TIDMKNOS
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
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Revenue GBP302.6m GBP234.7m +29%
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Statutory profit before tax GBP46.0m GBP50.3m -9%
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Adjusted pre-tax profit GBP58.8m GBP57.1m +3%
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Cash ([1]) GBP76.6m GBP80.9m -5%
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Bookings GBP349.8m GBP258.8m +35%
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Product Annual Recurring Revenue (ARR) GBP34.3m GBP23.6m +45%
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Contracted backlog GBP259.7m GBP206.2m +26%
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Diluted earnings per share 28.5p 32.1p -11%
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Adjusted diluted earnings per share 38.1p 36.8p +4%
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Total dividend per share ([2]) 22.2p 28.2p -21%
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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 GBP302.6 million (2021: GBP234.7 million).
-- Adjusted pre-tax profit increased 3% to GBP58.8 million
(2021: GBP57.1 million) as margins moderated following increased
investment and the further normalisation of costs.
-- Bookings up 35% to GBP349.8 million (2021: GBP258.8 million).
-- Contracted backlog growth of 26% to GBP259.7 million (2021: GBP206.2 million).
-- Following dividend payments and acquisition expenses,
period-end cash amounted to GBP76.6 million (2021: GBP80.9
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 GBP267.7 million (2021: GBP199.7 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 GBP199.8 million
(2021: GBP161.6 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 GBP70.9 million (2021: GBP49.0 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 GBP31.9 million (2021:
GBP24.2 million); at the same time the Annual Recurring Revenue
(ARR) increased 45% to GBP34.3 million (2021: GBP23.6 million).
-- We continued to invest in our Smart products, increasing our
R&D expenditure by 67%, to GBP6.0 million (2021: GBP3.6
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 GBP123.8 million (2021: GBP81.1 million).
-- Public sector revenues are up 5% to GBP111.0 million (2021: GBP105.5 million).
-- Healthcare revenues are up 41% to GBP67.9 million (2021: GBP48.1 million).
-- International revenues are up 48% to GBP87.0 million (2021: GBP59.0 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 GBP300 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 .
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: GBP199.8 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: GBP70.9 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: GBP31.9 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: GBP302.6 million (2021: GBP234.7 million).
-- Adjusted profit: GBP58.8 million (2021: GBP57.1 million).
-- Bookings: GBP349.8 million (2021: GBP258.8 million).
-- Contracted sales backlog: GBP259.7 million (2021: GBP206.2 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
GBP302.6 million, a 29% increase, and our adjusted pre-tax profit
growing 3% to GBP58.8 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 GBP199.8
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 GBP5.5 million, from GBP2.6 million a year ago. Our Data and AI
practice grew 95% to GBP15.8 million, with our Intelligent
Automation practice delivering revenues of GBP1.0 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 GBP31.9 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 GBP100
million and as a result we invested further in product development
(increased by GBP2.4 million to GBP6.0 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 * Maintain high standards when recruiting new
colleagues. applicants.
* This included 159 people who joined from school or * Invest in skills and career development of all
college. colleagues in Kainos.
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* Maintained our Sunday Times 'Best Companies to Work * Maintain or improve our employee engagement scores as
For' Top 100 ranking. measured independently.
* We were ranked in the '50 Best Places to Work in the * Ensure that employee retention remains high.
UK', by Glassdoor.
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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%.
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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 GBP108.4 * Maintain growth trajectory in both sectors,
million (2021: GBP102.2 million). supporting existing clients and projects, and addin
g
new long-term clients in line with our delivery
* Healthcare revenues increased by 52% to GBP66.3 capacity.
million (2021: GBP43.7 million).
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* Commercial sector revenues increased by 60% to * Continue to build reputation and references in the
GBP25.1 million (2021: GBP15.7 million). sector to maintain our accelerated growth.
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* Central Europe revenues increased by 101% to GBP5.2 * Continue to build reputation and references within
million (2021: GBP2.6 million). both regions.
* North American activity started during the year, * Refine sales and marketing approach as market
generating GBP0.3 million in revenues. penetration increases.
* 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 GBP70.9 * Maintain growth trajectory in all regions, suppor
million (2021: GBP49.0 million). ting
existing clients and projects, and adding new
long-term clients in line with capacity.
* Smart product revenues increased by 32% to GBP31.9
million (2021: GBP24.2 million).
========================================================
* We were appointed to 30+ customers where earlier * Continue to excel in customer service.
phases of the project were undertaken by a different
partner.
========================================================
* International revenues increased 46% to GBP81.5 * Maintain growth trajectory in all regions.
million (2021: GBP55.7 million).
* Continue to welcome our new colleagues to Kainos,
* Four international acquisitions completed in combining their capabilities with existing Kainos
Argentina, Netherlands, USA and the Nordics, adding teams.
153 new colleagues.
* Ensure consistent, high-quality service to new
clients originated by the acquisitions.
========================================================
* Smart R&D investment increased 67% to GBP6.0 million * Accelerate growth trajectory of Smart products.
(2021: GBP3.6 million).
* Launch our third Smart product, gaining significa
* Annual Recurring Revenue for Smart products increased nt
45% to GBP34.3 million (2021: GBP23.6 million). early adoption.
========================================================
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 * Maintain growth trajectory.
Intelligence practice is now 120 people, and has
grown revenues by 95% to GBP15.8 million (2021:
GBP8.1 million) * Manage investment levels in line with total 'new
opportunities' investments.
===========================================================
* Launched in 2020, our Intelligent Automation practice * Maintain growth trajectory.
is now 25 people and has grown revenues to GBP1.0
million (2021:
* Refine sales and marketing approach as we build
increased scale in customers.
===========================================================
* Launched in 2017, our Cloud practice now encompasses * Maintain growth trajectory.
160 people, with revenues of GBP11.7 million (2021:
GBP6.8 million), a growth of 73%.
* Extend offerings internationally, focused on Canada
and Germany in the first instance.
===========================================================
* Establish early adopter clients.
* In 2021, we launched our Digital Advisory practice,
it now includes 10 people on the team.
===========================================================
Within the innovation process,
there were 10 ideas evaluated: * Increase the number of submissions to the innovation
* Seven ideas stopped at investigation stage. process.
* 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 GBP302.6 million (2021: GBP234.7 million)
with adjusted pre-tax profit increasing by 3% to GBP58.8 million
(2021: GBP57.1 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
GBP349.8 million (2021: GBP258.8 million), which resulted in a 26%
increase in the contracted backlog to GBP259.7 million (2021:
GBP206.2 million).
On 31 March 2022, following dividend payments and acquisition
expenses we had a strong cash balance of GBP76.6 million (2021:
GBP80.9 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 GBP87.0 million
(2021: GBP59.0 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 GBP199.8 million (2021: GBP161.6
million), while our bookings increased by 36% to GBP215.0 million
(2021: GBP157.7 million); correspondingly the backlog increased by
11% to GBP132.7 million (2021: GBP119.4 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 GBP108.4 million (2021: GBP102.2 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
(GBP92 million, five years) and with Defra to deliver their Europe
and Trade Delivery Portfolio, and Future Farming and Countryside
Programme (GBP54.5 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 GBP25.1 million (2021: GBP15.7 million).
Healthcare sector
Our healthcare revenues increased by 52% to GBP66.3 million
(2021: GBP43.7 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 GBP800 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 GBP5.5 million (2021: GBP2.6
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 GBP102.8 million (2021:
GBP73.1 million) and backlog for the division increased by 46% to
GBP127.0 million (2021: GBP86.7 million), reflecting an increase in
bookings of 33% to GBP134.8 million (2021: GBP101.1 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 GBP70.9 million (2021:
GBP49.0 million); backlog increased by 46% to GBP51.1 million
(2021: GBP34.9 million); and bookings increased 31% to GBP78.2
million (2021: GBP59.9 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 GBP7.7 million (2021: GBPnil). The net
cash-outflow in the period (cash paid less cash acquired) was
GBP16.8 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 GBP56.6
million (2021: GBP41.2 million). This very strong sales performance
resulted in revenue increasing 32% to GBP31.9 million (2021:
GBP24.2 million), of which GBP28.9 million relates to SaaS
subscriptions (2021: GBP21.0 million); the Annual Recurring Revenue
was GBP34.3 million (2021: GBP23.6 million), an increase of 45% and
backlog increased 47% to GBP75.9 million (2021: GBP51.8
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 GBP6.2 million (2021: GBP4.2
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 GBP302.6 million (2021:
GBP234.7 million), representing an increase of 29%. Digital
Services revenue grew 24% to GBP199.8 million (2021: GBP161.6
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
GBP102.8 million (2021: GBP73.1 million). This was driven by 45%
growth (29% organic) in Workday Services to GBP70.9 million (2021:
GBP49.0 million) and 32% growth in Smart products to GBP31.9
million (2021: GBP24.2 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 GBP93.6
million (2021: GBP68.2 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 GBP6.2 million
(2021: GBP4.2 million) with all product development costs expensed.
Research and Development Expenditure Credit (RDEC) grants
recognised during the year totalled GBP3.2 million (2021: GBP3.6
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
(GBP000s) (GBP000s)
============ ===========
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
(GBP000s) (GBP000s)
============================================== ============ ===========
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
(GBP000s) (GBP000s)
=========== ==========
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 GBP58.8 million
(2021: GBP57.1 million). Profit before tax decreased by 9% to
GBP46.0 million (2021: GBP50.3 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 GBP76.6
million of cash and treasury deposits (2021: GBP80.9 million), no
debt and net assets of GBP107.7 million (2021: GBP87.6 million).
The combined underlying trade receivables and accrued income
totalled GBP74.7 million (2021: GBP52.1 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 GBP14.9 million at
year end (2021: GBP10.3 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 GBP18.8 million at 31 March 2022 (2021: GBP3.1 million) and
intangibles to GBP6.0 million (2021: GBP3.3 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
(GBP000s) (GBP000s)
========================================= ===== =========== ==========
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 accrued income (606) 269
========================================= ===== =========== ==========
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 729.1p 32.5p
=================== ===== =====
Diluted 728.5p 32.1p
=================== ===== =====
Consolidated statement of comprehensive income for the year
ended 31 March
2022
2022 2021
(GBP000s) (GBP000s)
================================================== === =========== ==========
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
(GBP000s) (GBP000s)
================================== ===== =========== ==========
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 Retained Total
capital premium reserve payment reserve earnings equity
reserve
(GBP000s)
(GBP000s) (GBP000s)
(GBP000s) (GBP000s) (GBP000s) (GBP000s)
======================== ========== ========== ========== =========== =========== ========== ==========
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)
======================== ========== ========== ========== =========== =========== ========== ==========
15,171(
Balance at 31 ([7])
March 2022 619 6,433 3,548 () 251 81,668 107,690
======================== ========== ========== ========== =========== =========== ========== ==========
Consolidated statement of cash flows for the year ended 31 March
2022
2022 2021
(GBP000s) (GBP000s)
============================================== === ============ ===========
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 Workday
Digital Services Practice Consolidated
12 months to 31 March (GBP000s) (GBP000s) (GBP000s)
================================== === ================= =========== =============
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
12 months to 31 March Workday
Services Practice Consolidated
(GBP000s) (GBP000s) (GBP000s)
==================================== === =========== =========== =============
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 expens e s( (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
(GBP000s) (GBP000s)
========= ================= =========== ==========
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 Digital Workday Workday
Services Services Practice Practice Total Total
2022 2021 2022 2021 2022 2021
-----------
(GBP000s) (GBP000s) (GBP000s) (GBP000s) (GBP000s) (GBP000s)
==================== ========= ========= ========= ========= =========== ==========
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
==================== ========= ========= ========= ========= =========== ==========
Digital Services 2022 2021
(GBP000s) (GBP000s)
===================================================== ========= =========== ============
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
(GBP000s) (GBP000s)
======= =========== ============= ===========
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
(GBP000s) (GBP000s)
================== ================================= =========== ==========
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
(GBP000s) (GBP000s)
================================================== ============ ==========
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
(GBP000s) (GBP000s)
========================== ========================== ========== ==========
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 GBP0.9 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
(GBP000s) (GBP000s)
================== =================================== =========== ==========
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
(GBP000s) (GBP000s)
================= ================================= =========== ==========
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 (GBP18.7 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
(GBP000s) (GBP000s)
================ =============================== ===========
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
(GBP000s) (GBP000s)
=================== =================================== ===========
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
(GBP000s) (GBP000s)
================= =============================== =========== ==========
Adjusted profit for the year 47,726 45,400
================================================== =========== ==========
Thousands Thousands
================================================== =========== ==========
Weighted average number of ordinary shares for
the purposes of basic earnings per share 122,804 121,898
================================================== =========== ==========
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 125,333 123,426
================================================== =========== ==========
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
(GBP000s) (GBP000s)
======= ============ =========== ==========
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
(GBP000s) (GBP000s)
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
=================================== =========== ==========
(([1]) () FY21 includes treasury deposits of GBP18.0
million.
(([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.
(([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.
(([4]) () BCS diversity report 2021: Women in IT.
(([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).
(([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.
(([7]) () GBP10.3 million relates to exercised or lapsed options
and is considered distributable.
(([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.
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END
FR SEDEFSEESEII
(END) Dow Jones Newswires
May 23, 2022 02:00 ET (06:00 GMT)
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