K3 Business Technology Group PLC Annual Report and Financial Statements for the year ended
30 November 2022
Registered number: 02641001
Contents
Overview
Highlights
K3 at a Glance
Fashion Retail Market
Case Studies
Strategic Report
Chairman's Statement
Chief Executive Officer's Review
Financial Review
ESG Scorecard
Risk Management
Section 172 Statement
Governance
Board of Directors
Directors' Report
Corporate Governance Statement
Remuneration Committee Report
Statement of Directors' Responsibilities
Audit Committee Report
Financial Statements
1 | Independent Auditor's Report | |
3 | to the Members of | 51 |
5 | K3 Business Technology Group plc | |
Consolidated Income Statement | 62 | |
6 | ||
Consolidated Statement of | ||
63 | ||
Comprehensive Income | ||
9 | Consolidated Statement of | |
Financial Position | 64 | |
13 | ||
Consolidated Statement of Cash Flows | 65 | |
18 | ||
Consolidated Statement of | ||
22 | 66 | |
Changes in Equity | ||
25 | Notes forming part of the | 67 |
30 | Financial Statements | |
Company Balance Sheet | 123 | |
34 | Company Statement of | 124 |
Changes in Equity | ||
36 | Notes forming part of the | |
39 | Company Financial Statements | 125 |
4844 | Other | |
49 | Notice of Annual General Meeting | 133 |
Information for Shareholders | 142 | |
Company Information | 143 |
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K3 Business Technology Group plc | Annual Report and Financial Statements for the year ended 30 November 2022 | 1 |
Highlights
Financial
2022 data represents 12 months to 30 November 2022 and 2021 data 12 months to 30 November 2021.
Revenue from | Recurring or | Adjusted EBITDA1 | ||||||||
continuing operations | predictable revenue1 | £5.1m | ||||||||
£47.5m | £37.6m | |||||||||
2021: £45.3m | 2021: £33.9m | 2021: £4.4m | ||||||||
2022 | £47.5m | 2022 | £37.6m | 2022 | £5.1m | |||||
2021 | £45.3m | 2021 | £33.9m | 2021 | £4.4m | |||||
12 months to | 12 months to | Change | ||||||||
30 November 2022 | 30 November 2021 | |||||||||
Revenue from continuing operations | £47.5m | £45.3m | 5% | |||||||
Recurring or predictable revenue1 | £37.6m | £33.9m | 11% | |||||||
- as a percentage of total revenue | 79% | 76% | 300bps | |||||||
Gross margin | 59.2% | 59.3% | (0.1)% | |||||||
Adjusted EBITDA1 | £5.1m | £4.4m | 16% | |||||||
Loss before tax from continuing operations, | £(3.8)m | £(7.8)m | £4.0m | |||||||
including exceptionals2 | ||||||||||
Net cash1 | £7.1m | £9.0m | £(1.9)m | |||||||
Reported (loss)/gain per share | (9.0)p | 8.0p | (17.0)p | |||||||
Adjusted (loss) per share for | (2.6)p | (13.6)p | 11.0p | |||||||
continuing operations1 |
- Revenue increase driven by strong growth in Third-party Solutions division and higher contribution from strategic products in K3 Products division
- Recurring and predictable income now accounts for 79% of Group revenue (2021: 76%)
- Group Annualised Recurring Contracts ("ARC") at year-end up 11% to £22.9m (2021: £20.7m)
- Strategic products ARC at year-end up 32% to £5.7m (2021: £4.3m), with the K3 Fashion Enterprise product being up 55%
- Adjusted EBITDA1 from continuing activities up 16% to £5.1m (2021: £4.4m)
- Healthy net cash of £7.1m (2021: £9.0m), and Group is expected to generate net cash in FY 2023
OVERVIEW
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
OTHER
- Refer to note 30 for definitions.
- Exceptionals include an impairment charge of £1.6m (2021: £1.4m) and reorganisation and acquisition costs of £0.70m (2021: £1.5m).
2 | K3 Business Technology Group plc | Annual Report and Financial Statements for the year ended 30 November 2022 |
Operational
- K3 Products division - encouraging underlying performance; good progress across our fashion and apparel offering (strategic products) masked by managed run-off of legacy products
- Divisional revenue decreased by £1.3m to £13.5m (2021: £14.8m); Adjusted EBITDA1 at £0.7m
(2021: £1.1m) - Gross profit margin up to 78.3% (2021: 75.3%)
- Managed run-off of legacy products customer base in line with management expectations
- Strategic products' ARC up 32% to £5.7m, with new customer wins and existing customers increasing contracted software licences
- ViJi acquisition is integrating well and has enhanced sustainability offering
- Largest software licence contract for flagship strategic product (K3 Fashion) signed post period
- Divisional revenue decreased by £1.3m to £13.5m (2021: £14.8m); Adjusted EBITDA1 at £0.7m
- Third-partySolutions division - strong growth and highly cash generative
- Divisional revenue up 11% to £34.0m (2021: £30.5m) and Adjusted EBITDA1 up 12% to £12.8m
(2021: £11.4m) - Gross profit margin constant at 51.6%
- Aggregate ARC growth of 8.4%
- NexSys software licence and maintenance contract renewals remained high at 98% (2021: 98%)
- Divisional revenue up 11% to £34.0m (2021: £30.5m) and Adjusted EBITDA1 up 12% to £12.8m
Prospects
- Encouraging strong start to trading in FY 2023 with good strategic fashion product ARC growth
- Board expects continued improvement across both divisions
Marco Vergani,
Chief Executive Officer of K3 Business Technology Group plc, said:
"K3 has made very encouraging progress in its first full year of executing its new growth plan. Against a challenging trading backdrop, we have delivered good growth in revenue, recurring income and profitability, and cash generation is on an upward trend.
"Our focus on driving the growth of our strategic fashion products is yielding very encouraging results and we have enhanced our sustainability offering. This is an increasingly important area for the fashion and apparel sector, with legislation also driving the adoption of sustainability solutions. Our Third-party Solutions division grew strongly and continues to generate high cash flows.
"The new financial year has started encouragingly, with our largest ever software licence contract for our flagship fashion product. The Board is confident that this progress will continue and expects the Group to become cash generative this year."
K3 Business Technology Group plc | Annual Report and Financial Statements for the year ended 30 November 2022 |
K3 at a Glance
K3 is a leading provider of business‐critical software solutions focused on fashion and apparel brands and related large retail brands. The Group's solutions comprise both wholly-authored products and third-party products enriched with K3 software. They provide customers with comprehensive, end-to-end capabilities. The Group operates through two divisions, K3 Products and Third-party Solutions.
The Group has approximately 2,400 customer installations across the UK, Europe, the Far East, and USA. Customers relationships are typically long, and the Group generates a high level of recurring or predictable income. This arises from annual renewals of software licences and maintenance and support contracts as well as from framework service agreements.
K3 Products
The division's products are outlined below. They are sold directly by K3 sales teams and indirectly via channel partners.
K3 Fashion
K3 Fashion is the Group's 'concept-to-consumer' solution, which is built on Microsoft Dynamics 365 for Finance, Supply Chain and Commerce. It is designed to meet all the needs of fashion and apparel enterprises, and has been endorsed globally by Microsoft as its recommended 'add-on' for the fashion sector. K3 Fashion provides enterprises with the ability to gain insight and control over all their processes and inventory, from planning and design, sourcing raw materials and managing suppliers and manufacturers, to sales, including all channels-to-market, logistics, ordering and the tracking of financial transactions.
K3 Pebblestone
K3 Pebblestone is tailored to the fashion industry and has similar functionalities to K3 Fashion. Built on Microsoft Dynamics Business Central, it is specifically aimed at smaller brands and retailers, and is available in both as an 'on-premises' solution and as a cloud-based SaaS solution.
K3 ViJi
K3 ViJi is a suite of solutions that supports the traceability, certification and sustainability of the fashion supply chain. The suite was brought into the K3 product portfolio in January 2022 through the acquisition of the French-based business, ViJi SAS. It is core to K3's vision of providing solutions that help the fashion and apparel industry to become more environmentally sustainable in tune with consumer concerns.
K3 Imagine
K3 Imagine is a cloud-native, unified commerce 'headless' (i.e. technology agnostic) platform, which enables brands and retailers to run their physical stores and omnichannel business in a seamless way. It includes K3 dataswitch, a real-time orchestration solution, which enables K3 Imagine to synchronise fully with any legacy application and ERP solution. This enables customers to adopt the new software within their pre-existing application environment and legacy systems, thereby benefiting from all the advantages of new technology while reducing the risks and disruption of replacing core IT systems.
K3 Legacy Solutions
The offering includes Retail POS solution, on a combination of cloud and on premise deployments, and some legacy ERP solutions.
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OVERVIEW
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
OTHER
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Disclaimer
K3 Business Technology Group plc published this content on 20 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2023 11:00:32 UTC.