Fashion software specialist hails progress as losses lessen and cost cuts take effect

K3 Business Technology, the Salford software group, said it has made good progress in the financial year to November 30, 2023, in which it saw revenues fall, but losses lessen.

The business provides business‐critical software solutions focused on fashion and apparel brands. Its executive chairman, Tom Crawford, was installed in the hot seat last October, just two-and-a-half years after joining the group, following the departure of then CEO, Marco Vergani, who joined the business in March 2021.

Today’s figures showed the group achieved sales of £43.8m, down from £47.2m, however, pre-tax losses of £1,821m were compared with £4.088m the prior year.

The group said it is in a stronger financial position, with improved cash generation and tighter cost discipline supporting increased net cash at financial year end of £8.3m, against £7.1m the previous year.

It said the benefits of further cost reduction measures implemented in the second half will be felt in fiscla year 2024 and beyond.

The board said it remains focused on the transition to higher quality recurring earnings, as well as cash generation, cost discipline and additional operational simplification, which will help to drive further shareholder value.

Group trading in the first quarter of the new financial year is in line with budget, and K3 has a stronger balance sheet than in FY22, which should continue to strengthen. While the markets that K3 serves remain challenging, the board said it believes that both divisions have good growth opportunities.

Overall, the board expects cash generation to continue to improve in FY24 and the group to deliver a higher adjusted operating profit result.

Tom Crawford said: “We made good progress in a number of important areas and achieved some significant financial and strategic milestones against a challenging trading environment.

“In particular, the group’s balance sheet has strengthened.”

He added: “Our Fashion portfolio performed well and has attractive growth opportunities. Third-party Solutions contended with a slowdown at Global Accounts, however, the NexSys operations grew strongly and continues to generate dependable and significant cash flows from software licence and maintenance and support renewals from its large user base.

“The transition to a unit structure will support our drive to generate value for shareholders and we remain disciplined in our focus on cash generation, costs and the shift to higher quality earnings.

“As we move through the new financial year, we expect K3 to generate increased cash and deliver a further improvement in adjusted operating profit.”