Kainos Group (KNOS) H1 2026 earnings summary

Executive summary

• Achieved record H1 revenue of £196.1m, up 7% year-over-year, with bookings up 27% to £228m, driven by strong sales execution and international expansion.

• Adjusted pre-tax profit declined 16% to £32m due to increased costs, margin pressure, and higher contractor use, but profit guidance is maintained.

• Over 1,150 global customers, with 43% of revenue from outside the UK and North America revenue more than doubling; Net Promoter Score improved to 70.

• Staff numbers increased 9% since year-end, reflecting organic growth and the Davis Pier acquisition, which added 120 staff and strengthened the Canadian presence.

• Launched Pay Transparency product, sold exclusively by Workday, supporting compliance with new EU legislation.

Financial highlights

• Revenue rose 7% to £196.1m (constant currency +9%), with Digital Services up 6%, Workday Services up 4%, and Workday Products up 14%; ARR for Workday Products up 19% to £78m.

• Adjusted pre-tax profit margin fell to 16% from 21% year-over-year; gross margin decreased to 35.8% (from 38.4%).

• Cash conversion at 48%, down from 75% last year, due to restructuring payments, working capital needs, and slower collections.

• Backlog increased 12% to £397m; bookings up 27% to £228m.

• Interim dividend increased 5% to 9.8p per share; £58m returned to shareholders via buybacks, with a further £30m approved.

Outlook and guidance

• Full-year adjusted pre-tax profit expected to be in line with consensus forecasts, with sequential improvement in H2.

• Revenue growth is expected to translate into profit by fiscal 2027 as cost structure normalizes.

• On track for £100m ARR in Workday Products by end of 2026 and £200m by 2030.

• Pay Transparency product launch expected to support ARR targets, though forecasting adoption is challenging due to the resale model with Workday.

• Focus on digital transformation in UK and Canadian public/health sectors, international expansion for Workday Services, and new product launches for Workday Products.