwind in 2021.

Results for the year end 30 November 2020 will be released on the 30 March 2021.

Adalsteinn Valdimarsson, CEO of K3 Business Technology Group plc, commented:

"Node4 is an excellent new home for Starcom with its focus exclusively on managed services, and the deal enables us to accelerate our strategy of growing own IP product revenue. We wish Starcom great success for the future."

Andrew Gilbert, CEO of Node4 Ltd, commented:

"We are excited to be working with the Starcom team and their customers, with our shared mission of helping businesses with cloud-led managed services.  We would like to thank K3 for working with us during the acquisition and are looking forward to continuing the relationship by providing industry leading managed services"

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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