K3 BUSINESS TECHNOLOGY GROUP PLC

K3 BUSINESS TECHNOLOGY GROUP PLC Unaudited Interim Statement For the six months to 31 December 2010

Chairman s Statement 01 Consolidated Income Statement 07 Consolidated Statement of Comprehensive Income 07 Consolidated Statement of Financial Position 08 Consolidated Statement of Cash Flows 09 Consolidated Statement of Changes in Equity 10 Notes to the Unaudited Interim Statement 11 This document is printed on paper with 55% recycled content and in a supply chain which meets the strict environmental criteria of Responsible Print. In addition, a payment has been made to offset 0.663 tonnes of CO 2 emissions associated with the entire life cycle of this printed item including paper, print processes, consumables, delivery and end life disposal. To find out the environmental saving of this document, visit www.mearsash.com and enter the unique number: ORP14035.

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Chairman s Statement 1 OVERVIEW Results for the six months to 31 December 2010 are very encouraging and continue to illustrate the robustness of K3 s earnings, which are underpinned by high levels of annual recurring income. I am pleased to report that the Group s profitability continues to improve, with adjusted profit from operations *1 for the six months up by 14% year on year to 6.24m and adjusted earnings per share *2 up by 13% to 16.9p year on year. This was achieved against a challenging market backdrop, with revenues up by 5%, helped by acquisitions in 2010, to 24.67m against the equivalent period in 2009. The strong improvement in the Group s profitability reflects the higher level of services in the sales mix as well as the increasing element of our own Intellectual Property ( IP ) in sales, which enhances margins. K3 continues to generate good cash flows and the Group s banking facilities offer ongoing support for both our acquisition strategy as well as our working capital needs. In K3 s last Annual Report, we stated that we had made strategically important progress in expanding the Group s growth opportunities. In particular, we highlighted the developments in our Hosting and Managed Services activities, encompassing Cloud Computing solutions and Software as a Service ( SaaS ). I am pleased to report that revenues from this Division, while still relatively small, have increased more than fourfold in the period, helped by our acquisition of DigiMIS in March 2010 and Panacea Limited in November 2010. Panacea provides managed services and IT solutions to both Microsoft and Sage users and its addition has brought additional expertise as well as critical mass to our Managed Services activities. After the period end, we agreed a global deal with SYSPRO for the exclusive provision of hosting SaaS services to SYSPRO customers, which has significant potential. As we look ahead, we see excellent opportunities to offer our expanded Hosting and Managed Services offerings to both our existing client base of 1,800 customers and to new customers. The development of our Hosting and Managed Services has huge potential to drive K3 s long-term contracted revenues and cash generation and will remain a major focus for us over the next few years. We are also pleased to announce today the acquisition of Sense Limited, a provider of Dynamics AX solutions to the manufacturing and distribution markets. The business fits our acquisition strategy; it is highly synergistic and easy to integrate, adding critical mass to our existing Dynamics AX business unit and strengthening our market positioning. It also brings a recurring income stream and a further 40 customers to whom we can offer additional services, including hosting. As we continue to build the business, our strategy remains focused on both organic growth and growth via complementary acquisitions. As we have previously noted, growth opportunities for K3 have opened up significantly through certain key steps we have taken. One of the most valuable assets we hold is our extensive customer base which generated 20m of annual licence revenue (44% of total revenue) and 19m of additional revenue in the twelve months to the end of December 2010. The ongoing expansion of our hosting and managed services across our client base will help to build our recurring revenues further and the acquisition of new customer bases will accelerate this process. K3 is financially and operationally well-placed. Our strong product offering and cash flows will help to support our growth and we view prospects for the remainder of the year positively. *1 Calculated before amortisation of acquired intangibles of 1.43m (2009: 1.15m) and acquisition costs of 0.15m (2009: nil). *2 Calculated before amortisation of acquired intangibles (net of tax) of 0.93m (2009: 0.83m) and acquisition costs (net of tax) of 0.15m (2009: nil).

2 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Chairman s Statement continued FINANCIAL RESULTS For the six months to 31 December 2010, the Group generated revenues of 24.67m, representing an increase of 5% over the prior period (2009: 23.52m). The two acquisitions (Panacea Ltd in November 2010 and certain assets of FD Systems Ltd in December 2010) made a contribution totalling 1.22m of which 0.66m was from Managed Services. The Retail Software Division contributed revenues of 12.60m (2009: 13.26m) to the Group s results, with the Manufacturing Software Division contributing 9.35m (2009: 9.91m) and the Managed Services Division 1.68m (2009: 0.36m) to the overall outcome. An initial contribution of 0.47m was made by our IP Division and there were Sage-related sales of 0.57m from the acquisitions of Panacea Ltd and the FD Systems Sage 200 business. Adjusted profit from operations *1 for the six month period rose by 14% to 6.24m on the comparable period last year (2009: 5.49m) and profit from operations increased by 7% to 4.66m (2009: 4.34m). Acquisition costs for the period amounted to 0.15m (2009: nil) due to the change in accounting standard which requires that such costs be expensed in the period incurred. Profit before tax for the six months rose by 8% year on year to 4.23m (2009: 3.91m) and adjusted earnings per share *2 increased by 13% to 16.9p (2009: 15.0p). Basic earnings per share rose by 9% to 12.7p (2009: 11.6p). This is stated after amortisation of acquired intangibles (net of tax) of 0.93m (2009: 0.83m) and acquisition costs of 0.15m (2009: nil). The tax charge for the period was 0.98m (2009: 1.05m) and includes the benefit of a 0.42m credit, primarily relating to deferred tax on acquired intangibles (2009: 0.23m). Cash Flow and Banking In September 2010, we negotiated increased banking facilities, including 7.50m of additional facilities for acquisitions. Part of this facility has been utilised in the period by drawing down 5.03m to make two acquisitions. Accordingly the net debt of the Group increased to 11.48m (2009: 5.38m, 30 June 2010: 10.98m). Operating cash flow in the first half was 4.91m, representing 79% of adjusted profit from operations *1. This compares to an exceptionally strong result in the same period in 2009 of 8.44m (arising from customer cash deposits from major new software deals), representing 154% of adjusted profit from operations *1. Finance costs at 0.42m were in line with the prior year due to the refinancing agreed and the timing of drawdown of acquisition facilities. Dividend In line with the Group s dividend policy, no interim dividend is proposed. The Directors intend to propose a final dividend with results for the full financial year. *1 Calculated before amortisation of acquired intangibles of 1.43m (2009: 1.15m) and acquisition costs of 0.15m (2009: nil). *2 Calculated before amortisation of acquired intangibles (net of tax) of 0.93m (2009: 0.83m) and acquisition costs (net of tax) of 0.15m (2009: nil)

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 3 OPERATIONAL REVIEW Retail Software Division For the six months to 31 December 2010, revenues at the Retail Software Division (which comprises our UK and Holland-based businesses supplying Microsoft Dynamics software) were 12.60m (2009: 13.26m). Adjusted profit from operations *3 were 30% higher than the prior period at 2.58m (2009: 1.99m). The UK business (which includes Ireland) contributed revenues of 9.32m (2009: 11.33m) and against a background of new deal slippage, we signed eight major new contracts worth a total of 3.4m (2009: eight contracts, 5.3m, including one deal at 2.5m). In line with our strategy, we have been increasing our focus on account management and services to drive additional sales from the existing customer base. We are increasingly selling more of our own IP, which has enhanced margins, and this helped lift adjusted profit from operations *4 by 9% to 1.83m (2009: 1.68m). The pipeline of new opportunities for the business remains strong with several deals at an advanced stage of negotiation. Our Netherlands-based business, K3 Business Solutions BV, has seen a significant increase in activity. As expected, this is in part due to the strengthening of our relationship with one of our major customers. It also reflects the benefits of the acquisition of the Pebblestone business in March 2010. K3 Business Solutions BV saw revenues increase by 71% year on year to 3.29m (2009: 1.92m) and adjusted profit from operations *5 more than doubled to 0.75m (2009: 0.31m). Over the first half, the business signed six major new contracts, worth a total of 0.64m (2009: four contracts, 0.50m). We also completed the integration of the Pebblestone business and I am pleased to report that its performance to date has exceeded our initial expectations. In addition, K3 Business Solutions BV enjoys strong relationships with a number of major global retailers and we are seeing a significant growth in demand that we expect to continue through 2011 and beyond. *3 Calculated before amortisation of acquired intangibles of 0.53m (2009: 0.43m). *4 Calculated before amortisation of acquired intangibles of nil (2009: nil). *5 Calculated before amortisation of acquired intangibles of 0.53m (2009: 0.43m).

4 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Chairman s Statement continued The Division has one of the largest mid-tier manufacturing software bases in the UK Manufacturing Software Division For the six months to 31 December 2010, the Manufacturing Software Division (which comprises three business units) delivered revenues of 9.35m (2009: 9.91m) and an adjusted profit from operations *6 of 3.29m (2009: 3.64m). Reflecting more challenging trading conditions, 13 significant new contracts worth a total of 0.93m were signed in the period (2009: nine contracts, 2.3m). The Division has one of the largest mid-tier manufacturing software customer bases in the UK, with approximately 900 customers and recurring income from annual licence and support renewals amounts to approximately 8.40m. Approximately 70% of this income falls in the first half and it continues to represent very stable and highly predictable earnings, reflecting the business critical nature of the systems we implement and support. K3 Supply Chain Solutions ( SCS ), which supplies SYSPRO ERP solutions, performed robustly in a period where new software sales have proved difficult to close on a timely basis. Revenue was in line with the same period last year at 6.92m (2009: 6.95m) and the adjusted profit from operations *7 rose by 2% to 3.04m (2009: 2.95m). SCS closed 11 significant new contracts, worth a total of 0.46m (2009: seven contracts, 0.83m). SCS s results demonstrate the underlying strength of this business unit as the impact of the delay in closing new software wins was more than offset by sales to the existing customer base. Encouragingly, we are starting to see lead intake improving. K3 AX, our Microsoft Dynamics AX ERP business (specialising in process manufacturing), generated revenues of 1.27m (2009: 1.43m) and an adjusted loss from operations *8 of 0.22m (2009: profit of 0.19m). It closed two small deals in the first half, worth 0.47m in total (2009: two contracts, 1.5m). Larger deals remain in negotiation and we are optimistic of signing significant contracts in the second half. Over the period, we have invested in pre-sales and delivery resource. While this reduced profitability, we should feel the benefit in the second half and beyond. The acquisition of Sense Enterprise Solutions Ltd ( Sense ), announced today, is highly complementary. Sense adds critical mass, new skills and additional IP to our AX business unit along with 40 new customers and should be easily integrated. We also see good cross-selling opportunities. Our Chertsey based small-business unit contributed revenues of 1.15m (2009: 1.53m) and an adjusted profit from operations *9 of 0.48m (2009: 0.50m). The unit continues to generate high levels of profitability and its customers, who typically run legacy systems, can be offered upgrade opportunities to our SYSPRO or AX solutions. *6 Calculated before amortisation of acquired intangibles of 0.72m (2009: 0.72m). *7 Calculated before amortisation of acquired intangibles of 0.60m (2009: 0.60m). *8 Calculated before amortisation of acquired intangibles of 0.12m (2009: 0.12m). *9 Calculated before amortisation of acquired intangibles of nil (2009: nil).

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 5 Hosting and Managed Services Division Revenue rose by more than fourfold year on year to 1.68m (2009: 0.36m), reflecting the benefit of the acquisition of DigiMIS in March 2010 and Panacea in November 2010. However, as we are investing heavily in the business, profitability lagged revenue growth and adjusted profit from operations *10 was 0.15m (2009: 0.10m). We see a substantial opportunity to develop our Managed Services offering and the acquisition of Panacea has added critical mass and extended our offering. With the addition of Panacea, annualised Managed Services revenues stand at 3.28m. After the period end, in February 2011, we announced a potentially very significant development with SYSPRO, to provide hosted Software as a Service on an exclusive basis worldwide. As SYSPRO is a leading developer of ERP solutions for the manufacturing sector globally, with some 14,000 customers, this represents a very material opportunity for us and we will be working closely with the SYSPRO partner network, which spans 60 countries, to market our SaaS provision. Sage Division During the period, we made a strategic decision to enlarge the addressable marketplace for our Hosting and Managed Services offering by entering the Sage ERP marketplace. The acquisition of Panacea, in November 2010, was a key step in this development and we now have the expertise to support and host Sage applications. Panacea, together with the FD Systems Limited Sage 200 business we acquired at the end of December 2010, has brought us a combined Sage customer base of some 400 companies, delivering annualised sales of 4.7m. Approximately 2.4m of sales are recurring, derived from a mix of software licence and support renewals and, in future, hosting income. Mirroring the model we are deploying for our Microsoft and SYSPRO customers, we will be cross-selling Cloud Computing solutions to our new customer base. As the adoption of Cloud Computing and Hosting increases, over time, we are confident that our growing Hosting and Managed Services Division will help to drive recurring income and deliver very high quality of earnings. *10 Calculated before amortisation of acquired intangibles of 0.11m (2009: nil).

6 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Chairman s Statement continued Intellectual Property Division The Intellectual Property Division, established in June 2010, manages the portfolio of fashion/ wholesale products acquired from Pebblestone as well as the Pebblestone reseller channel. In the period, the Division contributed sales of 0.47m and an adjusted profit from operations *11 of 0.36m. Central Costs Central costs for the six months to 31 December 2010 were 0.14m, significantly down on the 0.24m reported in the same period last year which included the one-off costs of relocation and reorganisation of head office functions and the recognition of additional VAT costs. Underlying costs remain unchanged but subject to the operational performance of the Group. Now, as we develop our Hosting and Managed Services offering, we are seeing a new recurring revenue stream emerge across the client base OUTLOOK The strength and resilience of our model was clearly demonstrated in the first half results, with a steady sales performance and a pleasing growth in profits. Underlying this performance is our extensive customer base of some 1,800 companies, which generates high levels of recurring income for the Group, principally through annual software licence and support renewals but also through the sale of additional product and services. Now, as we develop our Hosting and Managed Services offering, we are seeing a new recurring revenue stream emerge across the client base. Over time, we believe there is very significant potential to develop this new recurring income stream, driven by the wider trend towards Cloud Computing solutions and we will be continuing to focus intensively on maximising the opportunities for K3 in this area. We believe that our recent global Hosting/SaaS agreement with SYSPRO worldwide is a major opportunity as is our entry into the Sage marketplace. As we grow, we remain active in seeking further complementary and earnings enhancing acquisitions which fit our existing model and which will further strengthen the Group. With the growth opportunities available and the strong financial platform in place, we remain excited about the future prospects for the Group. Tom Milne, Chairman *11 Calculated before amortisation of acquired intangibles of 0.03m (2009: nil).

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Consolidated Income Statement & Consolidated Statement of Comprehensive Income for the six months ended 31 December 2010 7 Consolidated Income Statement for the six months ended 31 December 2010 Unaudited Unaudited Audited Six months to Six months to 18 months to 31 December 2010 31 December 2009 30 June 2010 Notes 000 000 000 Revenue 24,671 23,522 59,783 Profit from operations before amortisation of acquired intangibles and acquisition costs 6,237 5,488 9,052 Amortisation of acquired intangibles (1,434) (1,151) (2,892) Acquisition costs (146) Profit from operations 4,657 4,337 6,160 Finance income 2 18 28 Finance expense (426) (443) (1,393) Share of loss of associate (4) (28) Profit before taxation 4,233 3,908 4,767 Tax expense 2 (981) (1,049) (1,018) Profit for the period 3,252 2,859 3,749 All of the profit for the period is attributable to equity holders of the parent. Earnings per share 3 Basic 12.7p 11.6p 15.2p Diluted 12.5p 11.6p 15.2p Consolidated Statement of Comprehensive Income for the six months ended 31 December 2010 Unaudited Unaudited Audited Six months to Six months to 18 months to 31 December 2010 31 December 2009 30 June 2010 Notes 000 000 000 Profit for the period 3,252 2,859 3,749 Other comprehensive income (expense) Exchange differences on translation of foreign operations 635 772 (2,327) Net investment hedge (258) (309) 797 Cash flow hedges: Losses recognised on hedging instruments (16) (67) (170) Transferred to income statement 67 98 259 Other comprehensive income (expense), net of tax 428 494 (1,441) Total comprehensive income for the period 3,680 3,353 2,308 All of the total comprehensive income for the period is attributable to equity holders of the parent.

8 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Consolidated Statement of Financial Position as at 31 December 2010 Unaudited Unaudited Audited As at As at As at 31 December 2010 31 December 2009 30 June 2010 Notes 000 000 000 ASSETS Non-current assets Property, plant and equipment 1,942 1,212 1,393 Goodwill 36,272 32,496 33,467 Other intangible assets 16,739 10,097 13,176 Deferred tax assets 487 252 370 Investments in associates 194 Available-for-sale investments 196 196 Total non-current assets 55,636 44,251 48,602 Current assets Trade and other receivables 21,238 12,939 14,439 Cash and cash equivalents 2,684 5,220 369 Total current assets 23,922 18,159 14,808 Total assets 79,558 62,410 63,410 LIABILITIES Non-current liabilities Long-term borrowings 5 10,711 7,485 7,051 Other non-current liabilities 6 1,104 1,761 Deferred tax liabilities 4,481 2,895 3,645 Total non-current liabilities 16,296 10,380 12,457 Current liabilities Trade and other payables 7 23,224 16,644 14,728 Current tax liabilities 1,258 633 482 Short-term borrowings 5 3,457 3,111 4,300 Total current liabilities 27,939 20,388 19,510 Total liabilities 44,235 30,768 31,967 EQUITY Share capital 6,443 6,380 6,411 Share premium account 2,795 2,627 2,711 Other reserves 10,448 10,448 10,448 Cashflow hedging reserve (125) (194) (176) Translation reserve 1,100 1,642 723 Retained earnings 14,662 10,739 11,326 Total equity attributable to equity holders of the parent 35,323 31,642 31,443 Total equity and liabilities 79,558 62,410 63,410

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Consolidated Statement of Cash Flows for the six months ended 31 December 2010 9 Unaudited Unaudited Audited Six months to Six months to 18 months to 31 December 2010 31 December 2009 30 June 2010 000 000 000 Cash flows from operating activities Profit before tax 4,233 3,908 4,767 Adjustments for: Share-based payments charge (credit) 16 (20) (39) Depreciation of property, plant and equipment 180 114 418 Amortisation of intangible assets and development expenditure 1,620 1,439 3,788 Profit on sale of property, plant and equipment (1) Interest received (2) (18) (28) Interest expense 426 443 1,393 Share of losses of associate 4 28 Increase in trade and other receivables (4,217) (3,249) (4,022) Increase in trade and other payables 2,656 5,823 1,027 Cash generated from operations 4,912 8,444 7,331 Interest paid (529) (443) (1,331) Income taxes paid (625) (508) (1,637) Net cash generated from operating activities 3,758 7,493 4,363 Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (2,184) (424) Acquisition of other business units (967) (2,431) Acquisition of available-for-sale investments (2) Development expenditure capitalised (449) (286) (1,195) Purchase of property, plant and equipment (419) (109) (393) Proceeds from sale of property, plant and equipment 5 Purchase of intangibles (50) Interest received 2 18 28 Net cash absorbed by investing activities (4,017) (377) (4,462) Cash flows from financing activities Net proceeds from issue of share capital 103 1,440 1,431 Proceeds from long-term borrowings 5,025 1,474 Payment of long-term borrowings (1,616) (2,565) (4,752) Payment of loans from related parties (1,000) Payment of finance lease liabilities (44) (13) (47) Dividends paid (119) (247) Net cash absorbed by financing activities 3,468 (1,257) (3,141) Net change in cash and cash equivalents 3,209 5,859 (3,240) Cash and cash equivalents at start of period (571) (684) 2,828 Exchange gains (losses) on cash and cash equivalents 46 45 (159) Cash and cash equivalents at end of period 2,684 5,220 (571)

10 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Consolidated Statement of Changes in Equity for the six months ended 31 December 2010 Share Share Other Cashflow Translation Retained Total capital premium reserve hedging reserve earnings equity reserve 000 000 000 000 000 000 000 At 1 January 2009 5,939 1,619 10,448 (265) 2,253 7,874 27,868 Changes in equity for six months ended 30 June 2009 Share-based payment credit 55 55 Own shares acquired (13) (13) Total comprehensive income for the period 40 (1,074) 108 (926) At 30 June 2009 5,939 1,619 10,448 (225) 1,179 8,024 26,984 Changes in equity for six months ended 31 December 2009 Share-based payment debit (16) (16) Proceeds on share issue 441 1,008 1,449 Own shares acquired (9) (9) Dividends to equity holders (119) (119) Total comprehensive income for the period 31 463 2,859 3,353 At 31 December 2009 6,380 2,627 10,448 (194) 1,642 10,739 31,642 Changes in equity for six months ended 30 June 2010 Share-based payment debit (56) (56) Proceeds on share issue 31 84 115 Own shares acquired (11) (11) Dividends to equity holders (128) (128) Total comprehensive income for the period 18 (919) 782 (119) At 30 June 2010 6,411 2,711 10,448 (176) 723 11,326 31,443 Changes in equity for six months ended 31 December 2010 Share-based payment credit 97 97 Proceeds on share issue 32 84 116 Own shares acquired (13) (13) Total comprehensive income for the period 51 377 3,252 3,680 At 31 December 2010 6,443 2,795 10,448 (125) 1,100 14,662 35,323

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Notes to the Unaudited Interim Statement 11 1 Basis of preparation The consolidated interim financial information has been prepared in accordance with the accounting policies that are expected to be adopted in the Group s full financial statements for the year ended 30 June 2011 which are not expected to be significantly different to those set out in Note 1 of the Group s audited financial statements for the 18 months ended 30 June 2010. These are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective at 30 June 2011 or are expected to be adopted and effective at 30 June 2011. The financial information has not been prepared (and is not required to be prepared) in accordance with IAS 34. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of this financial information. The requirements of IFRS 3 (revised 2008) Business Combinations has been adopted in these interim statements as this standard became effective for the Group on 1 July 2010. The financial information in this statement relating to the six months ended 31 December 2010 and the six months ended 31 December 2009 has neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board. The financial information for the period ended 31 December 2010 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the period ended 30 June 2010 have been filed with the Registrar of Companies. The Independent Auditors Report on the Annual Report and Financial Statement for the period ended 30 June 2010 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. 2 Tax expense Unaudited Unaudited Audited Six months to Six months to 18 months to 31 December 2010 31 December 2009 30 June 2010 000 000 000 Current tax expense UK corporation tax and income tax of overseas operations on profits for the period 1,403 1,305 1,834 Adjustment in respect of prior periods (30) (64) Total current tax expense 1,403 1,275 1,770 Deferred tax expense Origination and reversal of temporary differences (315) (226) (752) Effect of change in rate of deferred tax (107) Total deferred tax expense (422) (226) (752) Total tax expense 981 1,049 1,018

12 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Notes to the Unaudited Interim Statement continued 3 Earnings per share The calculations of earnings per share are based on the profit for the financial period and the following numbers of shares: Unaudited Unaudited Audited Six months to Six months to 18 months to 31 December 2010 31 December 2009 30 June 2010 Number of shares Number of shares Number of shares Weighted average number of shares: For basic earnings per share 25,553,904 24,634,237 24,599,450 Effects of employee share options and warrants 393,510 40,422 48,517 For diluted earnings per share 25,947,414 24,674,659 24,647,967 Adjusted 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: Unaudited six months to Unaudited six months to Audited 18 months to 31 December 2010 31 December 2009 30 June 2010 Earnings Per Per Earnings Per Per Earnings Per Per share share share share share share amount amount amount amount amount amount Basic Diluted Basic Diluted Basic Diluted 000 p p 000 p p 000 p p Earnings per share (eps) 3,252 12.7 12.5 2,859 11.6 11.6 3,749 15.2 15.2 Amortisation of acquired intangibles (net of tax) 927 3.6 3.6 830 3.4 3.4 2,083 8.5 8.5 Acquisition costs (net of tax) 146 0.6 0.6 Adjusted eps 4,325 16.9 16.7 3,689 15.0 15.0 5,832 23.7 23.7 In prior years, the adjusted earnings per share calculations 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.

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 13 4 Acquisitions during the period Panacea Limited On 17 November 2010 the Company acquired the entire issued share capital of Panacea Limited. The consideration was 1.55m satisfied on completion in cash. Contingent consideration is also payable on the completion of certain contracts. The following table sets out the book values of the identifiable assets and liabilities acquired and their values to the Group: Book value Adjustments Provisional fair value 000 000 000 Assets Property, plant and equipment 287 287 Other tangible assets 3,128 3,128 Trade receivables 1,092 1,092 Other current assets 846 846 Liabilities Bank overdrafts (617) (617) Trade and other payables (4,387) (4,387) Finance lease creditors (99) (99) Current tax liabilities (4) (4) Deferred tax liabilities (845) (845) Net liabilities (2,882) 2,283 (599) Consideration Initial cash consideration 1,545 Contingent cash consideration 25 1,570 Goodwill 2,169 The contingent cash consideration payable is dependent on completion of certain contracts. The intangible assets recognised in the adjustments relate to customer relationships. 0.85m of the deferred tax liability recognised relates to these intangible assets. The goodwill is attributable to the significant synergies which are expected to arise from the integration of this business with that of K3 s existing Managed Services and other product offerings, and those intangibles such as the workforce which are not recognised separately.

14 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Notes to the Unaudited Interim Statement continued 4 Acquisitions during the period (continued) FD Systems On 23 December 2010 the Company acquired certain assets of FD Systems Limited. The initial consideration was 0.94m satisfied on completion in cash. Deferred consideration of 0.30m is payable, of which 0.26m was paid on 28 February 2011. The following table sets out the book values of the identifiable assets and liabilities acquired and their values to the Group: Book value Adjustments Provisional fair value 000 000 000 Assets Property, plant and equipment 19 19 Other intangible assets 200 1,120 1,320 Deferred tax assets 58 58 Trade receivables 216 216 Other current assets 115 115 Liabilities Trade and other payables (404) (404) Deferred tax liabilities (356) (356) Net liabilities 146 822 968 Consideration Initial cash consideration 941 Deferred cash consideration 300 1,241 Goodwill 273 The intangible assets recognised in the adjustments relate to the intellectual property and customer relationships and a tax amortisation benefit. 0.36m of the deferred tax liability recognised relates to these intangible assets. The deferred tax asset of 0.06m relates to deferred income balances which have already been taxed on a receipts basis. The goodwill is attributable to the significant synergies which are expected to arise from the integration of this business with that of Panacea Limited, acquired in November 2010, and those intangibles such as the workforce which are not recognised separately.

K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 15 5 Loans and borrowings Unaudited Unaudited Audited As at As at As at 31 December 2010 31 December 2009 30 June 2010 000 000 000 Non-current Bank loans and other facilities 10,699 7,473 7,051 Finance lease creditors 12 12 10,711 7,485 7,051 Current Bank overdrafts 940 Bank loans and other facilities 2,726 2,447 2,672 Finance lease creditors 91 24 48 Loans from related parties 640 640 640 3,457 3,111 4,300 Total borrowings 14,168 10,596 11,351 6 Other non-current liabilities Unaudited Unaudited Audited As at As at As at 31 December 2010 31 December 2009 30 June 2010 000 000 000 Contingent consideration 483 787 Deferred consideration 386 365 Other payables 48 Accruals 235 561 1,104 1,761 7 Trade and other payables Unaudited Unaudited Audited As at As at As at 31 December 2010 31 December 2009 30 June 2010 000 000 000 Trade payables 4,131 2,119 3,345 Other payables 265 325 501 Contingent consideration 1,040 25 548 Deferred consideration 131 137 Accruals 5,817 5,335 4,032 Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost 11,384 7,884 8,563 Derivative financial instruments 138 250 199 Other tax and social security taxes 3,333 2,683 1,664 Deferred revenue 8,369 5,827 4,302 23,224 16,644 14,728

16 K3 UNAUDITED INTERIM STATEMENT 31 DECEMBER 2010 Notes to the Unaudited Interim Statement continued 8 Events after the balance sheet date On 7 March 2011 the Company announced that it has agreed to acquire the entire issued share capital of Sense Enterprise Solutions Limited ( Sense ), the provider of Microsoft Dynamics AX ERP solutions to the manufacturing and distribution markets. The initial consideration is 1.20m payable in cash on completion. In addition, a payment of 0.35m is being made in respect of surplus cash in the business at completion. Further consideration of up to 0.90m is payable is dependent on certain performance criteria. 9 The above information is being sent to the shareholders and is available from the Company s website, www.k3btg.com, and from its registered office: Baltimore House, 50 Kansas Avenue, Manchester M50 2GL.

K3 Business Technology Group plc Baltimore House, 50 Kansas Avenue, Manchester M50 2GL www.k3btg.com