Unterföhring/Munich, March 7, 2024 - KPS AG (WKN: A1A6V4 / ISIN: DE000A1A6V48), Europe's leading consultancy for digital transformation and process optimisation in retail, has published its results for the 2022/2023 financial year and the results for the first quarter of 2023/2024.
Financial year 2022/2023: KaDeWe insolvency leads to delay in publication
On January 29, 2024, KPS announced via ad hoc announcement that it was postponing the publication of its annual and consolidated financial statements for the past 2022/2023 financial year, which had been scheduled for January 30, 2024. The background to this was that on January 26, 2024, The KaDeWe Group GmbH (KaDeWe) filed an application with the Charlottenburg Local Court for the opening of insolvency proceedings under self-administration and that on January 29, 2024, the court decided to order provisional self-administration and appoint a provisional administrator pending a decision on the aforementioned insolvency application. At the time of the court's decision, KaDeWe still had outstanding payments to KPS in the mid-single-digit million range. The effects of the insolvency can now be quantified and allocated to the financial years 2022/2023 and 2023/2024. The past 2022/2023 financial year was subsequently impacted by the insolvency in the amount of € 3.5 million. A value adjustment was made accordingly.
Financial year 2022/2023: Weak investments in retail and overcapacities provide additional negative factors
In the 2022/2023 financial year, KPS generated revenues amounting to € 177.8 million (previous year: € 180.0 million). Group revenues were thus in line with the forecast revised in April 2023 and slightly below the previous year's figure. The normalisation of consumer demand in the e-commerce sector following the boom during the coronavirus pandemic, deteriorating economic prospects and increasing geopolitical risks weighed on the willingness of retailers to invest in e-commerce and strategy projects. In addition, some ongoing projects have reached their planned maturity phase and had a negative impact on revenue development, as revenue typically declines in the maturity phase of a project.
The ERP projects segment developed positively. Accordingly, the Germany region recorded a pleasing revenue trend and was able to increase revenues by 17.6% to € 88.1 million. In contrast, revenues abroad fell by € 14.9 million. Due to the strong revenue increase in Germany, the sales mix shifted significantly compared to the previous year. The revenue share generated in Germany rose from 41.7% in the previous year to 49.6% in the 2022/2023 financial year.
Financial year 2022/2023: EBITDA and EBIT influenced by several factors
The insolvency of KaDeWe and other factors led to challenges for KPS in the 2022/2023 financial year.
In anticipation of rising demand, KPS significantly increased the number of consultants in the 2021/2022 financial year and at the start of 2022/2023, particularly in the area of e-commerce. In the weak environment and due to the lack of new e-commerce projects, this led to underutilisation of the company's own employee capacities.
The use of external consultants and service providers was increased so that the high volume of ERP projects could be carried out successfully and within the agreed deadlines. Due to the specific requirements profile, the excess capacity in the e-commerce area could not be used for the high volume of orders for ERP projects.
In addition, inflation-related increases in personnel expenses had a negative impact on earnings.
KPS reacted to the economic headwind and took countermeasures. Capacities were adjusted in line with project demand, restructuring measures were introduced and sales were additionally strengthened. The adjustments led to extraordinary expenses amounting to € 1.9 million.
EBITDA fell from € 21.7 million in the 2021/2022 financial year to € 7.8 million in the 2022/2023 financial year due to the effects of the KaDeWe insolvency and the weak willingness to invest in retail. Adjusted for the two one-off effects of restructuring (€ 1.9 million) and the KaDeWe insolvency (€ 3.5 million), adjusted EBITDA amounted to € 13.2 million and adjusted EBIT to € 5.4 million. Adjusted EBITDA is therefore within the forecast corridor of € 11 million to € 14 million revised in April 2023.
Earnings after taxes fell from € 9.5 million in the previous year to minus € 1.2 million. Due to the negative result, the negative special factors and in order to conserve the company's liquidity reserves and credit lines, the Executive Board and Supervisory Board will propose to the Annual General Meeting that no dividend be distributed for the 2022/2023 financial year.
First quarter of 2023/2024: weak business performance and the effects of the KaDeWe insolvency weigh on earnings performance
In the first quarter of the 2023/2024 financial year, demand for projects was weak due to the only moderate economic recovery and restrained willingness to invest. Revenues fell by 20.4% to € 38.9 million compared to the same period of the previous year (€ 48.8 million). Accordingly, EBITDA was minus € 0.9 million (previous year: € 4.9 million) and EBIT was minus € 2.8 million (previous year: € 2.3 million).
The results for the first quarter of 2023/2024 were impacted by impairment losses of € 1.8 million due to the insolvency of the KaDeWe Group. Excluding this one-off effect, adjusted EBITDA was positive at € 0.9 million.
KPS expects to have reached the bottom in terms of revenue development in the first quarter of 2023/2024. The business situation is therefore expected to improve in the further course of the financial year.
Cautious outlook for the 2023/2024 financial year: demand expected to remain weak
KPS expects demand for transformation projects to remain at a low level due to geopolitical uncertainties and the ongoing tense economic situation. In addition, the insolvency of the KaDeWe Group and the insolvency of The Body Shop in the UK will have a negative impact on KPS' earnings in the 2023/2024 financial year in the single-digit million range. The negative effects of the two insolvencies should be partially offset by the positive effects of the cost-cutting measures.
For the 2023/2024 financial year, the Executive Board of KPS forecasts that revenue will be in a range between € 164 million and € 167 million compared to the 2022/2023 business year (€ 177.8 million). For EBITDA, the Executive Board expects an increase from € 7.8 million to between € 11.5 million and € 13.0 million compared to the previous year. The forecast includes extraordinary value adjustments of € 3.3 million due to the effects of the insolvencies (KaDeWe and The Body Shop) (of which € 1.8 million are accounted in the first quarter of 2023/2024).
Based on the measures introduced, KPS assumes that it will be able to stabilise the business situation in the 2023/2024 financial year and lead the Group on a profitable growth path in the future.
March 07, 2024
KPS AG
The Executive Board
