REG - Kainos Group plc - Full Year Results
23/05/2022 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:20220523:nRSW3432Ma&default-theme=true
RNS Number : 3432M Kainos Group plc 23 May 2022
23 May 2022
Full year results for the year ended 31 March 2022
Kainos Group plc 'Kainos' or the 'Group'
Kainos Group plc (KNOS), a leading IT provider, operating through two
specialist business areas, Digital Services and its Workday Practice, is
pleased to announce its results for the year ended 31 March 2022.
Financial highlights
2022 2021 Change
Revenue £302.6m £234.7m +29%
Statutory profit before tax £46.0m £50.3m -9%
Adjusted pre-tax profit £58.8m £57.1m +3%
Cash(( 1 )) £76.6m £80.9m -5%
Bookings £349.8m £258.8m +35%
Product Annual Recurring Revenue (ARR) £34.3m £23.6m +45%
Contracted backlog £259.7m £206.2m +26%
Diluted earnings per share 28.5p 32.1p -11%
Adjusted diluted earnings per share 38.1p 36.8p +4%
Total dividend per share(( 2 )) 22.2p 28.2p -21%
Operational highlights
We have recorded our 12th 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 29% (26% organic) to £302.6 million (2021: £234.7
million).
• Adjusted pre-tax profit increased 3% to £58.8 million (2021: £57.1
million) as margins moderated following increased investment and the further
normalisation of costs.
• Bookings up 35% to £349.8 million (2021: £258.8 million).
• Contracted backlog growth of 26% to £259.7 million (2021: £206.2
million).
• Following dividend payments and acquisition expenses, period-end cash
amounted to £76.6 million (2021: £80.9 million); with cash conversion at 83%
(2021: 112%).
We continue to add to the talents of our global team.
• We now have 2,692 people (2021: 2,024) based across 22 countries. This
reflects strong recruitment in our core markets which has been enhanced
through the year with the expertise of 153 new colleagues who joined via the
acquisitions of Cloudator, Une Consulting, Blackline Group and Planalyse.
• Against the backdrop of a global shortage in digital skills, our
employee retention has reduced to 86% (2021: 92%). Our focus remains on being
a great employer and we have retained our Sunday Times, 'Top 100 Best
Companies to Work For' accreditation and were 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(()( 3 )()) remains high at 98% (2021: 98%).
• Existing customer revenue increased by 34% to £267.7 million (2021:
£199.7 million).
• Customer numbers increased to 731 (2021: 546), an increase of 34%.
We continue with our ambition to be a responsible organisation.
• We retained our carbon neutral status for 2022 and remain on track to
achieve carbon net zero by 2025.
• Our gender balance improved, with the proportion of women in Kainos
increasing to 33% (2021: 30%), ahead of the industry average of
19%(()( 4 )()); we remain committed to further improvement.
• We delivered over 1,100 work placements 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, healthcare and commercial sector.
• This extensive project portfolio has driven very strong revenue growth
of 24%, with revenues growing to £199.8 million (2021: £161.6 million).
• Customer demand remains very high across all sectors as digital
transformation continues to be a business priority.
We continue to be the leading pan-European Workday specialist and we have
established a significant presence in the North American market.
• Our Workday Services recorded very strong revenue growth of 45% (29%
organic) to £70.9 million (2021: £49.0 million).
• Focused on the opportunity in North America, we have doubled our
presence and now have 323 colleagues (2021: 142) based across USA, Canada and
Argentina.
Our Workday-related products, Smart Test and Smart Audit, achieved very strong
growth, particularly in North America.
• Smart product revenues grew 32% to £31.9 million (2021: £24.2
million); at the same time the Annual Recurring Revenue (ARR) increased 45% to
£34.3 million (2021: £23.6 million).
• We continued to invest in our Smart products, increasing our R&D
expenditure by 67%, to £6.0 million (2021: £3.6 million), all of which was
expensed during the year.
Our focus on sector diversification has ensured that we have built a robust
and well-balanced business across sector and region.
• Overall, our revenues: 41% Commercial, 37% Public Sector and, 22%
Healthcare.
• Commercial revenues are up 53% to £123.8 million (2021: £81.1
million).
• Public sector revenues are up 5% to £111.0 million (2021: £105.5
million).
• Healthcare revenues are up 41% to £67.9 million (2021: £48.1
million).
• International revenues are up 48% to £87.0 million (2021: £59.0
million).
Commenting on the results, CEO Brendan Mooney said:
"Our latest business results outline the consistency of our long-term
performance, as we recorded our twelfth consecutive year of growth - in terms
of people, customers, revenue and profitability.
Over those twelve years, we have helped organisations drive their digital
transformation programmes and realise their ambitions. That digitalisation
trend gathered further pace during the pandemic as our customers responded to
the changing ways of delivering essential services to citizens, patients,
customers, and employees.
That sustained demand, and the trust that our customers have placed in Kainos,
has allowed our business to thrive and this year we continued to pass
significant milestones. We now have over 2,600 colleagues and over 700
customers, whilst our revenues have exceeded £300 million.
In similar fashion, our business is becoming increasingly global. Over
two-thirds of our customers are based in Central Europe and North America,
with one-third of our colleagues based in the same regions.
Looking forward, we remain confident in our business as the demand for our
services has never been higher, our reputation for delivery continues to
flourish, while the scale and capability of our organisation continues to grow
at pace.
Underpinning that confidence is the quality and talents of our colleagues.
Their expertise, experience and energy have been the driving force behind all
that we have achieved. We share their excitement about the future - the
journey is just starting."
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
Canaccord Genuity
+44 20 7523 4606
Simon Bridges / Andrew Potts
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, across two specialist
business areas, Digital Services and its Workday Practice.
The Group's Digital Services include full lifecycle development and support of
customised digital services for public sector, healthcare and commercial
customers. These transformative solutions encompass a range of services from
experience design to artificial intelligence and cloud to deliver truly
intelligent solutions that are secure, accessible and cost-effective.
The Group's Workday Practice is one of Workday, Inc.'s most respected
partners. As a full-service partner, we are experienced in complex deployment
and integrations, and the leader in Workday test automation. We are trusted by
our customers to launch, test, expand and safeguard their Workday systems.
Kainos has over 2,600 people across 22 countries in Europe and the Americas.
Kainos is listed on the London Stock Exchange (LSE: KNOS), for further
information, please visit our website: www.kainos.com (http://www.kainos.com)
.
Definition of terms
We use the following definitions for our key metrics:
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.
Backlog: the value of contracted revenue that has yet to be recognised.
Bookings: the total value of sales contracted during the period.
Carbon net zero: any CO2, 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.
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.
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 revenues excluding revenue from acquisitions completed in
the year.
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 on-going subscription to use the
software rather than purchasing it once and installing it.
Kainos at a glance
We are a UK-headquartered IT provider, operating through two specialist
business areas, Digital Services and our Workday Practice.
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
FY22 revenue: £199.8 million, 66% of Group total, 5-year growth: 28% 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, delivers efficiencies, increases their
capabilities and future-proofs their businesses.
In healthcare, we help providers deliver a service that is faster, more
cost-effective and patient centric.
We deliver services to over 130 clients, including the Foreign, Commonwealth
and Development Office (UK), the Defence and Science Laboratory (UK), NHS
England (UK), Concardis (Germany) and Hello Fresh (Germany).
Workday Practice
Our Workday Practice is closely linked to Workday, Inc.'s software suite,
which includes cloud-based software for Human Capital Management (HCM),
Financial Management and Planning, enabling enterprises to organise their
staff efficiently and support their financial reporting requirements.
Workday Services
FY22 revenue: £70.9 million, 23% of Group total, 5-year growth: 50% 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 100 international clients, we are proud to work with Kion Group
(Germany), Shopify (Canada), Kone (Finland), TransferWise (UK), ASOS plc (UK),
Takeaway.com (Netherlands) and Match.com (USA).
Smart product suite
FY22 revenue: £31.9 million, 11% of Group total, 5-year growth: 42% CAGR.
We have developed two proprietary software tools, Smart Test and Smart Audit.
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.
Both 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 2013 and is now used by over 300 clients, including
Salesforce (USA), Whole Foods (USA), Xero (New Zealand), Netflix (USA),
CapitalOne (USA), Servicenow (USA), Aegon (Netherlands) and Condé Nast (USA).
Smart Audit was launched in 2021 and is now used by over 40 clients, including
SpencerStuart (USA), Chanel (UK), Rand Corporation (USA), BlueCross BlueShield
(USA) and QBE (Australia).
FY22 key statistics
People
• Number of staff and contractors: 2,692 (2021: 2,024).
• Employee retention: 86% (2021: 92%).
• People by region: UK & Ireland (72%), Central Europe (15%),
Americas (13%).
• Offices: (20) Amsterdam, Antwerp, Atlanta, Belfast, Birmingham, Buenos
Aires, Copenhagen, Denver, Derry, Dublin, Gdansk, Hamburg, Helsinki,
Indianapolis, London, Oslo, Paris, San Francisco, Stockholm and Toronto.
Customers
• Active customers: 731 (2021: 546).
• Customers rating our service as good or better: 98% (2021: 98%).
• Revenue from existing customers: 88% (2021: 85%).
Financial
• Revenue: £302.6 million (2021: £234.7 million).
• Adjusted profit: £58.8 million (2021: £57.1 million).
• Bookings: £349.8 million (2021: £258.8 million).
• Contracted sales backlog: £259.7 million (2021: £206.2 million).
• Revenue by sector: Commercial 41% (2021: 35%), Public 37% (2021: 45%),
Healthcare 22% (2021: 20%).
• Revenue by region: UK & Ireland 71% (2021: 75%), North America 19%
(2021: 16%), Central Europe 9% (2021: 8%), Rest of World 1% (2021: 1%).
CEO Statement
Resilience and gratitude
Our performance during 2021 must be viewed through the lens of a prolonged
pandemic - lockdowns, working from home and, eventually, the controlled and
gradual easing of restrictions.
To look backwards creates the opportunity, once again, to express our thanks
and admiration for all of those involved in the front-line response to the
health and economic crisis that the pandemic caused. Our sense of gratitude is
amplified for our customers in the NHS as they prioritised the health of the
nation above all else.
Our appreciation is also directed towards our colleagues who, throughout the
year, continued to support all our customers, ensuring that they could
continue to deliver critical services to their citizens, patients, customers
or employees. That appreciation was mirrored from our customers, as we once
again recorded a 98% customer approval rating.
Alongside the resilience of our colleagues and customers, we are also grateful
for the strength and resilience of our business. We recorded another excellent
performance, a reflection of the trust our customers place in Kainos and the
expertise, experience and energy of our colleagues, who have been the driving
force behind all that we have achieved.
An excellent business performance
The digital transformation market has been growing quickly for the past decade
and the pandemic has further demonstrated how important it is for
organisations to invest in their digital capabilities, both internally and
externally. Our customers have responded and 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 £302.6 million, a
29% increase, and our adjusted pre-tax profit growing 3% to £58.8 million. As
expected, our profit growth moderated as recruitment, training and marketing
costs returned to normal levels and as we experienced increased salary costs
and the increased use of contract staff. During the year we also accelerated
our investment in our Smart products, both in research and development and in
sales and marketing, all of which was expensed in the year.
We continued to add to the talents of our global team, as numbers increased by
33% to 2,692 colleagues. This increase was the result of very strong
recruitment as well as welcoming the expertise of 153 new colleagues who
joined us through the acquisitions of Cloudator (Nordics), Une Consulting
(Argentina), the Blackline Group (USA) and Planalyse (Netherlands). Our teams
are now based in 22 countries.
Our Digital Services division recorded growth of 24% to £199.8 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 New Ireland and
Genomics England, and new clients including Hello Fresh and National
Highways.
We are keen to open up new opportunities for Digital Services and our
investments continue to make progress. Our engagements in Central Europe and
Canada have continued to grow, with our revenues now £5.5 million, from £2.6
million a year ago. Our Data and AI practice grew 95% to £15.8 million, with
our Intelligent Automation practice delivering revenues of £1.0 million,
having been launched in mid-2020.
Our Workday Services team continues to help forward-thinking organisations
such as Kone, Kion Group and Takeaway.com deploy Workday, Inc.'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 continue to make significant progress addressing the opportunity
in North America, where our teams in Canada, Argentina and the US have more
than doubled, growing from 142 to 323 colleagues in the past year.
Over the course of the year our Smart product revenues grew 32% to £31.9
million. Our products, Smart Test (automated testing) and Smart Audit
(compliance monitoring) are used by organisations like Netflix, Salesforce and
match.com. We believe that there is the opportunity to grow our Smart product
revenues to £100 million and as a result we invested further in product
development (increased by £2.4 million to £6.0 million) and in our sales and
marketing capacity during the year.
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. Over 60% of our workforce are now in offices that use
renewable energy sources, with work underway to make further progress in the
year ahead.
Gender diversity remains a challenge within the wider industry, where just 19%
of roles are undertaken by women. During the year, the proportion of women in
Kainos increased from 30% to 33% reflecting focused recruitment campaigns. It
is good progress, but sustained effort is required to achieve our gender
parity target.
We seek to inspire the next generation of digital talent and to improve the
diversity of the sector. Last year over 1,100 school students participated in
our work placement programmes, where we had targeted programmes aimed at
improving gender diversity, social mobility and for those students with
special educational needs. At university, our digital bursaries will support
60 young people from backgrounds that are traditionally under-represented at
university.
A confident outlook
The digital transformation market has been growing strongly for over a decade,
with the pandemic accelerating the need for organisations to invest in their
digital capabilities. Our leading position within our core markets allows us
to look confidently to the future.
Our confidence is strengthened with the success of our additional growth
initiatives. Within Digital Services, international expansion, our Data and AI
practice, and our Intelligent Automation practice provide a platform for
further growth. Workday, Inc.'s focus on international expansion creates a
strong backdrop for our European growth plans; at the same time our growing
scale in the North American market provides an excellent foundation in the
largest Workday market globally. With our Smart products, we have the
opportunity to accelerate the adoption of our software across the Workday
ecosystem, creating a significant software business.
The pandemic has demonstrated that our sector is resilient, but it has also
demonstrated that the future can be unpredictable. Notwithstanding our
confidence, challenges remain: the Russia-Ukraine war, the possible resurgence
of Covid-19, inflation and the global shortage of digital talent dominate the
short-term landscape. Without minimising the significance of any of these
factors it feels that, collectively, they represent a lower risk than a global
pandemic.
A sense of gratitude
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 adds to our sense of excitement about the future.
That sense of anticipation is combined with a sense of gratitude.
We continue to be grateful for all the support, confidence and trust that
everyone has placed in Kainos. Thank-you.
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 careers.
As part of our 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; and we will continue to invest in
developing their skills and careers and we will continue to strive to be a
great employer.
Progress in FY22 Priorities for FY23
• Headcount increased by 668, to a total of 2,692 colleagues. • Maintain high standards when recruiting new applicants.
• This included 159 people who joined from school or college. • Invest in skills and career development of all colleagues in Kainos.
• Maintained our Sunday Times 'Best Companies to Work For' Top 100 • Maintain or improve our employee engagement scores as measured
ranking. independently.
• We were ranked in the '50 Best Places to Work in the UK', by Glassdoor. • Ensure that employee retention remains high.
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 FY22 Priorities for FY23
• Customer satisfaction levels recorded as 98%. • Maintain high levels of customer satisfaction, resulting in high levels
of net revenue retention.
• Net revenue retention recorded as 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 Practice client base.
Progress in FY22 Priorities for FY23
• Public sector revenues increased by 6% to £108.4 million (2021: £102.2 • Maintain growth trajectory in both sectors, supporting existing clients
million). and projects, and adding new long-term clients in line with our delivery
capacity.
• Healthcare revenues increased by 52% to £66.3 million (2021: £43.7
million).
• Commercial sector revenues increased by 60% to £25.1 million (2021: • Continue to build reputation and references in the sector to maintain
£15.7 million). our accelerated growth.
• Central Europe revenues increased by 101% to £5.2 million (2021: £2.6 • Continue to build reputation and references within both regions.
million).
• Refine sales and marketing approach as market penetration increases.
• North American activity started during the year, generating £0.3
million in revenues. • Build in-region delivery capability in line with success.
Workday Practice
Our focus is to:
• continue to grow in our existing, established markets as Workday, Inc.
continues to expand within these markets;
• gain market share, replacing incumbent providers to existing Workday
customers through a reputation for higher service levels;
• expand internationally, establishing operations in countries with large
and growing numbers of Workday customers; and
• invest in Smart Test, Smart Audit and Workday Extend and develop
additional products within the Workday ecosystem, where our blend of software
skills and Workday experience makes us uniquely positioned.
Progress in FY22 Priorities for FY23
• Workday Services revenues increased by 45% to £70.9 million (2021: • Maintain growth trajectory in all regions, supporting existing clients
£49.0 million). and projects, and adding new long-term clients in line with capacity.
• Smart product revenues increased by 32% to £31.9 million (2021: £24.2
million).
• We were appointed to 30+ customers where earlier phases of the project • Continue to excel in customer service.
were undertaken by a different partner.
• International revenues increased 46% to £81.5 million (2021: £55.7 • Maintain growth trajectory in all regions.
million).
• Continue to welcome our new colleagues to Kainos, combining their
• Four international acquisitions completed in Argentina, Netherlands, USA capabilities with existing Kainos teams.
and the Nordics, adding 153 new colleagues.
• Ensure consistent, high-quality service to new clients originated by the
acquisitions.
• Smart R&D investment increased 67% to £6.0 million (2021: £3.6 • Accelerate growth trajectory of Smart products.
million).
• Launch our third Smart product, gaining significant early adoption.
• Annual Recurring Revenue for Smart products increased 45% to £34.3
million (2021: £23.6 million).
New opportunities
Our focus is to:
• continue to invest in our Data and Artificial Intelligence and Cloud
practices, building capability and creating international, high growth
businesses;
• support the early progress of our Intelligent Automation practice,
ensuring the foundations are in place to create a significant long-term
business;
• establish our Digital Advisory practice; and
• through our innovation process, identify and promote ideas that have
the potential to become sizeable revenue streams in the future.
Progress in FY22 Priorities for FY23
• Launched in 2019, our Data and Artificial Intelligence practice is now • Maintain growth trajectory.
120 people, and has grown revenues by 95% to £15.8 million (2021: £8.1
million) • Manage investment levels in line with total 'new opportunities'
investments.
• Launched in 2020, our Intelligent Automation practice is now 25 people • Maintain growth trajectory.
and has grown revenues to £1.0 million (2021: <£0.1 million).
• Refine sales and marketing approach as we build increased scale in
customers.
• Launched in 2017, our Cloud practice now encompasses 160 people, with • Maintain growth trajectory.
revenues of £11.7 million (2021: £6.8 million), a growth of 73%.
• Extend offerings internationally, focused on Canada and Germany in the
first instance.
• In 2021, we launched our Digital Advisory practice, it now includes 10 • Establish early adopter clients.
people on the team.
Within the innovation process, there were 10 ideas evaluated: • Increase the number of submissions to the innovation process.
• Seven ideas stopped at investigation stage.
• Three ideas moved to investment stage.
o One was approved (Digital Advisory).
o One is undergoing further investigation.
o One was stopped.
• Data and AI was approved for further investment.
• Intelligent Automation was approved for further investment.
Operational Review
Our overall performance
Our established track record in helping ambitious organisations deliver
large-scale digital transformation programmes is particularly relevant in a
post-pandemic world. The underlying digitisation trend has been accelerated by
the pandemic and we have continued to support new and existing customers as
they respond to changing demands in their organisations.
Our high level of activity with our customers has translated into an excellent
set of results for our financial year.
Revenue grew by 29% to £302.6 million (2021: £234.7 million) with adjusted
pre-tax profit increasing by 3% to £58.8 million (2021: £57.1 million). As
expected, our profit growth moderated as recruitment, training and marketing
costs returned to normal levels; as we experienced increased salary costs and
the increased use of contract staff; and we increased investment in our
software products.
Our sales performance underlines our success in winning business while
continuing to operate on a remote basis - extensions to existing contracts,
additional projects placed by existing customers and winning new customers.
Bookings increased 35% to £349.8 million (2021: £258.8 million), which
resulted in a 26% increase in the contracted backlog to £259.7 million (2021:
£206.2 million).
On 31 March 2022, following dividend payments and acquisition expenses we had
a strong cash balance of £76.6 million (2021: £80.9 million including
treasury deposits), representing 83% cash conversion (2021: 112%).
Our people
We are clear that our success is driven by the ability, energy and expertise
of the people in Kainos.
Our employee engagement levels remain high. Once again, our people have voted
us into the Top 100 in the Sunday Times 'Best Companies to Work For' survey
and in early 2022 we were awarded '50 Best Places to Work For in the UK' by
Glassdoor, the online career community.
During the year, 86% of our colleagues made the choice to stay and develop
their career within Kainos (2021: 92%). While we remain focused on improving
as an employer, we also recognise that these reduced levels of retention are
also reflective of a global shortage of digital skills.
Since last year, our headcount has grown by 668 to 2,692 people (2021: 2,024),
including 153 new colleagues who joined through our acquisitions. Of our
colleagues, 12% are contractors (2021: 15%). By region, UK & Ireland
increased to 1,940 people (+399), Central Europe increased to 415 people (+74)
and the Americas increased to 337 people (+195).
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 - 98% of respondents to our
customer surveys rated our service as 'good' or above (2021: 98%).
Existing customers continue to trust us to deliver their most challenging
projects, and this is reflected in our revenues, with 88% of revenues coming
from our existing clients (2021: 85%). We have also gained new customers
during the year, and we now work with 731 customers (2021: 546).
From a sector perspective we have a well-diversified business, with 41% of our
revenues from commercial clients (2021: 35%), 37% from public sector
organisations (2021: 45%), and 22% from healthcare customers (2021: 20%).
Our international client base has also expanded and as a result our
international revenues have grown by 48% to £87.0 million (2021: £59.0
million). Regionally, UK & Ireland accounts for 71% of our business (2021:
75%), North America for 19% (2021: 16%), Central Europe for 9% (2021: 8%),
with the rest of the world representing 1% (2021: 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 24% to £199.8 million (2021: £161.6 million), while our
bookings increased by 36% to £215.0 million (2021: £157.7 million);
correspondingly the backlog increased by 11% to £132.7 million (2021: £119.4
million).
With more opportunities in our addressable markets than we have people to
deliver them, we have been prioritising which work we undertake. At the top of
that list is our existing project and customer commitments, followed by
prioritising new engagements in the commercial and healthcare sectors as we
work towards a more balanced sector coverage within the division. All sectors
grew during the year, with public sector now representing 54% of divisional
revenues (2021: 63%), healthcare 33% (2021: 27%) and commercial sector 13%
(2021: 10%).
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. As a result, revenues increased by 6% to £108.4
million (2021: £102.2 million).
Within central government, we continue to consolidate our strong position
across key accounts, securing new contracts to deliver digital programmes
including Data Products for HM Passport Office (£92 million, five years) and
with Defra to deliver their Europe and Trade Delivery Portfolio, and Future
Farming and Countryside Programme (£54.5 million, two years).
Commercial sector
In the UK, the commercial sector 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.
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 Concardis and New
Ireland and new customers such as IMCO, Danske Bank and Federated Hermes
Limited.
Reflecting these higher activity levels, our revenues increased 60% to £25.1
million (2021: £15.7 million).
Healthcare sector
Our healthcare revenues increased by 52% to £66.3 million (2021: £43.7
million).
We have enjoyed strong partnerships with both NHS Digital and NHS X, who have
now been merged to form NHS England's new Transformation Directorate. In the
past year, our work has been a blend of providing ongoing support to Covid-19
initiatives and, increasingly, to broader healthcare provision and how
technology can support the NHS with its ambitious digital plans. In this
regard, we are delighted to be named on the £800 million Digital Capability
for Health framework.
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 Concardis
and in the commercial and public sector in Canada with Investment Management
Corporation of Ontario (IMCO) and Government of Canada.
Our international revenues are reported in the figures in the above sectors,
but for clarity, international revenues for the division have increased by
112% to £5.5 million (2021: £2.6 million).
Digital Services outlook
We remain extremely positive about the future of digitisation in the UK public
sector and within the NHS, 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 year 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 our Workday Practice client base.
Workday Practice performance
Having first engaged with Workday, Inc. 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 39 partners globally who are accredited to implement
Workday's innovative SaaS platform.
Revenue for the period grew by 41% to £102.8 million (2021: £73.1 million)
and backlog for the division increased by 46% to £127.0 million (2021: £86.7
million), reflecting an increase in bookings of 33% to £134.8 million (2021:
£101.1 million).
The number of accredited Workday consultants at Kainos increased by 53% to 638
(2021: 416).
Workday Services
Within Europe, we continue to consolidate our position as the leading Workday
partner. This leadership position is the result of high satisfaction levels
within our customer base, our geographic expansion and, more recently, the
acquisition of Cloudator.
Our international growth started in Europe in 2015 when we opened our office
in Amsterdam, we now have colleagues based across 17 European countries (2021:
13). Having entered the North American market in 2018, we now have 323 people
(2021: 142) focused on clients in the region.
Within the ecosystem there is an established trend of larger partners buying
smaller organisations(()( 5 )()), and we anticipate further transactions will
occur in the future. The reduction in the number of partners provides further
growth opportunities for Kainos.
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.
Revenue for the year grew by 45% to £70.9 million (2021: £49.0 million);
backlog increased by 46% to £51.1 million (2021: £34.9 million); and
bookings increased 31% to £78.2 million (2021: £59.9 million).
Acquisitions
In June 2021, we completed the acquisition of Cloudator (55 people), the
largest Workday partner in the Nordic region. In September 2021 Buenos
Aires-based Une Consulting (42 people) was also acquired, further
strengthening our Workday capability in North and South America. In January
2022 we acquired US-based spend management specialist Blackline Group (50
people) and in February 2022 we acquired Planalyse (six people) a
well-regarded Workday Adaptive Planning partner based in the Netherlands.
Through these acquisitions, we are delighted to have added the expertise of
153 new colleagues.
In total, the acquisitions completed during the period contributed revenue of
£7.7 million (2021: £nil). The net cash-outflow in the period (cash paid
less cash acquired) was £16.8 million.
Smart product suite
Workday is a comprehensive SaaS platform, but we believe that there are
opportunities to develop software components that are complementary to the
platform and 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 currently
consists of six modules: HCM, Security, Financials, Payroll, Recruitment and
Advanced Compensation, with a further three modules due to launch during 2022
and 2023. In Workday's inaugural Innovation Awards, Smart Test came first in
the Product Innovation category. Smart Test is used by over 300 global
customers, including Netflix, Johnson & Johnson and WWE.
Smart Audit became generally available in August 2021 and has already been
deployed to over 40 customers including Match.com, University of Virginia and
Viasat. Smart Audit is a compliance monitoring tool that allows Workday
customers to maintain operational controls over 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 total, Smart product bookings increased 37% to £56.6 million (2021: £41.2
million). This very strong sales performance resulted in revenue increasing
32% to £31.9 million (2021: £24.2 million), of which £28.9 million relates
to SaaS subscriptions (2021: £21.0 million); the Annual Recurring Revenue was
£34.3 million (2021: £23.6 million), an increase of 45% and backlog
increased 47% to £75.9 million (2021: £51.8 million).
Workday Extend
Workday, Inc. has a Platform-as-a-Service offering known as Workday Extend,
(previously Workday Cloud Platform) 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 customers to build additional, specialised functionality
on the Workday platform to further enhance their Workday deployment. As
experts in Workday Extend, we have helped organisations such as Hilti and
Aggreko build Workday Extend applications.
In addition to these services-based assignments, Workday Extend provides the
opportunity to build further products. During 2021 we have built and deployed
applications such as Return to Work, Vaccination Management and Rewards and
Recognition. While the focus of these initial deployments has been to
demonstrate the capability of Workday Extend, we believe that there are
opportunities to create paid-for applications.
Workday Practice outlook
Our strong performance provides further evidence of the strength of the
Workday market. With Workday, Inc.'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 goal of achieving $10 billion
revenue by 2026.
In addition, we believe that we can outpace this rapid market growth by
continuing our international expansion and by replacing other Workday partners
in engagements where they are under-serving their customers.
For Smart Test and Smart Audit, and other products that we may develop, our
growth will be powered by the increase in Workday clients and by higher
penetration of our products 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 £6.2 million (2021: £4.2 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 spans the Company 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 (supporting 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 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. Now a team of 25 people, including externally
recruited experts, have seen us 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 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 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, the
Confederation of British Industry 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, Inc. 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
FY22 was another year of excellent financial performance as is detailed
further in the 'Operational Review'.
In summary, we achieved revenue of £302.6 million (2021: £234.7 million),
representing an increase of 29%. Digital Services revenue grew 24% to £199.8
million (2021: £161.6 million), reflecting increased demand for digital
transformation across all sectors. Our Workday Practice grew in all its
regional markets and as a result revenue grew by 41% (30% organic) to £102.8
million (2021: £73.1 million). This was driven by 45% growth (29% organic) in
Workday Services to £70.9 million (2021: £49.0 million) and 32% growth in
Smart products to £31.9 million (2021: £24.2 million).
Overall gross margin was 46.3% (2021: 50.4%). Digital Services margins
decreased to 38.7% (2021: 44.6%) mainly due to the normalisation of
utilisation levels, increased salary and contractor costs and the decrease of
Covid-19 related cost savings previously highlighted as non-recurring in
nature. Workday Practice margins decreased to 61.1% (2021: 63.3%), also driven
mainly by reduced utilisation and increased salary and contractor costs.
Operating expenses
Operating expenses for the year increased by 37% to £93.6 million (2021:
£68.2 million). The growth in operating expenses is higher than the revenue
growth due to the reduction of non-recurring cost savings in training,
recruitment, facilities and travel during the pandemic lockdown, increased
investment in our Smart products in both sales and product development, and
increased acquisition-related expenses.
Investment in product development increased to £6.2 million (2021: £4.2
million) with all product development costs expensed. Research and Development
Expenditure Credit (RDEC) grants recognised during the year totalled £3.2
million (2021: £3.6 million).
Alternative performance measures
The business is managed and measured on a day-to-day basis using underlying
results. The Directors believe that the 'adjusted profit before tax',
'adjusted EBITDA' and the 'adjusted diluted and basic earnings per share'
measures presented are more representative of the underlying performance of
the Group and enable comparability between periods.
To arrive at adjusted results, adjustments are made to 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 are not defined performance measures in
UK-adopted IFRS standards. The Group's definition may not be comparable with
similarly titled performance measures and disclosures in other entities.
Adjusted profit measures can be reconciled to the reported numbers as follows:
Adjusted profit measures
2022 2021
(£000s) (£000s)
Profit before tax 45,993 50,341
Share-based payment expense and related costs 3,727 4,513
Amortisation of acquired intangible assets 1,890 383
Compensation for post-combination services 5,520 1,836
Acquisition-related expenses 1,641 -
Adjusted profit before tax 58,771 57,073
2022 2021
(£000s) (£000s)
Profit after tax 35,768 39,601
Share-based payment expense and related costs 2,907 3,656
Amortisation of acquired intangible assets 1,890 383
Compensation for post-combination services 5,520 1,760
Acquisition-related expenses 1,641 -
Adjusted profit after tax 47,726 45,400
Adjusted EBITDA
2022 2021
(£000s) (£000s)
Adjusted profit before tax 58,771 57,073
Depreciation of property, plant and equipment 1,538 921
Depreciation of right-of-use assets 1,654 1,786
Finance expense 74 78
Finance income (52) (84)
Adjusted EBITDA 61,985 59,774
Adjusted pre-tax profit increased by 3% to £58.8 million (2021: £57.1
million). Profit before tax decreased by 9% to £46.0 million (2021: £50.3
million) driven by acquisition-related expenses.
Corporation tax charge
The effective tax rate for the year was 22% (2021: 21%), which is higher than
the UK tax rate of 19% due to acquisition expenses which are not deductible
for tax and our geographic mix of profits.
Financial position
We continue to have a strong financial position, with £76.6 million of cash
and treasury deposits (2021: £80.9 million), no debt and net assets of
£107.7 million (2021: £87.6 million). The combined underlying trade
receivables and accrued income totalled £74.7 million (2021: £52.1 million),
which increased due to the revenue growth in FY22 and due to the fact FY21 had
exceptionally high cash conversion.
Property, plant and equipment increased to £14.9 million at year end (2021:
£10.3 million). Spending during the year related mainly to premises
refurbishment costs and office equipment purchases.
The acquisitions of Cloudator, Une Consulting and Blackline completed during
the year, increased the carrying value of goodwill to £18.8 million at 31
March 2022 (2021: £3.1 million) and intangibles to £6.0 million (2021: £3.3
million).
Cash flow and cash conversion
Cash conversion, calculated by taking cash generated by operating activities
as a percentage of EBITDA continued to be strong at 83% (2021: 112%).
Dividend
We continue to adopt a progressive dividend policy; maximising shareholder
return alongside retaining sufficient funds to invest in long-term growth. We
have consistently been profitable and have generated a strong cash balance.
The proposed final dividend, if approved by shareholders, is 15.1p and would
be payable on 28 October 2022 to all shareholders on the Register of Members
on 7 October 2022, and with an ex-dividend date of 6 October 2022. This will
make the total dividend for the year 22.2p (2021: 28.2p) which will represent
a distribution of 58% of the adjusted profit after taxation for the year
(2021: 76%). The total dividend for FY21 of 28.2p includes a special dividend
paid in September 2020 of 6.7p per share. Excluding this special dividend the
total interim and final dividend for FY21 of 21.5p represents a distribution
of 58% of the adjusted profit after taxation for this year.
Consolidated income statement for the year ended 31 March 2022
Continuing operations Note 2022 2021
(£000s) (£000s)
Revenue 2 302,632 234,694
Cost of sales 2 (162,386) (116,396)
Gross profit 2 140,246 118,298
Operating expenses (93,625) (68,232)
Impairment (loss)/gain (including amounts recovered) on trade receivables and (606) 269
accrued income
Operating profit 46,015 50,335
Finance income 52 84
Finance expense (74) (78)
Profit before tax 45,993 50,341
Income tax expense (10,225) (10,740)
Profit for the year 35,768 39,601
Earnings per share
Basic 7 29.1p 32.5p
Diluted 7 28.5p 32.1p
Consolidated statement of comprehensive income for the year ended 31 March
2022
2022 2021
(£000s) (£000s)
Profit for the year 35,768 39,601
Items that may be reclassified subsequently to profit or loss:
Foreign operations - foreign currency translation differences 728 (1,132)
Total comprehensive income for the year 36,496 38,469
Consolidated statement of financial position as at 31 March 2022
Note 2022 2021
(£000s) (£000s)
Non-current assets
Goodwill 18,765 3,121
Other intangible assets 5,993 3,288
Property, plant and equipment 14,867 10,287
Right-of-use assets 3,166 3,857
Investments in equity instruments 1,343 1,225
Deferred tax asset 4,282 4,020
48,416 25,798
Current assets
Trade and other receivables 8 38,358 36,609
Prepayments 8 4,377 2,777
Accrued income 8 39,462 18,354
Treasury deposits - 18,028
Cash and cash equivalents 76,609 62,896
158,806 138,664
Total assets 207,222 164,462
Current liabilities
Trade payables and accruals 9 (49,199) (35,976)
Deferred income 9 (30,966) (21,985)
Current tax liabilities (1,959) (2,863)
Lease liabilities (1,093) (1,249)
Provisions (872) -
Other tax and social security 9 (11,917) (10,652)
(96,006) (72,725)
Non-current liabilities
Provisions (1,258) (1,735)
Lease liabilities (2,268) (2,394)
(3,526) (4,129)
Total liabilities (99,532) (76,854)
Net assets 107,690 87,608
Equity
Share capital 619 614
Share premium account 6,433 5,737
Capital reserve 3,548 662
Share-based payment reserve 15,171 9,083
Translation reserve 251 (477)
Retained earnings 81,668 71,989
Total equity 107,690 87,608
These financial statements were approved by the Board of Directors and
authorised for issue on 20 May 2022. They were signed on its behalf by:
Richard McCann
Director
20 May 2022
Consolidated statement of changes in equity for the year ended 31 March 2022
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 2020 610 5,446 664 5,610 655 46,169 59,154
Profit for the year - - - - - 39,601 39,601
Other comprehensive income - - - - (1,132) - (1,132)
Total comprehensive income for the year - - - - (1,132) 39,601 38,469
Equity-settled share-based payment - - - 3,473 - - 3,473
Current tax for equity-settled share-based payments - - - - - 441 441
Deferred tax for equity-settled share-based payments - - - - - 1,804 1,804
Issue of share capital 4 291 (2) - - - 293
Dividends - - - - - (16,026) (16,026)
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(()( 6 )()) - (1,600) 1,600 - - (-) -
Dividends - - - - - (27,419) (27,419)
Balance at 31 March 2022 619 6,433 3,548 15,171(()( 7 )()) 251 81,668 107,690
Consolidated statement of cash flows for the year ended 31 March 2022
2022 2021
(£000s) (£000s)
Cash flows from operating activities
Profit for the year 35,768 39,601
Adjustments for:
Finance income (52) (84)
Finance expense 74 78
Tax expense 10,225 10,740
Share-based payment expense 3,727 4,513
Depreciation of property, plant and equipment 1,538 921
Depreciation of right-of-use assets 1,654 1,786
Amortisation of intangible assets 1,890 383
Loss on disposal of property, plant and equipment 8 114
Post-acquisition remuneration settled by shares 2,950 760
Increase/(decrease) in provisions 395 (793)
Operating cash flows before movements in working capital 58,177 58,019
Increase in trade and other receivables (22,996) (9,262)
Increase in trade and other payables 16,571 18,397
Cash generated from operating activities 51,752 67,154
Income taxes paid (7,089) (7,213)
Net cash from operating activities 44,663 59,941
Cash flows from investing activities
Interest received 52 84
Purchases of property, plant and equipment (5,819) (1,468)
Acquisition of other investments (74) (200)
Amounts withdrawn/(placed) on treasury deposit 18,028 (18,028)
Acquisition of subsidiaries net of cash acquired (16,768) -
Net cash used in investing activities (4,581) (19,612)
Cash flows from financing activities
Dividends paid (27,419) (16,026)
Interest paid (74) (78)
Repayment of lease liabilities (1,409) (1,763)
Proceeds on issue of shares 2,301 293
Net cash used in financing activities (26,601) (17,574)
Net increase in cash and cash equivalents 13,481 22,755
Cash and cash equivalents at beginning of year 62,896 40,785
Effect of exchange rate fluctuations on cash held 232 (644)
Cash and cash equivalents at end of year 76,609 62,896
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 IFRSs'). 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 2022 or 31 March
2021 but is derived from those accounts. Statutory accounts for the year ended
31 March 2021 have been delivered to the registrar of companies, and those for
2022 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 20 May
2022.
2. Segment reporting
All of the Group's revenue during the year to 31 March 2022 was derived from
continuing operations. Kainos is structured into two operating divisions:
Digital Services and the Workday Practice.
The following is an analysis of the Group's revenue and results by reportable
segment:
2022 Digital Services Workday Practice Consolidated
12 months to 31 March (£000s) (£000s) (£000s)
Revenue 199,831 102,801 302,632
Cost of sales (122,430) (39,956) (162,386)
Gross profit 77,401 62,845 140,246
Direct expenses(()( 8 )()) (21,723) (37,598) (59,321)
Contribution 55,678 25,247 80,925
Central overheads(()(8)) (22,132)
Net finance expense (22)
Adjusted pre-tax profit 58,771
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
2021 Digital Workday Practice Consolidated
12 months to 31 March Services (£000s) (£000s)
(£000s)
Revenue 161,572 73,122 234,694
Cost of sales (89,578) (26,818) (116,396)
Gross profit 71,994 46,304 118,298
Direct expenses(()(8)()) (16,419) (27,366) (43,785)
Contribution 55,575 18,938 74,513
Central overheads(()(8)) (17,446)
Net finance income 6
Adjusted pre-tax profit 57,073
Share-based payments expense and related costs (4,513)
Amortisation of acquired intangible assets (383)
Compensation for post-combination remuneration (1,836)
Profit before tax 50,341
The Group's revenue from external customers by geographic location is detailed
below:
2022 2021
(£000s) (£000s)
United Kingdom & Ireland 215,606 175,710
North America 58,712 38,099
Central Europe 27,125 19,631
Rest of world 1,189 1,254
302,632 234,694
Disaggregation of the Group's revenue is presented in the following tables:
Digital Services Digital Services Workday Practice Workday
2022 2021 2022 Practice Total Total
2021 2022 2021
(£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
Type of revenue
Services 188,630 151,163 64,475 46,920 253,105 198,083
SaaS and related 5,947 5,385 38,295 26,159 44,242 31,544
Third party and other 5,254 5,024 31 43 5,285 5,067
199,831 161,572 102,801 73,122 302,632 234,694
Revenue recognition
At a point in time 5,254 5,024 31 43 5,285 5,067
Over time 194,577 156,548 102,770 73,079 297,347 229,627
199,831 161,572 102,801 73,122 302,632 234,694
2022 2021
Digital Services (£000s) (£000s)
Public 108,400 102,180
Commercial 25,120 15,653
Healthcare 66,311 43,739
199,831 161,572
Workday Practice
Public 2,582 3,314
Commercial 98,678 65,428
Healthcare 1,541 4,380
102,801 73,122
Total 302,632 234,694
Revenue for the Workday Practice can also be analysed as follows:
2022 2021
(£000s) (£000s)
Workday Practice
Workday Services 70,868 48,972
Smart 31,933 24,150
102,801 73,122
3. Profit for the year
Profit for the year has been arrived at after charging/(crediting):
2022 2021
(£000s) (£000s)
Total staff costs 168,395 125,962
Government grants (479) (2,193)
Research and development expensed as incurred 6,176 4,162
Research and Development Expenditure Credit (3,205) (3,643)
Depreciation of property, plant and equipment 1,538 921
Depreciation of right-of-use assets 1,654 1,786
Loss on disposal of property, plant and equipment 8 114
Net foreign exchange loss/(gain) 62 (128)
Amortisation of acquired intangibles 1,890 383
4. Staff numbers
The average number of employees during the year was:
2022 2021
Number Number
Technical 1,705 1,283
Administration 234 190
Sales 158 111
2,097 1,584
5. Tax expense
2022 2021
(£000s) (£000s)
Current tax expense:
Current year (UK) 7,882 9,233
Current year (overseas) 4,011 2,433
Adjustments in respect of prior years (1,043) (47)
10,850 11,619
Deferred tax
Origination and reversal of temporary differences (1,187) (879)
Adjustment to prior years 637 -
Change in tax rate (75) -
(625) (879)
10,225 10,740
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:
2022 2021
(£000s) (£000s)
Current tax
Permanent element of share-based payment deduction 1,610 441
Deferred tax
Deferred tax on share-based payments (883) 1,804
Effect of rate change 603 -
Total tax recognised directly in equity 1,330 2,245
UK corporation tax has been calculated at 19% (2021: 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 2022 was 22% (2021: 21%).
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 by the balance sheet
date and therefore included in these financial statements. Temporary
differences have been remeasured using these enacted tax rates that are
expected to apply when the liability is settled, or the asset realised. The
impact of this remeasurement has 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:
2022 2021
(£000s) (£000s)
Profit before tax on continuing operations 45,993 50,341
Tax at the UK corporation tax rate of 19% (2021: 19%) 8,739 9,565
Expenses not deductible for tax purposes 1,050 544
Tax exempt income (35) (60)
Effect of foreign exchange on consolidation 214 (65)
Effect of tax rates in foreign jurisdictions 671 803
Adjustments to tax charge in respect of prior years (406) (47)
Change in UK tax rates (8) -
Tax expense for the year 10,225 10,740
Effective tax rate 22% 21%
6. Dividend
2022 2021
(£000s) (£000s)
Amounts recognised as distributions to equity holders in the period:
Interim dividend for 2022 of 7.1p per share 8,774 -
Final dividend for 2021 of 15.1p per share 18,645 -
Interim dividend for 2021 of 6.4p per share - 7,831
Special dividend paid September 2020 of 6.7p per share - 8,195
27,419 16,026
The Board has proposed a final dividend in respect of the year ended 31 March
2022 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 15.1p per share (£18.7 million in total) and payable on
28 October 2022 to all shareholders on the Register of Members on 7 October
2022, and with an ex-dividend date of 6 October 2022.
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.
2022 2021
(£000s) (£000s)
Profit attributable to ordinary shareholders 35,768 39,601
Thousands Thousands
Issued ordinary shares at 1 April 122,785 122,089
Effect of shares held in trust (863) (917)
Effect of share options vested and exercised 802 646
Effect of shares issued related to a business combination 31 -
Effect of shares issued related to free share awards 49 80
Weighted average number of ordinary shares at 31 March 122,804 121,898
Basic earnings per share 29.1p 32.5p
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.
2022 2021
(£000s) (£000s)
Profit attributable to ordinary shareholders 35,768 39,601
Thousands Thousands
Weighted average number of ordinary shares (basic) 122,804 121,898
Effect of share options on issue 1,256 611
Effect of shares held in trust 863 917
Effect of potential shares to be issued related to a business combination 410 -
Weighted average number of ordinary shares (diluted) at 31 March 125,333 123,426
Diluted earnings per share 28.5p 32.1p
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 2022, 39,451 options (2021: 47,067) 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.
2022 2021
(£000s) (£000s)
Adjusted profit for the year 47,726 45,400
Thousands Thousands
Weighted average number of ordinary shares for the purposes of basic earnings 122,804 121,898
per share
Weighted average number of ordinary shares for the purposes of diluted 125,333 123,426
earnings per share
Adjusted basic earnings per share 38.9p 37.2p
Adjusted diluted earnings per share 38.1p 36.8p
8. Trade and other receivables
2022 2021
(£000s) (£000s)
Trade receivables 35,228 33,739
Other receivables 3,130 2,870
38,358 36,609
Prepayments 4,377 2,777
Accrued income 39,462 18,354
82,197 57,740
9. Trade and other payables
2022 2021
(£000s) (£000s)
Trade payables and accruals 49,199 35,976
Deferred income 30,966 21,985
Current tax liabilities 1,959 2,863
Other tax and social security 11,917 10,652
94,041 71,476
(#_ftnref1) (()( 1 )()) FY21 includes treasury deposits of £18.0 million.
(#_ftnref2) (()( 2 )()) Total dividend for FY21 includes a special dividend of
6.7p per share (paid September 2020), interim dividend of 6.4p per share (paid
December 2020) and final dividend of 15.1p per share. Total dividend for FY22
includes interim dividend of 7.1p per share and proposed final dividend of
15.1p per share.
(#_ftnref3) (()( 3 )()) 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.
(#_ftnref4) (()( 4 )()) BCS diversity report 2021: Women in IT.
(#_ftnref5) (()( 5 )()) Recent transactions include the Ataraxis acquisition
by HR Path (2018). In 2019 Alight acquired the Workday-related business
elements of Wipro, for a reported $110 million (350 consultants). In 2020,
Accenture acquired US-focused Sierra-Cedar (275 consultants) and Cognizant
completed the acquisition of Collaborative Solutions (c.1,000 consultants).
(#_ftnref6) (()( 6 )()) 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.
(#_ftnref7) (()( 7 )()) £10.3 million relates to exercised or lapsed
options and is considered distributable.
(#_ftnref8) (()( 8 )()) 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.
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 SEDEFSEESEIIRecent 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 - Transaction in Own Shares
Announcement