REG - Kainos Group plc - Final Results
22/05/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230522:nRSV1144Aa&default-theme=true
RNS Number : 1144A Kainos Group plc 22 May 2023
22 May 2023
Full year results for the year ended 31 March 2023
Kainos Group plc 'Kainos' or the 'Group'
Kainos Group plc (KNOS), a UK-headquartered IT provider with expertise across
three divisions - Digital Services, Workday Services, and Workday Products,
is pleased to announce its results for the year ended 31 March 2023.
Financial highlights
2023 2022 Change
Revenue £374.8m £302.6m +24%
Statutory profit before tax £54.3m £46.0m +18%
Adjusted pre-tax profit £67.6m £58.8m +15%
Cash £108.3m £76.6m +41%
Bookings £427.8m £349.8m +22%
Product Annual Recurring Revenue (ARR) £47.9m £34.3m +40%
Contracted backlog £322.9m £259.7m +24%
Diluted earnings per share 33.1p 28.5p +16%
Adjusted diluted earnings per share 42.5p 38.1p +12%
Total dividend per share 23.9p 22.2p +8%
Operational highlights
We have recorded our 13th consecutive year of growth across a wide range of
key metrics. Our very strong business performance reflects robust underlying
market demand, high levels of customer engagement and the ongoing commitment
of our colleagues.
• Revenue growth of 24% (22% organic) to £374.8 million (2022: £302.6
million).
• Adjusted pre-tax profit increased by 15% to £67.6 million (2022:
£58.8 million) reflecting strong underlying performance and increased
investment in Workday Products, where product development and sales &
marketing expenditure increased by £9.3 million.
• Workday Products revenues ARR increased by 40% to £47.9 million (2022:
£34.3 million) representing significant progress towards our 2026 target of
£100 million ARR.
• Bookings up 22% to £427.8 million (2022: £349.8 million).
• Contracted backlog growth of 24% to £322.9 million (2022: £259.7
million).
• Cash at 31 March 2023 was £108.3 million (2022: £76.6 million), with
cash conversion at 104% (2022: 83%).
We continue to grow as a global business with over one-third of revenues
generated internationally.
· Very strong international growth, up 52% to £132.0 million (2022:
£87.0 million), and now representing 35% of total revenue.
Commercial sector customers now generate half our revenues.
· Commercial revenues are up 51% to £186.4 million (2022: £123.8
million), representing 50% of total revenue.
· Public sector revenues up 24% to £138.0 million (2022: £111.0
million) or 37% of revenue.
· Healthcare revenues, as anticipated, have reduced by 26% to £50.4
million (2022: £67.9 million), which is 13% of total revenue.
We continue to grow a global, talented and engaged team.
• We now have 2,990 people (2022: 2,692) based across 22 countries.
• Our employee retention has increased to 88% (2022: 86%), and engagement
levels remain high, measuring 81% on our internal surveys, and we were again
awarded '50 Best Places To Work in the UK' by Glassdoor.
Excellent customer service drives customer satisfaction and retention,
underpinning revenue growth.
• Customer approval rating ((( 1 (#_ftn1) ))) remains high at 99% (2022:
98%).
• Existing customer revenue increased by 26% to £337.6 million (2022:
£267.7 million), which represents a Net Revenue Retention of 126%.
• Customer numbers increased to 821 (2022: 731), an increase of 12%.
We continue with our ambition to be a responsible organisation.
• We retained our carbon neutral status in 2023 and remain on track to
achieve carbon net zero by 2025.
• Our gender balance improved, with the proportion of women in Kainos
increasing to 34% (2022: 33%), well above the industry average of 22%((( 2
(#_ftn2) ))) and we remain committed to further improvement.
• We hosted over 1,800 young people on our outreach programmes, including
targeted programmes aimed at improving gender diversity, supporting social
mobility and for those students with special educational needs.
In Digital Services, we continue to deliver significant digital transformation
programmes across the public sector, commercial sector and healthcare.
• This extensive project portfolio has driven strong revenue growth of
12%, with Digital Services revenues increasing to £224.4 million (2022:
£199.8 million).
• Customer demand remains strong as digital transformation continues to
be a business and political priority.
We continue to be the leading pan-European Workday specialist and during the
year we were appointed Workday Phase 1 Prime partner in the US market.
• Workday Services recorded very strong revenue growth of 49% (41%
organic) to £105.7 million (2022: £70.9 million).
• Our international expansion continues with North America now
representing over half of Workday Services revenues at £55.9 million (2022:
£30.4 million) an increase of 84%.
((1)) Data from all completed customer surveys in the year. There are five
possible designations: 'Poor', 'Satisfactory', 'Good', 'Very Good' or
'Excellent'; the rating reflects the percentage of customers that rate our
performance 'Good' or better.
((2)) BCS diversity report 2022: Women in IT.
Our Workday-related products, Smart Test, Smart Audit and Smart Shield
delivered very strong growth, and we remain on track to achieve our target of
£100 million ARR by 2026.
• Workday Products revenues grew 40% to £44.7 million (2022: £31.9
million) and ARR increased by 40% to £47.9 million (2022: £34.3 million).
• We continued to invest in our Workday Products, increasing research
& development expenditure by 52%, to £9.1 million (2022: £6.0 million)
and sales & marketing spend increased 135% to £10.8 million (2022: £4.6
million).
Commenting on the results, CEO Brendan Mooney said:
"Our latest results, the eighth as a public company, outline another excellent
performance as we once again achieved strong growth in terms of people,
customers, revenue and profitability.
Our performance as a business is influenced by many factors, but it is our
relationships with our customers and the talents of our colleagues that are
the key drivers. The strength and depth of both have continued to grow this
year and we are grateful for the trust and confidence that our customers
continue to place in Kainos and the expertise, experience, and energy of our
colleagues, who have been the driving force behind all that we have achieved.
These results describe our performance over the past twelve months. While we
draw a sense of satisfaction from the consistency of our performance,
representing the thirteenth consecutive year of growth, our attention is
firmly fixed on the future.
The digital transformation market continues to grow in importance for
organisations operating in government, in healthcare and in the commercial
sector.
This importance is translating into continued demand for the work we do for
our customers. Despite the economic uncertainty, there is an urgency for our
customers about extending existing projects and starting new projects, as they
change the ways they deliver essential services to citizens, patients,
customers and employees.
In addition to responding to the needs of our customers we have also been
focused on building solid foundations for our business - across the services
we offer, the sectors within which we operate and in the regions where we are
based.
As a result, our business is becoming increasingly resilient. We work with
over 800 organisations, many of whom are international in scale and who
operate across a range of industries including healthcare, public sector,
banking, insurance, pharmaceuticals and education. From our UK base we have
expanded globally, with over one-third of our revenues now generated
internationally.
It is all these factors combined - our customers, our people, our consistent
performance, the opportunity and the scale and resilience of our business -
that underpin the confidence that we have about the future.
Alongside our confidence, we also have a sense of excitement - technology
continues to develop at pace and the positive impact it can have on people's
lives increases. It is energising to be at the forefront of these
developments."
For further information, please contact:
Kainos
via FTI
Consulting LLP
Brendan Mooney, Chief Executive Officer
Richard McCann, Chief Financial Officer
Investec Bank plc
+44 20 7597 5970
Patrick Robb / Ben Griffiths
FTI Consulting LLP
+44 20 3727 1000
Matt Dixon / Dwight Burden / Kwaku Aning
About Kainos Group plc
Kainos Group plc is a UK-headquartered IT provider with expertise across three
divisions: Digital Services, Workday Services, and Workday Products.
· Digital Services develops and supports custom digital service
platforms for public sector, commercial, and healthcare customers. Our
solutions transform the delivery of these services, ensuring they are secure,
accessible, and cost-effective, and provide better outcomes for users.
· Workday Services specialises in the deployment of Workday, Inc.'s
Finance, HR and Planning products to leading organisations across Europe and
North America. We are one of Workday's most respected partners, experienced in
complex deployment and trusted by our customers to launch, test, expand, and
support their Workday systems.
· Workday Products develops products that complement Workday. Our Smart
product suite, including Smart Test (for automated testing), Smart Audit (for
compliance monitoring), and Smart Shield (for data masking), are used by more
than 350 customers globally to safeguard their Workday systems.
Our people are central to our success. We employ more than 2,900 people in 22
countries across Europe and the Americas.
We are listed on the London Stock Exchange (LSE: KNOS) and you can discover
more about us at www.kainos.com (http://www.kainos.com) .
Definition of terms
We use the following definitions for our key metrics:
Active customer: a customer who has paid us to deliver a product or service
within the current financial year.
Adjusted EBITDA: calculated as being adjusted pre-tax profit excluding
interest, tax, depreciation of property, plant and equipment and right-of-use
assets, and amortisation of intangible assets.
Adjusted pre-tax profit: profit before tax excluding the effect of share-based
payment expense, acquisition-related expenses including amortisation of
acquired intangible assets and post-combination remuneration expense (relating
to contingent deferred consideration subject to future service conditions).
Annual Recurring Revenue (ARR): the value at the end of the accounting period
of the software and subscription recurring revenue annualised.
Bookings: the total value of sales contracted during the period.
Carbon net zero: any CO(2), released into the atmosphere from a company's
entire value chain is reduced as much as possible and the rest is removed.
Carbon neutral: any CO(2) released into the atmosphere from a company's entire
value chain activities is balanced by an equivalent amount being removed.
Cash conversion: cash generated from operating activities as a percentage of
adjusted EBITDA.
Constant currency (ccy): Excludes the effect of foreign currency exchange rate
fluctuations on year-on-year performance by translating the relevant prior
year figure at current year average exchange rates.
Contracted backlog: the value of contracted revenue that has yet to be
recognised.
Compound annual growth rate (CAGR): annual growth rate over a specified period
of time.
Net revenue retention (NRR): is the percentage of recurring revenue from
existing customers we retained over the year. This considers increases or
reductions in customer spending and those customers where the engagement has
ended; it does not include revenue from new customers. NRR therefore shows how
our business could continue to grow solely from our current customer base
alone, without acquiring any new ones.
Organic revenue: our revenue excluding revenue from acquisitions completed in
the current and comparative reporting periods.
Software as a service (SaaS): is a software distribution model that delivers
application programs over the Internet, with users typically accessing the
program through a web browser. Users pay an ongoing subscription to use the
software rather than purchasing it once and installing it.
Science Based Targets initiative (SBTi) - partnership between Carbon
Disclosure Project (CDP), the United Nations Global Compact, World Resources
Institute (WRI) and the World Wide Fund for Nature (WWF) created to encourage
companies to design clearly defined emission reduction plans in line with the
Paris Agreement goals.
Kainos at a glance
We are a UK-headquartered IT provider, operating through three specialist
business areas: Digital Services, Workday Services and Workday Products.
Purpose
Our purpose is to help our customers with their most challenging projects and,
together with our partners, help them build the capability to succeed in the
digital age.
Our operating divisions
Digital Services
FY23 revenue: £224.4 million, 60% of Group total, 5-year growth: 18% CAGR.
Our Digital Services division helps our customers to solve their business
problems by using technology, enabling them and their users to work smarter,
faster and better.
Working collaboratively with customers around the world, our innovative and
transformative solutions are secure, accessible, cost-effective, and take a
user-first approach. We leverage the benefits of the public cloud and enable
customers to utilise their data to drive better decision-making.
In the public sector, we have delivered projects helping more than 60 million
citizens, while saving our customers hundreds of millions of pounds.
In the commercial sector, customers trust us to provide digital transformation
programmes that evolve their services, deliver efficiencies, increase their
capabilities and future-proof their businesses.
In healthcare, we help providers deliver a service that is faster, more
cost-effective and patient-centric.
We deliver services to over 160 clients, including Allied Irish Bank, NHS
Digital, and the Department for Environment Food and Rural Affairs, and new
clients including the London Mayor's Office for Policing and Crime and the NHS
Business Services Authority.
Workday Services
FY23 revenue: £105.7 million, 28% of Group total, 5-year growth: 47% CAGR.
In our Workday Services business we provide consulting, project management,
integration and post-deployment services for Workday's software suite. We work
with clients globally and have an outstanding relationship with Workday, Inc.
With over 300 international clients, we are proud to work with customers such
as Kion Group (Germany), Shopify (Canada), Novozymes (Denmark), Kone
(Finland), ASOS plc (UK), Takeaway.com (Netherlands) and Match.com (USA).
Workday Products
FY23 revenue: £44.7 million, 12% of Group total, 5-year growth: 41% CAGR.
We have developed three proprietary software tools, Smart Test, Smart Audit
and Smart Shield.
Smart Test allows Workday customers to automatically test and verify that
their unique Workday configuration is operating effectively, both during
implementation and in live operation. Smart Test is the leading automated
testing platform specifically designed for Workday.
Smart Audit is our compliance monitoring tool that allows Workday customers to
maintain operational controls over their Workday HCM and Financials
environments, particularly in the areas of Segregation of Duties, Privileged
Access Controls and Personal and Sensitive employee data protection.
Smart Shield is a data masking tool that can easily and seamlessly mask
sensitive data without impacting the Workday user experience. It ensures that
sensitive data remains controlled when Workday environments are made available
to broader internal or external teams, for instance, during support and
maintenance activities, or for ongoing internal Workday training and
onboarding programmes.
These tools are implemented as cloud-based Software as a Service (SaaS)
solutions and customers utilise them on a subscription basis.
Smart Test was launched in 2014 and is now used by over 350 clients, including
Webhelp (France), AT&T (USA), State of Oregon (USA), Veolia ES (UK),
Werner Enterprises (USA), University of Miami (USA) and Sentara Healthcare
(USA).
Smart Audit was launched in 2021 and is now used by over 70 clients, including
Booking.com (Netherlands), Metropolitan Museum of Art (USA), Magna
International (Canada) and Whole Foods (USA).
Smart Shield was launched in 2022 and is now used by over 40 clients including
Ohio State University (USA), Loews Corporation (USA), John Lewis (UK) and
Netflix (USA).
FY23 key statistics
People
• Number of staff and contractors: 2,990 (2022: 2,692).
• Employee retention: 88% (2022: 86%).
• People by region: UK & Ireland (71%), Central Europe (16%),
Americas (13%).
• Offices: (14) Antwerp, Atlanta, Belfast, Birmingham, Buenos Aires,
Copenhagen, Derry, Dublin, Gdansk, Hamburg, Indianapolis, London, Paris, and
Toronto.
Customers
• Active customers: 821 (2022: 731).
• Customers who rated our service as good or better: 99% (2022: 98%).
• Revenue from existing customers: 90% (2022: 88%).
Financial
• Revenue: £374.8 million (2022: £302.6 million).
• Adjusted pre-tax profit: £67.6 million (2022: £58.8 million).
• Bookings: £427.8 million (2022: £349.8 million).
• Contracted sales backlog: £322.9 million (2022: £259.7 million).
• Revenue by sector:
· Commercial sector: 50% (2022: 41%),
· Public sector: 37% (2022: 37%), and
· Healthcare: 13% (2022: 22%).
• Revenue by region:
· UK & Ireland; 65% (2022: 71%),
· North America: 25% (2022: 19%),
· Central Europe: 9% (2022: 9%), and
· Rest of World: 1% (2022: 1%).
Chief Executive Officer's statement
Consistency in a turbulent environment
This is our eighth annual report as a public company. On review of our
previous seven reports, it is obvious that we have recycled many of the
adjectives that we have used to describe our business performance - with
'consistency' amongst the most reused terms.
Those same seven reports also describe an economic environment that has been
subject to significant volatility. From localised events such as Brexit to
global impacts from the pandemic, organisations have needed to respond
urgently to rapidly changing circumstances.
That theme of turbulence is repeated in this report. The ebb of the pandemic
has been followed by war in Ukraine, the energy crisis, inflation, interest
rate rises, recession fears and, more recently, concerns about the global
banking sector.
Despite the volatility seen throughout the year, our execution has remained
consistent, and we have again recorded strong growth and robust financial
performance, alongside pleasing customer satisfaction and employee engagement
levels.
An excellent business performance
The digital transformation market has been growing quickly for over a decade,
initially with a focus on the replacement of ageing and inefficient legacy
systems. This driver has been augmented by organisations striving for greater
agility, to allow them to react quickly to changes, whether accelerating new
opportunities or, more typically, responding to challenges. As a result, our
customers continue to prioritise their critical digital programmes and we
continue to help them deliver these ambitious projects.
This strong demand has resulted in our revenues growing to £374.8 million, a
24% increase, and our adjusted pre-tax profit growing 15% to £67.6 million.
Our moderated profit growth is mainly because of increased investment in our
Workday Products, both in research and development and in sales and marketing,
an increase of £9.3 million, all of which was expensed in the year.
We continued to add to the talents of our global team, as numbers increased by
11% to 2,990 colleagues. Despite the high demand for digital talent and the
global shortage of the same people, our retention increased to 88%, with
further improvements in recent weeks as people became increasingly cautious
about changing jobs. Our teams are now based in 22 countries.
Our Digital Services division recorded revenue growth of 12% to £224.4
million. We continued to deliver significant programmes in partnership with
the UK Government and with leading healthcare and commercial clients. As
always, our growth is a result of demand from existing clients, such as Allied
Irish Bank, NHS Digital, and the Department for Environment Food and Rural
Affairs, and new clients including the Mayor's Office for Policing and the NHS
Business Services Authority.
We are keen to open new opportunities for Digital Services and our investments
continue to make progress. Our international engagements in Central Europe and
Canada have continued to grow, with our revenues now £9.6 million, from £5.5
million a year ago. Collectively, our Cloud, Data and AI and Intelligent
Automation practices now generate £41.9 million, representing an increase of
47% in the past year.
Our Workday Services team continues to help forward-thinking organisations
such as Kone, Kion Group and Takeaway.com deploy Workday's innovative Software
as a Service (SaaS) platform to support their people and finance requirements.
We remain the leading European partner within the Workday ecosystem and in
July we were appointed Workday Phase 1 Prime Status Partner for the US market,
accelerating our access to the single largest global market for Workday
consulting services.
Over the course of the year our Workday Product revenues grew 40% to £44.7
million. Our products, Smart Test (automated testing), Smart Audit (compliance
monitoring) and Smart Shield (data masking) are used by organisations like
Netflix, Salesforce and match.com. We believe that there is an opportunity to
grow our Workday Product revenues to £100 million by 2026 and as a result we
invested further in product development (increased by £3.1 million to £9.1
million) and in our sales & marketing capacity during the year (increased
by £6.2 million to £10.8 million).
Being a responsible business
We have maintained our focus on positive climate action. We have been
carbon-neutral for the past two years and remain firmly on track to achieve
carbon net zero by 2025. Our climate targets have now been certified by SBTi,
with our actual Scope 1, 2 and 3 emissions significantly below the
corresponding SBTi target. We are increasingly able to record the carbon and
cost savings that our solutions deliver to our customers, for instance the
United Nations International Organisation for Migration where the carbon
saving of 594 tonnes per year, represented a 92% reduction in emission of
IOM's IT estate.
Gender diversity remains a challenge within the wider technology sector, where
just 22% of roles are undertaken by women. During the year, the proportion of
women in Kainos increased from 33% to 34% reflecting focused recruitment
campaigns and we recognise that a sustained effort is required to make further
improvements.
We seek to inspire the next generation of digital talent and to improve the
diversity of the sector. Last year over 1,800 young people participated in our
outreach programmes, where we had targeted programmes aimed at improving
gender diversity and social mobility for young people and for students with
special educational needs. Our digital bursaries will support 60 young people
from backgrounds that are traditionally under-represented at university.
Maintaining a confident outlook
The ongoing economic volatility means that the pressure on our customers
remains intense. In response they are looking to reduce their costs and
increase their organisation's agility. Digital transformation is a key
foundation in achieving both these ambitions and the market will continue its
growth, especially as organisations redirect their spending from inefficient
legacy systems to agile, modern systems. The execution of our strategy has
placed us in leading positions within our core markets, which allow us to look
confidently to the future.
Our confidence is strengthened with the success of our additional growth
initiatives:
Within Digital Services, our international expansion and our Cloud, Data and
AI and Intelligent Automation practices already generates revenues in excess
of £51 million; together these provide a platform for further growth.
Workday's focus on international expansion creates a strong backdrop for our
European growth plans; at the same time our appointment as a Workday Prime
Partner in the US market provides accelerated access to the largest Workday
services market globally.
With our Workday Products, we can accelerate the adoption of our software
across the Workday ecosystem, creating a significant software business.
We can be certain that the economic uncertainty will continue. While it is
sensible to be confident about our markets, our customers and our abilities,
it is equally sensible to remain vigilant and be responsive to any changes.
That too is a sentiment that has been reflected in our previous seven annual
reports.
A sense of gratitude
In each of our previous reports, the final words of this statement have
focused on thanking our customers and our colleagues; and this year we
continue to observe this important tradition.
Our performance as a business is influenced by many factors, but it is our
relationships with our customers and the talents of our colleagues that truly
shape our future.
The strength and depth of both have continued to grow this year and we are
grateful for the trust and confidence that our customers continue to place in
Kainos and the expertise, experience, and energy of our colleagues, who have
been the driving force behind all that we have achieved.
Brendan Mooney
Chief Executive Officer
Our strategy
We are a growth-orientated business and while we are always confident of
growing our market share in subdued markets, we naturally orientate towards
higher growth, dynamic markets. It is in these markets where the talents of
our people shine the brightest and opportunities for growth are the strongest.
Our ambition is to be a global, independent company operating towards the
disruptive end of technology, that will thrive not just today, but for
generations. In building for the long-term, we aspire to provide our people
with rewarding and fulfilling long-term careers.
As part of this ambition, we believe that we can achieve sustained growth in
terms of revenue, adjusted pre-tax profit and cash flow.
We have, deliberately, developed from a national to an international
organisation, both internally and in the customers and markets that we serve.
We expect our international presence to continue to expand in terms of
locations, people and customers.
It is our preference to grow organically; we will undertake acquisitions only
in exceptional circumstances, for instance, where we need to obtain unique
skills.
We also look to ensure that we have a well-balanced business, which is not
overly reliant on any one customer, market or sector. This occasionally
requires us to prioritise smaller, early-stage opportunities ahead of
established market growth. We are comfortable with taking this long-term view.
People
The fundamental component of our strategy is our people. Our business is
successful because of the talent, skill and motivation of our colleagues as
they deliver on commitments to internal and external customers.
We will add to our existing talented workforce by recruiting high calibre
people from school, college and industry; we will continue to invest in
developing their skills and careers; and we will continue to strive to be a
great employer.
Progress in FY23 Priorities for FY24
• Headcount increased by 298, to a total of 2,990 colleagues (2022: • Maintain high standards when recruiting new applicants.
2,692). This included 184 early careers colleagues.
• Ongoing investment in skills and career development of all colleagues in
• Invested over 18,000 days of technical and skills development in our Kainos.
people.
• Employee retention increased to 88%. • Maintain our high levels of employee retention (achieve over 85%).
• We were ranked in the '50 Best Places to Work in the UK' by Glassdoor. • Maintain or improve our scores for employee engagement, D&I and
wellbeing.
• As measured through Workday Peakon, we have maintained high levels of
employee engagement (81%), and high ratings for diversity and inclusion
(D&I) (84%) and wellbeing (78%).
• Involved over 1,800 young people and those from under-represented groups • Continue to inspire and educate young people and those from
in our outreach programmes. under-represented groups for potential careers in IT.
Customers
Our business model is based on the conviction that by delivering consistently
to our customers we will build long-lasting, mutually beneficial relationships
that will see us thrive as a business.
These relationships are built on our reputation for delivery and exemplary
customer service. By being responsive to and supportive of our customers'
complex and changing business needs, we reinforce the strength of our
relationships.
Therefore, our purpose is to help our customers with their most challenging
projects and, together with our partners, help them build the capability to
succeed in the digital age.
Progress in FY23 Priorities for FY24
• Customer satisfaction levels recorded as 99% (2022: 98%). • Maintain high levels of customer satisfaction, resulting in high levels
of net revenue retention.
• Net revenue retention recorded as 126% (2022: 134%).
Markets
Digital Services
Our focus is to:
• continue to grow within the public and healthcare sectors, being
engaged in ambitious transformation projects across UK Government and the NHS;
• repeat our digital transformation success within the UK commercial
sector, with a focus on financial services; and
• expand internationally, focused initially within Germany and Canada
where we already have established delivery teams, have built business
development expertise and have an existing Workday Services and Products
client base.
Progress in FY23 Priorities for FY24
• Public sector revenues increased by 26% to £137.0 million (2022: • Grow our business in both sectors, supporting existing clients and
£108.4 million). projects, and adding new long-term clients in line with our delivery capacity.
• Following the easing of pandemic-related spending, healthcare revenues
decreased by 25% to £49.7 million (2022: £66.3 million).
• Commercial sector revenues increased by 51% to £37.8 million (2022: • Continue to build reputation and references in the sector to maintain
£25.1 million). our accelerated growth.
• International revenues from Central Europe and North America increased • Continue to build reputation and references within both regions.
by 75% to £9.6 million (2022: £5.5 million).
• Refine sales and marketing approach as market penetration increases.
• Build in-region delivery capability in line with success.
Workday Services
Our focus is to:
• continue to grow in our existing, established markets as Workday
continues to expand within these markets;
• gain market share, replacing incumbent providers to existing Workday
customers through a reputation for higher service levels; and
• expand internationally, establishing operations in countries with large
and growing numbers of Workday customers.
Progress in FY23 Priorities for FY24
• Workday Services revenues increased by 49% to £105.7 million (2022: • Maintain growth trajectory in all regions, supporting existing clients
£70.9 million). and projects, and adding new long-term clients in line with capacity.
• We were appointed by 40+ customers where earlier phases of the project • Continue to excel in customer service.
were undertaken by a different partner.
• International revenues increased by 60% to £81.1 million (2022: £50.7 • Maintain growth trajectory in all regions, in particular develop the
million). Phase 1 opportunity in the US market.
• Achieved Workday Phase 1 Prime Partner status in US, the largest market
for Workday consulting services globally.
Workday Products
Our focus is to:
• increase the number of Workday's customers who use our software;
• ensure high levels of customer satisfaction driving strong Net Revenue
Retention (NRR); and
• invest in our existing products, and develop additional products within
the Workday ecosystem, where our blend of software skills and Workday
experience makes us uniquely positioned.
Progress in FY23 Priorities for FY24
• Our customer numbers increased, with 350+ customers using Smart Test, • Increase the total number of customers using our software.
70+ using Smart Audit and 40+ using Smart Shield.
• Increase the adoption of multiple products by each customer.
• Revenues increased by 40% to £44.7 million (2022: £31.9 million).
• NRR is over 100%, driven by customer satisfaction levels of 99%. • Maintain our high levels of customer satisfaction.
• We successfully launched Smart Shield (August 2022). • Ensure that customer adoption and revenues reflect the very strong
increase in investment.
• Overall investment, spanning product development and sales &
marketing, increased by 88% to £19.9 million (2022: £10.6 million). • Develop and launch one new product.
New opportunities
In addition to the investment we make in our Workday Products, our focus also
includes:
• continue to invest in our Cloud (launched 2017), Data and Artificial
Intelligence (2019) and Intelligent Automation (2020) practices, further
building capability and creating international, high-growth businesses;
• through our innovation process, identify and promote new ideas that
have the potential to become sizeable revenue streams in the future.
Progress in FY23 Priorities for FY24
• Our practices continued to grow in scale, achieving combined revenues of • Maintain growth trajectory, embedding our new activities across several
£41.9 million (2022: £28.5 million) an increase of 47%, and with 360 of our digital transformation projects.
colleagues involved in the three areas (2022: 305).
• Manage investment levels in line with total 'new opportunities'
investments.
• Our innovation process evaluated several new ideas, however none were • Increase the number of submissions to the innovation process.
approved for further investment.
Operational review
Our overall performance
The level of digital transformation undertaken by ambitious organisations
continues to increase as the industry enters its second decade. Our
established track record in guiding and supporting customers to deliver their
large-scale digital transformation programmes, as they respond to the changing
demands in their organisations, continues to provide the bedrock for our own
growth.
Our high levels of activity with our customers have translated into an
excellent set of results for our financial year.
Revenue for the year grew by 24% (20% ccy) to £374.8 million (2022: £302.6
million) with adjusted pre-tax profit((( 3 (#_ftn3) ))) increasing by 15%
(increased 4% ccy) to £67.6 million (2022: £58.8 million). Adjusted pre-tax
profit would have been c.£6.1 million lower under constant currency exchange
rates.
In line with our previous guidance, we have increased investment in our
software products, representing a total of £9.3 million. Research &
development investment increased to £9.1 million (2022: £6.0 million) and
our product-related sales & marketing investment increased to £10.8
million (2022: £4.6 million).
Our sales performance underlines our success in winning business - extensions
to existing contracts, additional projects placed by existing customers and
winning new customers. Bookings for the year increased by 22% (20% ccy) to
£427.8 million (2022: £349.8 million), which resulted in a 24% increase in
the contracted backlog to £322.9 million (2022: £259.7 million).
As at 31 March 2023, we had a very strong cash balance of £108.3 million
(2022: £76.6 million), representing 104% cash conversion (2022: 83%).
Our people
We are clear that our success is driven by the ability, energy and expertise
of the people in Kainos.
Since last year, our headcount has grown by 298 to 2,990 people (2022: 2,692).
Of our colleagues, 7% are contractors (2022: 12%). By region, UK & Ireland
increased to 2,130 people (+190), Central Europe increased to 465 people (+50)
and the Americas increased to 395 people (+58).
Our employee engagement levels remain high. We now utilise Workday Peakon to
continuously assess employee engagement and have achieved a rating of 81%. For
the second consecutive year, we were awarded '50 Best Places to Work For in
the UK' by Glassdoor, the online career community.
During the year, 88% of our colleagues made the choice to stay and develop
their career within Kainos (2022: 86%). For much of the year, the global
shortage of digital skills created recruitment and retention challenges,
however these eased during the last weeks of the financial year.
((3)) The Financial Review section includes reconciliations between adjusted
pre-tax profit and profit before tax numbers.
Our customers
We believe that by delivering consistently to our customers we build long-term
relationships. This is a perspective shared by our customers, who continue to
have a very positive view of our performance - 99% of respondents to our
customer surveys rated our service as 'good' or above (2022: 98%).
Existing customers continue to trust us to deliver their most challenging
projects, and this is reflected in our revenues, with 90% of revenues coming
from our existing clients (2022: 88%). We have also gained new customers
during the year, and we now work with 821 customers (2022: 731).
From a sector perspective we have a well-diversified business, with 50% of our
revenues from commercial clients (2022: 41%), 37% from public sector
organisations (2022: 37%), and 13% from healthcare customers (2022: 22%).
Our international client base has also expanded and as a result our
international revenues have grown by 52% to £132.0 million (2022: £87.0
million). Regionally, UK & Ireland accounts for 65% of our business (2022:
71%), North America for 25% (2022: 19%), Central Europe for 9% (2022: 9%),
with the rest of the world representing 1% (2022: 1%).
Digital Services performance
Our Digital Services division builds solutions that are highly cost-effective
and make public-facing services more accessible and easier to use for the
citizen, patient and customer.
Revenues grew by 12% (12% ccy) to £224.4 million (2022: £199.8 million).
Bookings, at £238.2 million (2022: £215.0 million), represented an increase
of 11% (11% ccy) and as a result, contracted backlog increased by 6% to
£140.9 million (2022: £132.7 million).
During the year our healthcare revenues decreased as pandemic-related
expenditure reduced. With strong opportunities in both the public sector and
commercial sector we reallocated a number of teams to projects in these larger
sectors.
Overall, public sector now represents 61% of divisional revenues (2022: 54%),
healthcare 22% (2022: 33%) and commercial sector 17% (2022: 13%).
Public sector
Our public sector customers have remained committed to their digital
transformation programmes and they remain ambitious in the scope of services
that they wish to digitise, which is underpinned by a new digital
transformation policy which outlines 50 of 75 services to be digitised by
2025. As a result of this commitment, our revenues increased by 26% to £137.0
million (2022: £108.4 million).
Within central government, we continue to consolidate our strong position
across key accounts, securing new contracts to deliver digital programmes
in Driver and Vehicle Standards Agency and Foreign Commonwealth &
Development Office. Beyond our existing accounts, we are also delivering
projects with new areas, in Defence (Defence Science & Technology
Laboratory - Artificial Intelligence Delivery Partner) and the Mayor's Office
for Policing (Cloud Migration Partner).
Commercial sector
In the UK, the commercial sector total expenditure on IT is over three times
that of the public sector. While this represents significant opportunity, to
increase our likelihood of success, we have initially chosen to focus our
activity on financial services customers.
Like all large organisations post-pandemic, those within banking and insurance
are increasing their levels of investment in digital transformation. This,
coupled with our growing references in the sector, has driven a rapid increase
in activity as we have helped established customers like Nets Group and New
Ireland and new customers such as Investment Management Corporation of Ontario
(IMCO), Danske Bank and Allied Irish Bank.
Reflecting these higher activity levels, our revenues increased by 51% to
£37.8 million (2022: £25.1 million).
Healthcare sector
As flagged in our November update, our healthcare revenues reduced during the
year to £49.7 million (2022: £66.3 million), a reduction of 25%.
The reduction in revenue is largely attributable to the easing of
pandemic-related spending, although the merging of our customers NHS Digital
and NHS X to form NHS England's new Transformation Directorate has also had an
impact.
More positively, excluding pandemic-related expenditure, our healthcare
revenues have been rising steadily, increasing by 85% from £19.4 million in
2019 to current levels. This year, our customers have included the Department
for Health and Care Wales, where we delivered their Patient App, Genomics
England and Our Future Health.
International expansion outside of UK and Ireland
With the UK as an early adopter of digital transformation, we believe that
there is a significant opportunity to replicate our home market success
internationally. Our initial focus is primarily on commercial customers in
Germany and Switzerland, with organisations such as Hello Fresh and Nets Group
and in the commercial and public sector in Canada with IMCO and Government of
Canada.
Our international revenues are reported in the figures in the sectors listed
above, but for clarity, international revenues for the division have increased
by 75% to £9.6 million (2022: £5.5 million).
Digital Services outlook
We remain extremely positive about the future of digitisation in the UK public
sector both immediately and over the long-term. We are confident that based
upon our strong reputation and successful track record, we are well positioned
to maintain a central role in this transformation drive.
The digitisation pressures and opportunities within the commercial sector are
similar, and therefore the growth prospects for us are substantial. Our
progress in the past eighteen months provides confidence that we will deliver
significant growth in the years ahead.
We are similarly optimistic about the international opportunity, utilising the
skills and expertise gained as a leading digital transformation specialist in
the UK and focusing on international regions where we already have established
delivery teams, sales expertise and a strong Workday client base.
Workday Services performance
Revenue for the year grew by 49% (40% ccy) to £105.7 million (2022: £70.9
million); contracted backlog increased by 42% to £72.8 million (2022: £51.1
million); and bookings increased by 56% (50% ccy) to £121.7 million (2022:
£78.2 million).
The number of accredited Workday consultants at Kainos increased by 27% to 808
(2022: 638).
Having first engaged with Workday in 2011, we are now one of their most
experienced partners. We are the only specialist Workday partner headquartered
in the UK and one of only 49 partners globally accredited to implement
Workday's innovative SaaS platform.
From our initial strong base in UK & Ireland, we expanded internationally
- into Northern and Central Europe in 2015 and into the North American market
in 2018. Within Europe, we are the leading Workday partner - this leadership
position is the result of high satisfaction levels within our customer base,
coupled with our geographic expansion in the region. Our European customers,
including those in the UK & Ireland, generated 47% of total revenue (2022:
57%).
A similar focus on customer success in our North American market has resulted
in our appointment, in mid-2022, as a Phase 1 Prime partner for the US market
- which remains the largest market globally for Workday services. Our North
American customers generated 53% of total revenue (2022: 43%).
In addition to the delivery of Workday for new customers, we are increasingly
involved in supporting customers already live on the Workday platform. We
describe this annuity-style revenue stream as Post Deployment Services.
Workday Extend
Alongside these typical consulting activities, there is a growing opportunity
linked to Workday Extend, Workday's Platform-as-a-Service offering which
became generally available to customers in May 2020. Kainos has been part of
the Workday Extend early adopter programme since 2017.
Workday Extend allows organisations to build additional, specialised
functionality on the Workday platform to further enhance customers' Workday
deployment. As experts in Workday Extend, we have helped organisations such as
Universal Music Group, Groupon and Cardinal Health build Workday Extend
applications specific to their requirements.
Workday Services outlook
Our strong performance provides further evidence of the strength of the
Workday market. With Workday's main competitors, Oracle and SAP, soon to mark
50 years in the ERP market, we believe that Workday's more innovative product
suite can continue to gain significant market share for many years to come.
This is reflected in Workday Inc's bold target of achieving $10 billion
revenue by 2026((( 4 (#_ftn4) ))), up from c.$6 billion today.
((4)) Workday, Inc.
In addition, we believe that we can outpace this rapid market growth by
continuing our international expansion, especially within the US market, and
by replacing other Workday partners in engagements where they are underserving
their customers.
Workday Products performance
Our Workday Products revenue increased by 40% (26% ccy) to £44.7 million
(2022: £31.9 million); the Annual Recurring Revenue was £47.9 million (2022:
£34.3 million), an increase of 40% (33% ccy) and backlog increased by 44% to
£109.3 million (2022: £75.9 million).
Workday is a comprehensive SaaS platform, but we have identified opportunities
to develop our own software products that are complementary to the platform
and that enable customers to further increase the benefit that they can
realise from their investment in Workday.
In 2014, Kainos launched Smart Test which is used by organisations to
automatically verify their Workday configurations. Smart Test is used by over
350 global enterprise customers, including Salesforce, Capital One and Whole
Foods.
Our second product, Smart Audit, became generally available in August 2021 and
has already been deployed to over 70 customers including Chanel, Arcbest and
QBE Insurance. Smart Audit is a compliance monitoring tool that allows Workday
customers to maintain operational security controls across their Workday
environments. Our pre-built controls focus on safeguarding against Segregation
of Duties conflicts, providing robust Privileged Access Controls and
protecting Personal and Sensitive employee data.
In August 2022, we launched our third product, Smart Shield, a data-masking
tool that can easily and seamlessly mask sensitive data without impacting the
Workday user experience. It ensures that sensitive data remains controlled
when Workday environments are made available to broader internal or external
teams, for instance, during support and maintenance activities, or for ongoing
internal Workday training and onboarding programmes. Although just released,
Smart Shield is now used by over 40 customers, including Match.com and LKAB.
Workday Extend
In addition to the consulting services opportunity linked to Workday Extend,
and described in the previous section, the platform provides us further
opportunity to build products that are embedded inside Workday.
During 2023 we have developed a new product, Employee Document Management,
to help customers manage and simplify the full lifecycle of employee
documents. Although not yet generally available, it is gaining traction with
Workday customers.
Workday Products outlook
For our existing Workday products, our growth will be powered by the increase
in Workday clients and by higher penetration of our products into the Workday
client base.
We believe that we are well positioned to identify and develop additional
products for the Workday ecosystem. Our growth will initially be determined by
the product-market fit of our new products, followed by the penetration into
the Workday client base.
Innovation, research and development
Successful businesses continue to challenge themselves and we are keen to
improve our existing offerings, develop new business ideas and assess business
and technology concepts that are likely to impact our clients in the future.
Including our product investment, our research and development expenditure for
the year amounted to £9.1 million (2022: £6.2 million), which was wholly
expensed in the year.
Innovation framework
We take the view that our people, who are often deeply engaged with our
customers, are best placed to identify interesting problems. To support them,
we have developed an innovation framework that is used across Kainos and
comprises a body of knowledge, tools, methods and approaches for innovating,
and processes to develop opportunities and ideas.
a) Spark & Scale
We create the conditions for our staff to identify interesting problems
(finding the Spark) and support the development of ideas from conception
through to launch (creating the Scale). This can range from applying
cutting-edge technologies to existing customer problems, to identifying and
testing a potential partnership or a new business offering.
Our dedicated innovation services team are on hand to explore the idea,
developing an informed judgement of its early commercial potential. The Spark
& Scale process is typically an investment of up to 20 days, with some
external expenditure.
b) Practice Incubator
Through our dedicated incubator, we accelerate the creation of new practices,
which focus on bringing new technologies to customers through dedicated,
highly skilled practitioners. Proposals for new practices are evaluated by a
panel composed of experienced Kainos leaders. If successful, new practices are
given a formal investment package, typically composed of development time,
specialist recruitment and external expenditure.
For example, our Intelligent Automation practice, graduated from this process
and was launched in August 2020. The team, now 32 people, including externally
recruited experts, has allowed us to undertake small, focused engagements for
existing and new clients. We have every belief that our Intelligent Automation
practice will follow the success of our Data and Artificial Intelligence
practice, which is now over 120 specialists.
c) Technical and market research
To support innovation activities and strategic decision making across Kainos,
we have invested in a team dedicated to technical and market research. The
team's activities include providing foresight and research into emerging
technologies, interpreting developing trends and identifying market insights.
The team is continuing research into: the advances of machine learning and
AI, such as reinforcement learning; sustainability, including green technology
and applying sustainable models to our services; fog, edge and distributed
systems for the creation of smart environments, devices and places; the
ethical use of data and AI; advances and emerging concepts in the development
of healthcare technology; and a range of other emerging concepts, including
quantum computing and ambient intelligence, with a goal of understanding when
they should approach a level of maturity and the impact they will have on our
business and clients.
Partnerships
In addition to internally sourced ideas, we nurture relationships with a broad
network of partner organisations. We are active in start-up ecosystems,
working with entrepreneurial young companies. Our people mentor and support
their teams, helping to increase success prospects for their business, and
with the aspiration of identifying and developing joint commercial
opportunities.
We also work with academic research partners and leading industry
organisations, such as the Turing Institute, Digital Catapult and the
Institution of Engineering and Technology as well as working with our
strategic partners on further-from-market technology and research.
Close-to-customer innovation
Technology continues to develop at pace, and we look to continuously improve
our delivery approach for our customers. These improvements reflect our most
recent experience in delivering projects, as well as using the improvements in
the platforms from Workday, Microsoft, AWS, UI Path, and other partners.
Within Digital Services, our continued investment makes us leaders in cloud
native software and data engineering, delivering technology, practices and
principles that enable our customers to achieve long-term success with digital
and data transformation. Through our Digital Advisory Practice, we work on
customer innovation, bringing our leading technical expertise and wide network
of partners to bear on real-world problems, quickly delivering value for
users.
Workday frequently releases software and functionality updates for their
platform, and we ensure that these latest developments are reflected in our
delivery approach and methodology. We also assess new modules, particularly
Workday Extend, which allows customers to add unique functionality to their
Workday system.
Financial review
FY23 was another year of excellent financial performance.
In summary, we grew revenue by 24% (20% ccy) to £374.8 million (2022: £302.6
million). Digital Services revenue rose by 12% to £224.4 million (2022:
£199.8 million), reflecting increased demand for digital transformation,
primarily across the public and commercial sectors. Workday Services revenue
grew 49% (40% ccy) to £105.7 million (2022: £70.9 million) driven by growth
in North America. Workday Products revenue increased to £44.7 million (2022:
£31.9 million), representing growth of 40% (26% ccy) (2022: 32%). The
Operating Review provides more information on our revenue performance.
Our overall gross margin was 47.3% (2022: 46.3%). Digital Services' gross
margin decreased to 38.1% (2022: 38.7%), mainly due to the two additional UK
bank holidays in the period. Workday Services margin remained consistent at
54.2% (2022: 54.3%). Workday Products margin increased to 76.6% (2022: 76.3%).
Operating expenses
Operating expenses increased by 33% to £124.6 million (2022: £93.6 million).
The growth in operating expenses is higher than revenue growth due to the
increased investment in Workday Products in both sales and product
development.
Our investment in product development increased to £9.1 million (2022: £6.0
million), all of which was expensed during the period. We recognised £4.2
million of Research & Development Expenditure Credit (RDEC) income during
the year (2022: £3.2 million).
Alternative performance measures
We use underlying results to manage the business and measure performance
day-to-day. We believe that 'adjusted profit before tax', 'adjusted EBITDA'
and 'adjusted diluted and basic earnings per share' better represent the
Group's underlying performance and make it easier to compare the Group's
performance between periods.
Our adjusted results exclude the effect of share-based payment expense,
acquisition-related expenses, including amortisation of acquired intangible
assets, and compensation for post-combination services.
The adjusted profit measures we use are not defined in UK-adopted
International Accounting Standards and our definitions may not be comparable
with similarly titled performance measures and disclosures in other entities.
The adjusted profit measures reconcile to the reported numbers as follows:
Adjusted profit measures
2023 2022
(£000s) (£000s)
Profit before tax 54,338 45,993
Share-based payment expense and related costs 6,346 3,727
Amortisation of acquired intangible assets 2,642 1,890
Compensation for post-combination services 4,176 5,520
Acquisition-related expenses 57 1,641
Adjusted profit before tax 67,559 58,771
2023 2022
(£000s) (£000s)
Profit after tax 41,645 35,768
Share-based payment expense and related costs 4,886 2,907
Amortisation of acquired intangible assets 2,642 1,890
Compensation for post-combination services 4,176 5,520
Acquisition-related expenses 57 1,641
Adjusted profit after tax 53,406 47,726
Adjusted EBITDA
2023 2022
(£000s) (£000s)
Adjusted profit before tax 67,559 58,771
Depreciation of property, plant and equipment 2,249 1,538
Depreciation of right-of-use assets 1,163 1,654
Finance expense 71 74
Finance income (1,463) (52)
Adjusted EBITDA 69,579 61,985
Adjusted pre-tax profit increased by 15% to £67.6 million (2022: £58.8
million). Profit before tax increased by 18% to £54.3 million (2022: £46.0
million).
Corporation tax charge
The effective tax rate for the year was 23% (2022: 22%). This is higher than
the UK tax rate of 19% as we earn profits in countries with higher corporation
tax rates than the UK.
Financial position
We continue to have a strong financial position, with £108.3 million of cash
(2022: £76.6 million), no debt and net assets of £129.3 million (2022:
£107.7 million). Underlying trade receivables and accrued income balance is
similar to last year at £74.5 million (2022: £74.7 million), despite the
growth in revenue, due to very strong cash conversion in the period.
Property, plant and equipment decreased to £9.5 million at the year end
(2022: £14.9 million). During the year £5.2 million was transferred from
property, plant and equipment to investment property, reflecting our agreement
to sell part of the site acquired in 2019 for the development of our future
headquarters in Belfast. Furthermore, we listed property located in Belfast
for sale in February 2023. The carrying value of this property (£0.3 million)
has been transferred to assets held for sale within current assets.
Cash flow and cash conversion
Cash conversion, which is cash generated by operating activities as a
percentage of adjusted EBITDA, remained strong at 104% (2022: 83%).
Dividend
Our progressive dividend policy maximises shareholder returns, while ensuring
we have sufficient funds to invest in long-term growth. The proposed final
dividend recommended by Directors is 16.1p and, if approved by shareholders,
will be paid on 20 October 2023 to shareholders on the register on 29
September 2023, with an ex-dividend date of 28 September 2023. This will make
the total dividend for the year 23.9p (2022: 22.2p) which will represent a
distribution of 56% of adjusted profit after taxation (2022: 58%).
Consolidated income statement for the year ended 31 March 2023
Continuing operations Note 2023 2022
(£000s) (£000s)
Revenue 2 374,807 302,632
Cost of sales 2 (197,652) (162,386)
Gross profit 2 177,155 140,246
Operating expenses (124,597) (93,625)
Impairment gain/(loss) (including amounts recovered) on trade receivables and 388 (606)
accrued income
Operating profit 52,946 46,015
Finance income 1,463 52
Finance expense (71) (74)
Profit before tax 54,338 45,993
Income tax expense 5 (12,693) (10,225)
Profit for the year 41,645 35,768
Earnings per share
Basic 7 33.6p 29.1p
Diluted 7 33.1p 28.5p
Consolidated statement of comprehensive income for the year ended 31 March
2023
2023 2022
(£000s) (£000s)
Profit for the year 41,645 35,768
Items that may be reclassified subsequently to profit or loss:
Foreign operations - foreign currency translation differences 779 728
Total comprehensive income for the year 42,424 36,496
Consolidated statement of financial position as at 31 March 2023
Note 2023 2022
(£000s) (£000s)
Non-current assets
Goodwill 19,007 18,765
Other intangible assets 3,816 5,993
Investment property 5,160 -
Property, plant and equipment 9,509 14,867
Right-of-use assets 1,261 3,166
Investments in equity instruments 1,299 1,343
Deferred tax asset 3,103 4,282
43,155 48,416
Current assets
Trade and other receivables 8 38,970 38,358
Prepayments 8 3,656 4,377
Accrued income 8 38,808 39,462
Tax receivable 400 -
Cash and cash equivalents 108,302 76,609
Assets held for sale 310 -
190,446 158,806
Total assets 233,601 207,222
Current liabilities
Trade payables and accruals 9 (52,348) (49,199)
Deferred income 9 (37,087) (30,966)
Tax payable - (1,959)
Lease liabilities (794) (1,093)
Provisions (341) (872)
Other tax and social security 9 (12,068) (11,917)
(102,638) (96,006)
Non-current liabilities
Provisions (1,031) (1,258)
Lease liabilities (585) (2,268)
(1,616) (3,526)
Total liabilities (104,254) (99,532)
Net assets 129,347 107,690
Equity
Share capital 623 619
Share premium account 6,567 6,433
Capital reserve 3,548 3,548
Share-based payment reserve 23,394 15,171
Translation reserve 1,030 251
Retained earnings 94,185 81,668
Total equity 129,347 107,690
These financial statements were approved by the Board of Directors and
authorised for issue on 19 May 2023. They were signed on its behalf by:
Richard McCann
Director
19 May 2023
Consolidated statement of changes in equity for the year ended 31 March 2023
Share Share Capital Share-based Translation reserve Retained Total
capital premium reserve payment earnings equity
reserve
(£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
(£000s)
Balance at 31 March 2021 614 5,737 662 9,083 (477) 71,989 87,608
Profit for the year - - - - - 35,768 35,768
Other comprehensive income - - - - 728 - 728
Total comprehensive income for the year - - - - 728 35,768 36,496
Equity-settled share-based payment - - - 6,088 - - 6,088
Current tax for equity-settled share-based payments - - - - - 1,610 1,610
Deferred tax for equity-settled share-based payments - - - - - (280) (280)
Issue of share capital - share options exercised 5 2,296 - - - - 2,301
Issue of shares as purchase consideration - - 1,286 - - - 1,286
Transfer between reserves(( 5 (#_ftn5) )) - (1,600) 1,600 - - - -
Dividends - - - - - (27,419) (27,419)
Balance at 31 March 2022 619 6,433 3,548 15,171 251 81,668 107,690
Profit for the year - - - - - 41,645 41,645
Other comprehensive income - - - - 779 - 779
Total comprehensive income for the year - - - - 779 41,645 42,424
Equity-settled share-based payment - - - 8,223 - - 8,223
Current tax for equity-settled share-based payments - - - - - 237 237
Deferred tax for equity-settled share-based payments - - - - - (931) (931)
Issue of share capital - share options exercised 4 134 - - - - 138
Dividends - - - - - (28,434) (28,434)
Balance at 31 March 2023 623 6,567 3,548 23,394(( 6 (#_ftn6) )) 1,030 94,185 129,347
(5) Premium on shares issued as consideration in FY20 reclassified from share
premium account to capital reserve, in accordance with the requirements of the
Companies Act 2006, S612.
(6) £12.1 million relates to exercised or lapsed options and is considered distributable.
Consolidated statement of cash flows for the year ended 31 March 2023
2023 2022
(£000s) (£000s)
Cash flows from operating activities
Profit for the year 41,645 35,768
Adjustments for:
Finance income (1,463) (52)
Finance expense 71 74
Tax expense 12,693 10,225
Share-based payment expense 6,346 3,727
Depreciation of property, plant and equipment 2,249 1,538
Depreciation of right-of-use assets 1,163 1,654
Amortisation of intangible assets 2,642 1,890
Loss on disposal of property, plant and equipment - 8
Post-acquisition remuneration settled by shares 3,200 2,950
(Decrease)/increase in provisions (758) 395
Operating cash flows before movements in working capital 67,788 58,177
Increase in trade and other receivables (3,380) (22,996)
Increase in trade and other payables 8,076 16,571
Cash generated from operating activities 72,484 51,752
Income taxes paid (10,585) (7,089)
Net cash from operating activities 61,899 44,663
Cash flows from investing activities
Interest received 1,463 52
Purchases of property, plant and equipment (2,499) (5,819)
Acquisition of other investments - (74)
Amounts withdrawn/(placed) on treasury deposit - 18,028
Acquisition of subsidiaries net of cash acquired - (16,768)
Net cash used in investing activities (1,036) (4,581)
Cash flows from financing activities
Dividends paid (28,434) (27,419)
Interest paid (71) (74)
Repayment of lease liabilities (1,075) (1,409)
Proceeds on issue of shares 138 2,301
Net cash used in financing activities (29,442) (26,601)
Net increase in cash and cash equivalents 31,421 13,481
Cash and cash equivalents at beginning of year 76,609 62,896
Effect of exchange rate fluctuations on cash held 272 232
Cash and cash equivalents at end of year 108,302 76,609
Notes to the consolidated financial information
1. General information and basis of preparation
Kainos Group plc ('the Company') is a public company limited by shares
incorporated in the United Kingdom under the Companies Act 2006 and is
registered in England and Wales (company registration number 09579188), having
its registered office at 21 Farringdon Road, 2nd Floor, London EC1M 3HA. The
Company is listed on the London Stock Exchange.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the 'Group').
The Group financial statements have been prepared and approved by the
Directors in accordance with UK-adopted International Accounting Standards
('UK-Adopted IFRS'). The financial statements are presented in Pounds
Sterling, generally rounded to the nearest thousand.
The financial information set out in this document does not constitute the
statutory accounts of the Group for the years ended 31 March 2023 or 31 March
2022 but is derived from those accounts. Statutory accounts for the year ended
31 March 2022 have been delivered to the registrar of companies, and those for
2023 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
This financial information was authorised for issue by the Directors on 19 May
2023.
2. Segment reporting
All of the Group's revenue during the year ended 31 March 2023 and for the
year ended 31 March 2022 was derived from continuing operations.
The Group's Executive Directors are considered to be the Chief Operating
Decision Maker ('CODM') of the Group. They use internal management reports to
assess both performance and strategy of the Group and the three specialist
business areas: Digital Services, Workday Services and Workday Products.
During the year, we opted to amend our divisional reporting structure both
internally to our CODM (Executive Directors) and publicly. In prior years we
reported results with respect to our Digital Services and Workday Practice
divisions. Due to the continued growth of our Workday Services and Workday
Products businesses, we are now reporting these areas as separate operating
divisions. There is no change in reporting for our Digital Services
division.
The tables below present the results for current and prior year in our current
reporting structure. As such, the comparative information below has been
represented to reflect the new reporting structure.
The following is an analysis of the Group's revenue and results by reportable
segment:
2023 Digital Services Workday Services Workday Product Consolidated
12 months to 31 March (£000s) (£000s) (£000s) (£000s)
Revenue 224,384 105,741 44,682 374,807
Cost of sales (138,798) (48,406) (10,448) (197,652)
Gross profit 85,586 57,335 34,234 177,155
Direct expenses((( 7 (#_ftn7) ))) (24,326) (36,439) (21,687) (82,452)
Contribution 61,260 20,896 12,547 94,703
Central overheads((7)) (28,536)
Net finance income 1,392
Adjusted pre-tax 67,559
profit
Share-based payments expense and related costs (6,346)
Amortisation of acquired intangible assets (2,642)
Compensation for post-combination remuneration (4,176)
Acquisition-related expenses (57)
Profit before tax 54,338
((7)) Direct expenses plus central overheads plus share-based payment expense
and acquisition related expenses (including amortisation of acquired
intangible assets and compensation for post-combination remuneration) equals
the sum of operating expenses plus impairment losses and reversals on trade
receivables and accrued income. Direct expenses are expenses that are directly
attributable to each division.
2022 Workday Workday Products Consolidated
12 months to 31 March Digital Services (£000s) Services (£000s) (£000s)
(£000s)
Revenue 199,831 70,868 31,933 302,632
Cost of sales (122,430) (32,388) (7,568) (162,386)
Gross profit 77,401 38,480 24,365 140,246
Direct expenses(()(7)()) (21,723) (24,666) (12,932) (59,321)
Contribution 55,678 13,814 11,433 80,925
Central overheads(()(7)) (22,132)
Net finance expense (22)
Adjusted pre-tax 58,771
profit
Share-based payments expense and related costs (3,727)
Amortisation of acquired intangible assets (1,890)
Compensation for post-combination remuneration (5,520)
Acquisition-related expenses (1,641)
Profit before tax 45,993
The Group's revenue from external customers by geographic location is detailed
below:
2022 2022
(£000s) (£000s)
United Kingdom & Ireland 242,787 215,606
North America 95,505 58,712
Central Europe 35,262 27,125
Rest of world 1,253 1,189
374,807 302,632
Disaggregation of revenue by type
In line with the change in divisional reporting structure, the Group considers
the new revenue types as presented in the table below to be a more informative
representation. Subscription revenue previously classed within 'SaaS and
related' has been presented separately with related revenues represented as
'Services' or 'Third party and other' as appropriate. The Group has
represented FY22 revenue categories in line with the current reporting
period.
Digital Services Workday
2023 Services Workday Products Total
2023 2023
2023
(£000s) (£000s) (£000s) (£000s)
Type of revenue
Services 217,490 98,961 1,625 318,076
Subscriptions - - 43,057 43,057
Third party and other 6,894 6,780 - 13,674
224,384 105,741 44,682 374,807
Digital Services Workday
2022 Services Workday Products Total
2022 2022
2022
(£000s) (£000s) (£000s) (£000s)
Type of revenue
Services 192,662 64,475 2,990 260,127
Subscriptions - - 28,943 28,943
Third party and other 7,169 6,393 - 13,562
199,831 70,868 31,933 302,632
Disaggregation of revenue by sector
Digital Services 2023 2022
(£000s) (£000s)
Public 136,951 108,400
Commercial 37,782 25,120
Healthcare 49,651 66,311
224,384 199,831
Workday Services
Public 167 1,311
Commercial 105,423 68,948
Healthcare 151 609
105,741 70,868
Workday Products
Public 891 1,271
Commercial 43,171 29,730
Healthcare 620 932
44,682 31,933
Group
Public 138,009 110,982
Commercial 186,376 123,798
Healthcare 50,422 67,852
Total 374,807 302,632
3. Profit for the year
Profit for the year has been arrived at after charging/(crediting):
2023 2022
(£000s) (£000s)
Total staff costs 232,033 168,395
Government grants (12) (479)
Research and development expensed as incurred 9,061 6,176
Research and Development Expenditure Credit (4,230) (3,205)
Depreciation of property, plant and equipment 2,249 1,538
Depreciation of right-of-use assets 1,163 1,654
Loss on disposal of property, plant and equipment - 8
Net foreign exchange (gain)/loss (873) 62
Amortisation of acquired intangibles 2,642 1,890
4. Staff numbers
The average number of employees during the year was:
2023 2022
Number Number
Technical 2,107 1,705
Administration 311 234
Sales 188 158
2,606 2,097
5. Tax expense
2023 2022
(£000s) (£000s)
Current tax expense:
Current year (UK) 7,793 7,882
Current year (overseas) 5,271 4,011
Adjustments in respect of prior years (385) (1,043)
12,679 10,850
Deferred tax:
Origination and reversal of temporary differences (1,130) (1,187)
Adjustments in respect of prior years 1,144 637
Change in tax rate - (75)
14 (625)
Total tax expense 12,693 10,225
In addition to the amount charged to the statement of comprehensive income,
the following amounts relating to tax have been recognised directly in equity
in relation to share based payments:
2023 2022
(£000s) (£000s)
Current tax
Permanent element of share-based payment deduction 237 1,610
Deferred tax
Deferred tax on share-based payments (931) (883)
Effect of rate change - 603
(931) (280)
Total tax recognised directly in equity (694) 1,330
UK corporation tax has been calculated at 19% (2022: 19%) of the estimated
taxable profit for the year, the prevailing rate at the balance sheet date.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions. The effective tax rate for 2023 was 23% (2022: 22%).
On 24 May 2021, the UK Finance Act 2021 was substantively enacted, increasing
the corporate tax rate to 25% effective from 1 April 2023. The change to the
main rate of corporation tax was substantively enacted as at 31 March 2022 and
therefore included in the prior year financial statements. Temporary
differences were remeasured in the prior year using these enacted tax rates
that are expected to apply when the liability is settled, or the asset
realised. The impact of this remeasurement, recognised in the year ended 31
March 2022 resulted in an uplift in deferred tax assets of £0.9 million.
We envisage our future effective tax rates to be broadly in line with the main
UK corporation tax rate.
The Group's tax charge can be reconciled to the profit in the income statement
and effective tax rate as follows:
2023 2022
(£000s) (£000s)
Profit before tax on continuing operations 54,338 45,993
Tax at the UK corporation tax rate of 19% (2022: 19%) 10,324 8,739
Expenses not deductible for tax purposes 919 1,050
Tax exempt income (3) (35)
Effect of foreign exchange on consolidation (92) 214
Effect of tax rates in foreign jurisdictions 740 671
Adjustments to tax charge in respect of prior years 759 (406)
Change in UK tax rates 46 (8)
Tax expense for the year 12,693 10,225
Effective tax rate 23% 22%
6. Dividend
2023 2022
(£000s) (£000s)
Amounts recognised as distributions to equity holders in the period:
Interim dividend for 2023 of 7.8p per share 9,702 -
Final dividend for 2022 of 15.1p per share 18,732 -
Interim dividend for 2022 of 7.1p per share - 8,774
Final dividend for 2021of 15.1p per share - 18,645
28,434 27,419
The Board has proposed a final dividend in respect of the year ended 31 March
2023 subject to approval by shareholders at the Annual General Meeting. This
dividend has not been recognised as a liability in these financial statements
and there are no tax consequences. The proposed final dividend, if approved by
shareholders, will be 16.1p per share (£20.1 million in total) and payable on
20 October 2023 to all shareholders on the Register of Members on 29 September
2023, and with an ex-dividend date of 28 September 2023.
7. Earnings per share
Basic
The calculation of basic earnings per share (EPS) has been based on the
following profit attributable to ordinary shareholders and weighted-average
number of ordinary shares outstanding.
2023 2022
(£000s) (£000s)
Profit attributable to ordinary shareholders 41,645 35,768
Thousands Thousands
Issued ordinary shares at 1 April 124,078 122,785
Effect of shares held in trust (786) (863)
Effect of share options vested and exercised 392 802
Effect of shares issued related to a business combination 18 31
Effect of shares issued related to free share awards 99 49
Weighted average number of ordinary shares at 31 March 123,801 122,804
Basic earnings per share 33.6p 29.1p
Diluted
The calculation of diluted EPS has been based on the following profit
attributable to ordinary shareholders and weighted-average number of ordinary
shares outstanding after adjustment for the effects of all dilutive potential
ordinary shares.
2023 2022
(£000s) (£000s)
Profit attributable to ordinary shareholders 41,645 35,768
Thousands Thousands
Weighted average number of ordinary shares (basic) 123,801 122,804
Effect of share options on issue 758 1,256
Effect of shares held in trust 786 863
Effect of potential shares to be issued related to a business combination 299 410
Weighted average number of ordinary shares (diluted) at 31 March 125,644 125,333
Diluted earnings per share 33.1p 28.5p
The average market value of the Company's shares for the purpose of
calculating the dilutive effect of share options was based on quoted market
prices for the year during which the options were outstanding.
At 31 March 2023, 159,755 options (2022: 39,451) were excluded from the
diluted weighted average number of ordinary shares calculation because their
effect would have been anti-dilutive.
Adjusted
Adjusted basic earnings per share is calculated using the adjusted profit for
the year measure. The calculation of adjusted profit for the year is detailed
in the Financial Review section.
2023 2022
(£000s) (£000s)
Adjusted profit for the year 53,406 47,726
Thousands Thousands
Weighted average number of ordinary shares for the purposes of basic earnings 123,801 122,804
per share
Weighted average number of ordinary shares for the purposes of diluted 125,644 125,333
earnings per share
Adjusted basic earnings per share 43.1p 38.9p
Adjusted diluted earnings per share 42.5p 38.1p
8. Trade and other receivables
2023 2022
(£000s) (£000s)
Trade receivables 35,693 35,228
Other receivables 3,277 3,130
38,970 38,358
Prepayments 3,656 4,377
Accrued income 38,808 39,462
81,434 82,197
9. Trade and other payables
2023 2022
(£000s) (£000s)
Trade payables and accruals 52,348 49,199
Deferred income 37,087 30,966
Current tax liabilities - 1,959
Other tax and social security 12,068 11,917
101,503 94,041
(#_ftnref1)
(#_ftnref2)
(#_ftnref3)
(#_ftnref4)
(#_ftnref5)
(#_ftnref6) ( )
(#_ftnref7)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAESFADPDEAARecent news on Kainos
See all newsREG - Kainos Group plc - Transaction in Own Shares
AnnouncementREG - Kainos Group plc - Transaction in Own Shares
AnnouncementREG - Kainos Group plc - Transaction in Own Shares
AnnouncementREG - Kainos Group plc - Transaction in Own Shares
AnnouncementREG - Kainos Group plc - Year-end Trading Update
Announcement