Kainos Group (KNOS) H1 2025 earnings summary

Executive summary

• Revenue declined 5% year-over-year to £183.1m for H1 2024, with strong growth in Workday Products and healthcare offset by subdued Digital Services and Workday Services due to softer market conditions and political uncertainty.

• Adjusted pre-tax profit rose 1% to £38.2m, maintaining profitability despite revenue headwinds; statutory profit before tax up 11% to £34.2m.

• Cash reserves increased 34% to £151.6m, with a share buyback programme of £30m announced and interim dividend up 13% to 9.3p per share.

• Backlog grew 8% to £354.1m, and Workday Products ARR increased 18% to £65.1m, now 19% of group revenue.

• Disciplined cost management, including a 2% decrease in average employee salary and low contractor numbers, supported profitability and investment in future growth.

Financial highlights

• Group adjusted profit margin reached 21%; gross margin improved to 50.3% (prior year: 48.0%).

• Workday Products revenue up 28% to £34.3m; ARR up 18% to £65.1m; margin increased to 78.4%.

• Cash conversion at 75% in H1; company remains debt free.

• Adjusted PBT for H1 was £38.2m, up 1% year-over-year; effective tax rate at 26%.

• Interim dividend per share: 9.3p (+13%); diluted EPS: 20.1p (+15%).

Outlook and guidance

• Cautious outlook for H2 and FY2026 due to ongoing economic and political uncertainty, especially in the UK public sector.

• Confident in achieving £100m Workday Products ARR by 2026 and raised long-term target to £200m by 2030, supported by the Built on Workday partnership.

• Digital Services and Workday Services revenue expected to remain flat or slightly decrease in the near term, with medium-term growth from digital transformation and international expansion.

• Expecting continued growth in healthcare and international markets, with public sector recovery anticipated post-election.

• Healthy pipeline, strong balance sheet, and significant contracted backlog support medium-term growth opportunities.