TIDMKNOS
RNS Number : 4125P
Kainos Group plc
29 May 2018
29 May 2018
Kainos Group plc
("Kainos" or the "Group")
Preliminary Results for the year ended 31 March 2018
Kainos Group plc (KNOS), a leading UK-based provider of digital
services and platforms, is pleased to announce its results for the
year ended 31 March 2018.
Financial Highlights
2018 2017 Change
Revenue GBP96.7m GBP83.5m +16%
Adjusted pre-tax profit1 GBP15.3m GBP14.3m +7%
Statutory profit before tax GBP14.3m GBP13.3m +8%
Cash GBP29.0m GBP23.7m +22%
Sales orders GBP130.7m GBP94.8m +38%
SaaS sales orders GBP13.3m GBP10.1m +32%
Backlog2 GBP110.7m GBP76.4m +45%
Adjusted diluted earnings
per share(1) 10.4p 9.5p +9%
Diluted earnings per share 9.6p 8.7p +10%
Proposed total dividend 6.6p 6.3p +5%
Operational Highlights
-- Performance in-line with market expectations and represents
the eighth consecutive year of revenue and adjusted pre-tax profit
growth.
-- Very strong sales execution continues to underpin further revenue growth.
- Sales Orders at GBP130.7 million (2017: GBP94.8 million), of
which Software-as-a-Service (SaaS) bookings represent GBP13.3
million (2017: 10.1 million).
- Order growth translated into very strong growth in contracted
backlog, to GBP110.7 million (2017: GBP76.4 million).
-- Continued diversification, with growth in international,
commercial and software revenues.
- International revenues increased to GBP20.2 million (2017: GBP17.1 million).
- Commercial revenues grown to GBP29.1 million (2017: GBP24.4 million).
- SaaS and software-related revenues now GBP15.9 million (2017: GBP15.3 million).
-- Continued growth in Digital Services driven by demand from new and existing customers.
- Significant ongoing engagements in UK government's digital transformation programme.
- Strengthened position as the leading European Workday
implementation partner, with strong contribution from
recently-opened Frankfurt and Copenhagen offices.
-- Digital Platforms making progress against key milestones.
- Smart sales orders increased to GBP10.7 million (2017: GBP9.2
million) with 115 clients (2017: 92) now utilising the
software.
- Evolve sales orders increased to GBP10.0 million (2017: GBP7.8 million).
- Maintained high level of R&D at GBP4.9 million (2017: GBP4.6 million).
-- High customer satisfaction, with 99% of customers rating service 'Good' or better.
-- Strong recruitment has seen staff and contractor numbers
increase by 194 to 1,169 at year end.
-- Sixth consecutive year in the Sunday Times 'Best Companies to Work For' Top 100.
-- Strong underlying cash conversion and period-end cash of
GBP29.0 million (2017: GBP23.7 million).
1 Adjusted measures are based on reported statutory profit
numbers excluding the effect of share-based payments.
Reconciliations between the reported and adjusted measures are
included in the Financial Review.
2 The value of contracted revenue that has yet to be
recognised.
Brendan Mooney, CEO, commented:
"I am delighted to report another year of significant progress,
with this year marking the eighth consecutive year of revenue and
adjusted pre-tax profit growth.
Our Digital Services division continued to experience strong
momentum, fuelled by demand from existing and new customers both
locally and internationally. We continue to deliver major
transformation programmes across UK government and for our
commercial clients. Demand in the UK has resulted in the opening of
a new office in Birmingham and in Europe we have opened offices in
Frankfurt and Copenhagen, alongside the established offices in
Amsterdam and Gdansk.
Our Digital Platforms division continues to make progress
against key milestones. Smart, our market-leading Software as a
Service (SaaS) platform for automated testing of the Workday suite
continues to add global brands as customers, with 115 international
organisations now on the platform. In Evolve, both our Electronic
Medical Record and Integrated Care platforms continued to face NHS
funding challenges, however a strong sales performance during the
year provides a base for growth in the year ahead.
We remain focused on providing exceptional careers for our staff
and exceptional digital products and services for our customers.
The Group's pipeline of prospects continues to strengthen across
all divisions and the Board believes that the Group is
well-positioned for growth both in the short term and in the coming
years."
Ends
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
Andrew Pinder / Patrick Robb
Canaccord Genuity +44 20 7523 4606
Simon Bridges / Emma Gabriel
FTI Consulting LLP +44 20 3727 1000
Matt Dixon / Harry Staight
About Kainos
Kainos Group plc is a UK-headquartered provider of Digital
Services and Digital Platforms.
The Group's Digital Services include full lifecycle development
and support of customised Digital Services for government and
commercial customers. Kainos is also the leading European partner
for Workday, Inc. ('Workday'), responsible for implementing
Workday's innovative Software-as-a-Service (SaaS) platform for
enterprise and, now, government customers.
The Group's Digital Platforms comprise specialised digital
platforms in the mobile healthcare and automated testing arenas.
Smart is an automated testing platform for Workday customers;
Evolve Electronic Medical Records ('EMR') is the market-leading
product for the digitisation of patient notes in the Acute sector
of the NHS; and Evolve Integrated Care ('IC') is a SaaS-based
integrated care platform for the NHS and international healthcare
providers.
Kainos has over 1,150 people across eleven offices in Europe and
the US, working interchangeably across its Services and Platforms
divisions.
Kainos is listed on the London Stock Exchange (LSE: KNOS). For
further information, please visit www.kainos.com.
Overview
The financial results for the year ended 31 March 2018 represent
the eighth consecutive year of revenue and adjusted pre-tax profit
growth and the success in winning projects with new and existing
customers provides an excellent platform for future growth.
Revenue for the year ended 31 March 2018 grew by 16% to GBP96.7
million (2017: GBP83.5 million). Adjusted pre-tax profits increased
by 7% to GBP15.3 million (2017: GBP14.3 million), which included
GBP4.9 million in R&D expensed in the year (2017: GBP4.6
million).
Sales orders for this period amounted to GBP130.7 million (2017:
GBP94.8 million), a total that included GBP13.3 million (2017:
GBP10.1 million) of SaaS product sales orders, an increase of 32%.
The contracted backlog for the Group increased by 45% to GBP110.7
million (2017: GBP76.4 million). The proportion of revenue
generated from customers outside the UK increased by 18% in 2018
and now accounts for 21% of total Group revenue (2017: 20%).
Staff and contractor numbers increased by 194 to 1,169 at 31
March 2018 (2017: 975). The Group continues to attract very strong
interest from both graduates and experienced senior candidates in
key employment markets, with 11,465 job applications received
during the year; 80% of people joining Kainos were recruited
directly rather than via recruitment agencies (2017: 82%). Employee
engagement remains high, with the Group being ranked in the Sunday
Times Top 100 'Best Companies to Work For' for the sixth
consecutive year. Attrition across the Group rose to 13% (2017: 8%)
but remains below UK average (17%)3.
Customer satisfaction remains high, with 99% of customers rating
Group service 'good' or better. This high level of customer service
underpins the Group's long-term relationships with customers, with
existing customers accounting for 86% of Group revenue (2017: 91%).
In the year to 31 March 2018, the Group acquired 82 new customers,
making a total of 294 customers.
Across sectors, 56% of revenue is derived from government
customers (2017: 54%), 30% from commercial sector (2017: 29%) and
14% from healthcare (2017: 17%). Commercial sector revenue grew 19%
to GBP29.1 million (2017: GBP24.4 million).
In the year ended 31 March 2018, Digital Services experienced
very strong growth across both Digital Transformation (a 19%
increase) and Workday Implementation (a 40% increase) service
lines. Digital Transformation continues to play a major role in the
UK government's digitisation programme, with ongoing demand from
existing customers and with an increasing number of commercial
clients. Workday Implementation services experienced very strong
growth through increased demand from existing customers, new
customer acquisition and geographic expansion. The opening of the
Frankfurt and Copenhagen offices contributed to this accelerated
growth.
In the Digital Platforms division, the Kainos Smart automated
testing platform continued its growth trajectory, adding 33 new
customers during the period to bring the total number of customers
on the platform to 115 at 31 March 2018.
The funding landscape in the NHS shows some signs of
improvement, with Evolve sales orders excluding third party
increasing 28% to GBP10.0 million (2017: GBP7.8 million4). However,
the funding constraints that dominated 2017 resulted in Evolve
revenue (excluding third party) decreasing by 24% to GBP8.1 million
(2017: GBP10.6 million), which is in line with previous
guidance.5
3 2017 ExperHR Survey.
4 Third party Evolve sales includes sales charged to customers
for third party services and products, such as scanning services
and computer hardware.
5 Evolve revenue (including third party) reduced by 28% to
GBP10.3 million (2017: GBP14.3 million).
In the UK, Evolve IC continues to focus on the Shared Care
project with a leading Clinical Commissioning Group (CCG) and with
early adopter Acute Trusts who are deploying individual care
pathways. In the US, the commercial arrangement with Telehealth
provider, InTouch Health, concluded on 31 March 2018. Whilst this
venture has not yielded the expected outcome, it has reaffirmed the
Kainos team's belief in the potential for Evolve in the US
Healthcare market place. As a result, Kainos expects to see limited
revenue from Evolve in the US next year whilst the team accelerates
other early-stage discussions with possible US-based partners.
Finally, the Group finished the year with a strong cash balance
of GBP29.0 million at 31 March 2018 (2017: GBP23.7 million),
representing 96% cash conversion6 (2017: 110%).
Business Strategy
The strategy of the Group is to achieve sustained revenue,
adjusted pre-tax profit and cash flow growth in its chosen markets
through:
-- Growing the Group's reputation;
-- Capitalising on its established market position and significant growth opportunities;
-- Building strong, long-term relationships with its customer base;
-- Exploiting favourable market dynamics and drivers;
-- Nurturing and expanding its experienced and highly-skilled employee pool; and
-- Recruiting high calibre entry-level and experienced staff.
6 Calculated as adjusted pre-tax profit adding back finance
income and depreciation, divided by cash generated by
operations.
Divisional Review
Digital Services
The Digital Services division comprises two areas of
activity:
-- Digital Transformation: the delivery of customised online
digital solutions, principally for central, regional and local
government departments and agencies ("UK government") and for
commercial sector organisations. The solutions provided are highly
cost-effective and make public-facing services more accessible and
easier to use for the citizen and customer.
-- Workday Implementation: the provision of consulting, project
management, integration and post deployment services for Workday's
software suite, which includes cloud-based software for Human
Capital Management (HCM) and Financial Management that enables
enterprises to organise their staff efficiently and to support
financial reporting requirements.
Digital Services revenue for the year ended 31 March 2018 grew
by 22% to GBP78.6 million (2017: GBP64.5 million). Digital Services
revenue from customers in commercial sectors accounted for GBP21.3
million (2017: GBP19.7 million), an increase of 8%. Sales orders in
Digital Services increased by 45% to GBP108.4 million (2017:
GBP74.6 million) and backlog for the division increased by 96% to
GBP70.6 million (2017: GBP36.1 million).
Digital Services - Digital Transformation
Brexit has clearly introduced elements of uncertainty into
aspects of the wider UK economy. With regard to the impact to the
Government IT landscape the Kainos assessment remains consistent
with previous guidance - there is no negative impact to the
programmes with which it is involved.
Within central government, Kainos operates across Land Registry,
Home Office, Cabinet Office, Department for Environment, Food and
Rural Affairs, The Foreign and Commonwealth Office, Driver and
Vehicle Standards Agency, HM Probation and Prison Service Ministry
of Justice, Department for Transport and the Department for
International Development, delivering a combination of existing and
new programmes. In devolved government Kainos has been successful
in winning new projects in Scotland and Wales; whilst the absence
of political institutions in Northern Ireland has deferred most
procurement activity during the period.
The number of commercial clients in UK, Ireland and Germany
continues to increase and is now at 47 (2017: 42 clients),
reflecting the positive impact of prior period investment in sales
capacity. Kainos, in conjunction with NHS Digital, is delivering
significant elements of the Empower People pillar (which includes
NHS Online and The NHS Apps Library).
Looking forward the Group remains optimistic about the future of
digitisation in the UK public sector and is confident that it is
well positioned to maintain a central role in public sector
transformation. Equally, a developing reputation in the commercial
sector and opportunities within NHS Digital are expected to
generate further growth for the Group.
Digital Services - Workday Implementation
Kainos first engaged with Workday in 2010, deploying Workday's
HCM platform at organisations such as Grant Thornton, United Drug
Group and Travelex and is now one of the most experienced
participants in Workday's partner ecosystem. Kainos remains the
only boutique Workday partner headquartered in the UK and one of
only 35 partners globally accredited to implement Workday's
innovative SaaS platform.
Within Europe, Kainos continues to consolidate its position as a
leading Workday partner, signing 39 new clients in the period
(2017: 12). This leadership position is a result of high
satisfaction levels within the Kainos customer base but is also
aided by the consolidation within the partner ecosystem. Recent
transactions include the Appirio acquisition by Wipro (2016),
DayNine by Accenture (2016) and Ataraxis by HR Path (2018).
Kainos has continued its geographic expansion, with the opening
of an office in Copenhagen in September 2017 to develop the Nordic
markets of Denmark, Sweden, Norway and Finland. This is in addition
to offices opened in Amsterdam (2015, covering Belgium, Netherlands
and Luxembourg) and Frankfurt (2017, covering Germany, Austria and
Switzerland). Kainos now has 29 clients for Workday services in
mainland Europe (2017: 17).
The UK Public Sector is now a key market for Workday and Kainos
have been instrumental in securing the early customers. Of the five
deals signed by Workday, Kainos are undertaking the implementation
with four customers and Workday are delivering the remaining
project. Kainos customers include Office for Students and Innovate
UK.
In addition to the delivery of Workday for new customers, Kainos
is increasingly involved in supporting the operation of customers
that are already live on the Workday platform. This annuity-style
revenue stream, described as Post Deployment Services, accounts for
GBP4.5m of revenue (2017: GBP1.4m) and has 44 customers (2017:
15).
Within the US, a small number of Post Deployment Services
projects have commenced as part of an early stage market assessment
activity.
The number of accredited Workday consultants in the Group's
Digital Services division has increased by 55% to 170 people (2017:
110 people).
Looking forward, growth prospects remain very strong, driven by
geographic expansion, increased penetration within the UK Public
Sector and the further development of the Post Deployment Services
offering. These prospects are, in turn, underpinned by very strong
revenue growth at Workday Inc.
Digital Platforms
The Digital Platforms division comprises three discrete
platforms:
-- Smart Automated Testing (Smart): Smart is a proprietary
software tool that allows Workday customers to automatically verify
their Workday configuration both during implementation and in live
operation. Smart is the only automated testing platform
specifically designed for the Workday product suite. Smart is a
cloud-based SaaS solution licensed on a subscription basis to
customers.
-- Evolve Electronic Medical Record (Evolve EMR): Evolve EMR is
a proprietary software product that removes paper from the care
process by digitising NHS patient records, thereby enabling
efficient healthcare and supporting Digital Maturity programmes.
EMR features in-built electronic forms and workflow that allows
patient information to be captured and routed electronically,
saving time and effort, and helping to improve quality of patient
care. Historically, Evolve EMR core product has been sold to
customers as a one-off perpetual licence, however in 2017 Evolve
Cloud EMR was launched which offers the same software platform on a
hosted, managed service basis.
-- Evolve Integrated Care (Evolve IC): Evolve IC is a
mobile-optimised integrated care platform, designed to automate
common care pathways for healthcare delivery organisations. It
simplifies the provision of healthcare by integrating disparate
healthcare systems and results in easier access, better outcomes
and lower cost. Evolve IC is a cloud-based SaaS solution licensed
on a subscription basis to customers.
Aggregate Digital Platforms revenue (excluding third party
revenue) for the twelve months ended 31 March 2018 increased by 4%
to GBP15.9 million (2017: GBP15.2 million)7. Sales orders for
Digital Platforms (excluding third party) increased by 22% to
GBP20.7 million (2017: GBP17.0 million) of which sales orders for
the Group's SaaS platforms increased by 32% to GBP13.3 million
(2017: GBP10.1 million).
7 Aggregate Digital Platforms revenue, including 3(rd) party
decreased by 5% to GBP18.1 million (2017: GBP19.0 million).
Within Smart, revenue for the period increased by 66% to GBP7.8
million (2017: GBP4.7 million), of which GBP6.4 million relates to
SaaS subscriptions (2017: GBP3.7 million). New sales bookings for
the period amounted to GBP10.7 million (2017: GBP9.2 million), an
increase of 17%. The Annual Recurring Revenue (ARR) for Smart at
period end was GBP7.1 million (2017: GBP5.5 million); backlog for
Smart is GBP14.2 million (2017: GBP11.7 million).
Despite the on-going funding constraints within the NHS, Evolve
sales orders (excluding third party) for the period increased by
28%, amounting to GBP10.0 million (2017: GBP7.8 million). However,
the historic lack of funding has resulted in a further reduction in
Evolve revenue (excluding 3rd party), decreasing by 24% to GBP8.1
million (2017: GBP10.6 million)8.
Digital Platforms - Smart
Smart is now used by 115 global customers to automatically
verify their Workday configurations (2017: 92). Kainos had three
Smart module offerings during the period - HCM, Security and
Financials and a fourth module, Payroll, which was launched as beta
software in October 2017. Over 95% of customers have purchased a
subscription for both HCM and Security, with 23 customers
subscribed to Financials (which is in line with the wider adoption
of Workday Financials) and six customers who have a Payroll
subscription.
In the year ended 31 March 2018, the Group added 33 new Smart
customers (2017: 37), including Centrica, Discover Financial and
Centene Corporation.
Workday have announced Workday Cloud Platform (WCP), their
Platform-as-a-Service (PaaS) offering. Kainos has been part of the
early adopter programme since 2017. While still in its embryonic
stages, WCP may offer a new future growth opportunity - such as
additional IP development for Kainos or specialised development
services to other Workday customers and partners.
Looking forward, continued strong growth for Smart will be
powered by increased penetration of Smart in the Workday Inc.
customer base, by expansion of the Workday Inc. customer base
itself and by the development and adoption of new Smart modules, of
which Payroll is the most recent example.
8 Evolve revenue (including third party) reduced by 28% to
GBP10.3 million (2017: GBP14.3 million).
Digital Platforms - Evolve EMR
Evolve EMR continues to be a leading supplier to the NHS and is
now deployed at enterprise scale across 35 Health Trusts
(approximately 110 hospitals), managing over 1.5 billion images and
with 35 million patients registered on the system.
The increasing importance of Evolve as a critical operational
system is prompting some existing clients to consider transitioning
to Evolve Cloud EMR and away from their current on-premise
arrangements. Hardware refresh costs, the WannaCry virus and the
issues in retention of IT skills within the NHS have all
accelerated a number of conversations within the existing client
base. During 2018, two existing customers have adopted Evolve Cloud
EMR.
Within Ireland there are 48 hospitals, overseen by the Health
Services Executive (HSE) who provide all of Ireland's public health
services in hospitals and communities. The HSE has signed contracts
for Galway University Hospital (2 sites), which is part of Saolta
University Health Care Group (Ireland) and for the National
Children's Hospital, Dublin. These deployments will represent the
first systems of this type in the Irish market.
Looking forward, the Group believes that the opportunity for
Evolve EMR remains undiminished in the long term, with 98 Health
Trusts in England still to address their considerable paper
challenge, representing an available market of approximately GBP200
million. While increased procurement activity and a very strong
increase in sales booked during 2018 indicate an improving funding
landscape, the Group remains cautious about growth forecasts for
2019.
Digital Platforms - Evolve IC
Evolve IC is a multi-tenanted cloud platform onto which
healthcare organisations will deploy care pathways, with a
subscription charged for each care pathway that is deployed.
Typical care pathways can be specialty specific in areas such as
Stroke Assessment and Paediatrics or cross organisation to support
processes such as Pre-operative Assessment or Patient
Discharge.
In the UK, Evolve IC will commence live operation during 2018
across four different Acute Trusts with a variety of care pathways:
Clinical Noting, Stroke Assessment, Patient Discharge,
Community-based Stroke Care and Drug Assessment. Subscriptions for
each care pathway vary between GBP15k and GBP75k per annum,
depending on the complexity of the care pathway.
Evolve IC is also scheduled to commence live operation for an
NHS Clinical Commissioning Group (CCG), supporting care provision
across a patient population of over 600,000 people. This Shared
Care Record project will support the needs of clinical and nursing
staff in the Urgent Care setting and will enable unified access to
primary, acute and community care data from a total of 11 different
healthcare systems.
Progress for Evolve IC in the US has been impacted following the
decision by InTouch Health to terminate their commercial
relationship with Kainos and instead to develop their own internal
solution; we have now referred this matter to US legal counsel. The
change of direction by InTouch Health will, in the short-term,
reduce costs, but it will also require Kainos to accelerate other,
early-stage, US-based partner discussions.
Looking forward, the immediate priority is to support the
go-live events in NHS CCG and for the hospitals implementing the
new care pathways. Over the medium-term revenue growth will be
driven by the wider adoption of care pathways by new or existing
NHS clients and the appointment of additional US-based healthcare
partners.
Financial Review
Kainos achieved revenue of GBP96.7 million, representing a 16%
growth on 2017 (GBP83.5 million). Digital Services revenue grew 22%
to GBP78.6 million (2017: GBP64.5m) which was driven by growth in
both Digital Transformation and Workday Services. Whilst the
headline Digital Platform revenue reduced by 5% to GBP18.1 million
(2017: GBP19.0 million), when excluding third party revenue,
Digital Platform revenue increased 4% to GBP15.9 million (2017:
GBP15.2 million).
Overall gross margin was 48% (2017: 50%) with Digital Services
decreasing to 46% (2017: 48%), whilst Digital Platforms gross
margin increased to 59% (2017: 57%). The reduction in Digital
Services gross margin was mostly due to increasing the number of
contractors in the second half of the year and also the geographic
expansion within Workday Services.
Operating expenses excluding share-based payments for 2018
increased by 13% to GBP31.3 million (2017: GBP27.8 million). This
increase is in line with revenue growth and relates to the
geographic expansion and sales investment within the Digital
Services division. Whilst investment in product development has
increased to GBP4.9 million (2017: GBP4.6 million), it has reduced
during the second half of the year. All product development costs
were expensed in the period. Research and Development Expenditure
Credit (RDEC) grants recognised in the period totalled GBP2.8
million (2017: GBP1.7 million).
Adjusted pre-tax profit increased by 7% to GBP15.3 million
(2017: GBP14.3 million). Statutory profit before tax increased by
8% to GBP14.3 million (2017: GBP13.3 million). The adjusted profit
measures can be reconciled to the reported statutory numbers as
follows:
2018 2017
(GBP000s) (GBP000s)
Statutory profit before tax 14,251 13,320
Share-based payments 1,096 949
----------------------------- ----------- -----------
Adjusted profit before tax 15,347 14,269
============================= =========== ===========
2018 2017
(GBP000s) (GBP000s)
Statutory profit after tax 11,666 10,416
Share-based payments (net of associated taxes) 910 949
------------------------------------------------ ----------- -----------
Adjusted profit after tax 12,576 11,365
================================================ =========== ===========
The effective tax rate for 2018 was 18% (2017: 22%). The 2017
effective tax rate was higher due to the implementation of the RDEC
scheme (previously the large company super deduction scheme). The
2018 effective tax rate was reduced slightly due to the impact of
overseas deferred tax assets. Going forward we expect the effective
tax rate to be broadly in line with the UK corporation tax
rate.
The Group continues to have a robust balance sheet with GBP29.0
million of cash (2017: GBP23.7 million), no debt and net assets of
GBP35.7 million (2017: GBP30.0 million). Cash conversion,
calculated by taking cash generated by operations over EBITDA,
continued to be strong at 96% (2017: 110%). The combined underlying
trade debtor and accrued income totalled GBP25.8 million (2017:
GBP19.8 million). The increase in accrued income was within
expectations and related to the timing on achieving milestones
within a small number of projects.
Dividend
Consistent with the guidance set out in the 2015 Prospectus, the
Group has adopted a progressive dividend policy, maximising
shareholder return alongside retaining sufficient funds in the
Group to invest in long-term growth. Kainos has consistently been
profitable and has generated a strong cash balance. The final
dividend, if approved by shareholders, will be 4.6p and payable on
19 October 2018 to shareholders on the register on 21 September
2018, with an ex-dividend date of 20 September 2018. This will make
the total dividend for the year 6.6p (2017: 6.3p) which will
represent a distribution of 61% of the adjusted profit after
taxation for the year (2017: 66%).
Summary and Outlook
The directors believe that the Group's very strong sales
performance and consequent increase in contracted backlog underpin
near-term performance.
Over the longer term, Kainos remains well placed to deliver
further growth. The Group's Digital Services division continues to
benefit from the UK government's digitisation programmes, and from
the strong and sustained growth of Workday. In the Group's Digital
Platforms division, Smart remains in a commanding position as the
only automated testing product for Workday globally, and while
constrained NHS funding is expected to limit the growth of Evolve
in the near-term, the directors remain confident that it is well
positioned to capitalise on its lead in the NHS marketplace in the
medium term.
In summary, the Group sees continued stability and growth
opportunities for its Digital Services division and is encouraged
by the strong position of its Digital Platform SaaS offerings
globally. Going forward, the Group will remain focused on providing
exceptional careers for staff and exceptional digital products and
services for its customers.
Consolidated income statement for the financial period ended 31
March 2018
Note 2018 2017
(GBP000s) (GBP000s)
Continuing operations
Revenue 2 96,680 83,504
Cost of sales 2 (50,076) (41,479)
---------------------------------------------------- ----- ------------- -------------
Gross profit 2 46,604 42,025
Operating expenses excluding share-based payments 2 (31,308) (27,821)
Share-based payments (1,096) (949)
---------------------------------------------------- ----- ------------- -------------
Operating expenses 32,404 (28,770)
---------------------------------------------------- ----- ------------- -------------
Operating profit 14,200 13,255
---------------------------------------------------- ----- ------------- -------------
Finance income 53 66
Finance expense (2) (1)
---------------------------------------------------- ----- ------------- -------------
Profit before tax 14,251 13,320
Taxation on ordinary activities 5 (2,585) (2,904)
---------------------------------------------------- ----- ------------- -------------
Profit for the year 11,666 10,416
==================================================== ===== ============= =============
Consolidated statement of comprehensive income
2018 2017
(GBP000s) (GBP000s)
---------------------------------------------------- ----- ------------- -------------
Profit for the year 11,666 10,416
Other comprehensive income:
Currency translation difference (201) (249)
---------------------------------------------------- ----- ------------- -------------
Total comprehensive income for the year 11,465 10,167
---------------------------------------------------- ----- ------------- -------------
Earnings per share
Basic 7 10.0p 8.9p
Diluted 7 9.6p 8.7p
Consolidated statement of financial position as at 31 March
2018
Note 2018 2017
(GBP000s) (GBP000s)
Non-current assets
Property, plant and equipment 2,109 2,002
Investments 1,025 900
Other non-current assets 1,289 324
------------------------------- ----- ------------ ------------
4,423 3,226
------------------------------- ----- ------------ ------------
Current assets
Trade and other receivables 8 23,157 18,750
Prepayments 2,647 1,559
Accrued income 6,106 3,677
Cash and bank balances 28,961 23,722
------------------------------- ----- ------------ ------------
60,871 47,708
------------------------------- ----- ------------ ------------
Total assets 65,294 50,934
=============================== ===== ============ ============
Current liabilities
Trade creditors and accruals 9 (13,039) (8,683)
Deferred income 9 (6,993) (6,320)
Corporation tax 9 (3,157) (2,075)
Other tax and social security 9 (6,028) (3,573)
(29,217) (20,651)
------------------------------- ----- ------------ ------------
Non-current liabilities
Other provisions (347) (297)
Total liabilities (29,564) (20,948)
------------------------------- ----- ------------ ------------
Net assets 35,730 29,986
=============================== ===== ============ ============
Equity
Share capital 593 592
Share premium account 1,702 1,626
Capital reserve 666 667
Share-based payment reserve 2,549 1,279
Translation reserve (450) (249)
Retained earnings 30,670 26,071
------------------------------- ----- ------------ ------------
Total equity 35,730 29,986
=============================== ===== ============ ============
Richard McCann
Director
25 May 2018
Consolidated statement of changes in equity for the year ended
31 March 2018
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
2016 590 1,607 668 524 - 22,534 25,923
Profit for the year - - - - - 10,416 10,416
Other comprehensive
income - - - - (249) - (249)
---------------------------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Total comprehensive
income for the year - - - - (249) 10,416 10,167
---------------------------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Share-based payment
expense - - - 949 - - 949
Adjustments in respect
of prior periods - - - (194) - 194 -
Current tax for equity-
settled share-based
payments - - - - - (12) (12)
Deferred tax for
equity-settled share-based
payments - - - - - 147 147
Issue of share capital 2 19 (1) - - - 20
Dividends - - - - - (7,208) 7,208
Balance at 31 March
2017 592 1,626 667 1,279 (249) 26,071 29,986
---------------------------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Profit for the year - - - - - 11,666 11,666
Other comprehensive
income - - - - (201) - (201)
---------------------------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Total comprehensive
income for the year - - - - (201) 11,666 11,465
---------------------------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Share-based payment
expense - - - 1,096 - 1,096
Adjustments in respect
of prior periods - - - 174 - (174) -
Current tax for equity-
settled share-based
payments - - - - - 82 82
Deferred tax for
equity-settled share-based
payments - - - - - 606 606
Issue of share capital 1 76 (1) - - - 76
Dividends - - - - - (7,581) (7,581)
---------------------------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Balance at 31 March
2018 593 1,702 666 2,549 (450) 30,670 35,730
============================ ========== ========== ========== =========== =========== ========== ==========
Consolidated cash flow statement for the year ended 31 March
2018
2018 2017
(GBP000s) (GBP000s)
Net cash from operating activities 14,152 16,927
--------------------------------------------------------- ------------ ------------
Investing activities
Purchases of trading investments (125) -
Purchases of property, plant and equipment (1,130) (813)
--------------------------------------------------------- ------------ ------------
Net cash (used in)/from investing activities (1,255) (813)
--------------------------------------------------------- ------------ ------------
Financing activities
Dividends paid (7,581) (7,208)
Proceeds on issue of shares 76 20
--------------------------------------------------------- ------------ ------------
Net cash used in financing activities (7,505) (7,188)
--------------------------------------------------------- ------------ ------------
Net increase/(decrease) in cash and cash equivalents 5,392 8,926
Cash and cash equivalents at beginning of year 23,722 15,045
Effects of foreign exchange rate changes (153) (249)
--------------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of year 28,961 23,722
========================================================= ============ ============
Net cash from operating activities 2018 2017
(GBP000s) (GBP000s)
Profit for the year 11,666 10,416
Adjustments for:
Income tax expense 2,585 2,904
Share-based payment expense 1,096 949
Government grants released (13) (11)
Depreciation 976 897
Loss on disposal of property, plant and equipment 47 -
Increase in provisions 50 -
---------------------------------------------------------- ------------ --------------------------
Operating cash flows before movements in working capital 16,407 15,155
Increase in receivables (8,087) (1,691)
Increase in payables 7,370 3,155
---------------------------------------------------------- ------------ --------------------------
Cash generated by operations 15,690 16,619
Income taxes received/(paid) (1,538) 308
---------------------------------------------------------- ------------ --------------------------
Net cash from operating activities 14,152 16,927
========================================================== ============ ==========================
Notes to the consolidated financial statements
1. General information and basis of preparation
Kainos Group plc ("the Company") is a company incorporated and
domiciled in the UK (company registration number 09579188), having
its registered office at 4th Floor, 111 Charterhouse Street, London
EC1M 6AW.
The preliminary results announcement for the year ended 31 March
2018 has been prepared by the directors based on the results and
position which are reflected in the statutory accounts. The
statutory accounts are prepared in accordance with International
Financial Reporting Standards as adopted by the European Union
(Adopted IFRS).
The financial information for the years to 31 March 2018 and 31
March 2017 does not constitute statutory accounts and has been
extracted from the Company's consolidated accounts for the year to
31 March 2018.
Statutory accounts for the year to 31 March 2017 have been
delivered to the Registrar of Companies, and those for the year to
31 March 2018 will be delivered following the Company's Annual
General Meeting ('AGM'). The auditor has reported on those
accounts: its report was unqualified, did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying its report, and did not contain
statements under Section 498(2) or 498(3) of the Companies Act
2006.
The financial statements are presented in Pounds Sterling and
rounded to the nearest thousand. The consolidated financial
statements consolidate those of the Company and its subsidiaries
(together "Kainos", or "the Group").
2. Segment reporting
All the Group's revenue for the year ended 31 March 2018 was
derived from continuing operations.
Kainos is structured into two divisions: Digital Services and
Digital Platforms.
Digital Services include full lifecycle development and support
of digital solutions for government and commercial customers.
Kainos is also the leading partner for Workday in Europe,
responsible for implementing Workday's Software-as-a-Service (SaaS)
platform for enterprise customers.
Digital Platforms comprise Evolve EMR, the market leading
product for the digitisation of patient notes in the Acute sector
of the NHS; Evolve IC, an integrated care platform for NHS and
international healthcare providers; and Smart, an automated testing
platform for Workday customers.
Segment revenue and results
The following is an analysis of the Group's revenue and results
by reportable segment:
2018 Digital Services Digital Platforms
12 months to 31 March (GBP000s) (GBP000s) Consolidated
(GBP000s)
Revenue 78,592 18,088 96,680
Cost of sales (42,605) (7,471) (50,076)
------------------------------ ----------------- ------------------ --------------
Gross profit 35,987 10,617 46,604
Direct expenses (9,297) (9,099) (18,396)
------------------------------ ----------------- ------------------ --------------
Contribution 26,690 1,518 28,208
Central overheads(9) (12,861)
------------------------------------------------- ------------------ --------------
Adjusted pre-tax profit 15,347
------------------------------------------------- ------------------ --------------
2017 Digital Services Digital Platforms
12 months to 31 March (GBP000s) (GBP000s) Consolidated
(GBP000s)
Revenue 64,526 18,978 83,504
Cost of sales (33,374) (8,105)10 (41,479)
-------------------------------- ----------------- ------------------ --------------
Gross profit 31,152 10,873 42,025
Direct expenses(9) (6,186) (8,922) (15,108)
-------------------------------- ----------------- ------------------ --------------
Contribution 24,966 1,951 26,917
Central overheads(9) (12,648)
Adjusted pre-tax profit 14,269
-------------------------- ---- ----------------- ------------------ --------------
9 Operating expenses excluding share-based payments includes
direct expenses, central overheads and finance income/expenses.
10 For the period ended 31 March 2017 GBP1.5 million of costs
for Digital Platforms have been reclassified from direct expenses
to costs of sale in line with current period presentation.
Reconciliation of adjusted pre-tax profit to profit before
tax
2018 2017
(GBP000s) (GBP000s)
Adjusted pre-tax profit 15,347 14,269
Share-based payments (1,096) (949)
------------------------- ------------ ------------
Profit before tax 14,251 13,320
========================= ============ ============
The Group's revenue from external customers by geographic
location is detailed below:
2018 2017
(GBP000s) (GBP000s)
United Kingdom 76,478 66,310
Republic of Ireland 6,632 8,726
US 6,715 4,420
Other 6,855 4,048
--------------------- ------------ ------------
96,680 83,504
===================== ============ ============
3. Profit for the year
Profit for the year has been arrived at after
charging/(crediting):
2018 2017
(GBP000s) (GBP000s)
Total staff costs 55,881 44,696
Government grants (3,076) (1,676)
Operating lease rentals 1,499 1,272
Research and development costs 4,909 4,641
Research and Development Expenditure Credit grant (2,781) (1,715)
Depreciation of property, plant and equipment 976 897
Net foreign exchange loss/(gain) 43 (784)
=================================================== =========== ===========
4. Staff numbers
The average number of employees during the year was:
2018 2017
Number Number
Technical 780 749
Administration 129 80
Sales 55 55
---------------- -------- --------
964 884
================ ======== ========
The number of employees at 31 March 2018 was:
2018 2017
Number Number
Technical 846 781
Administration 139 80
Sales 50 55
Contractors 134 59
---------------- -------- --------
1,169 975
================ ======== ========
5. Tax on ordinary activities
2018 2017
(GBP000s) (GBP000s)
Corporation tax:
Current year (UK) 2,434 2,497
Current year (overseas) 489 377
Adjustments in respect of prior years 19 218
--------------------------------------- ----------- -----------
2,942 3,092
Deferred tax (357) (188)
--------------------------------------- ----------- -----------
2,585 2,904
======================================= =========== ===========
UK corporation tax is calculated at 19% (2017: 20%) of the
estimated taxable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions. The effective tax rate for 2018 was 18%
(2017: 22%).
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Act 2016 and Finance Act 2015. As a
result, the main rate of corporation tax reduced to 19% from 1
April 2017 and will reduce to 17% from 1 April 2020. 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
statement of comprehensive income as follows:
2018 2017
(GBP000s) (GBP000s)
Profit before tax on continuing operations 14,251 13,320
-------------------------------------------------------- ----------- -----------
Tax at the UK corporation tax rate of 19% (2017: 20%) 2,708 2,664
Non-deductible expenses 19 61
Non-taxable income - (6)
Effect of foreign exchange on consolidation (91) -
Effect of non-UK tax rates 98 (11)
Movement in prior year unrecognised deferred tax asset (218) (23)
Adjustments to tax charge in respect of prior years 34 201
Change in UK tax rates 35 18
-------------------------------------------------------- ----------- -----------
Tax expense for the year 2,585 2,904
======================================================== =========== ===========
In addition to the amount charged to the statement of
comprehensive income, the following amounts relating to tax have
been recognised directly in equity.
2018 2017
(GBP000s) (GBP000s)
Current tax
Permanent element of stock option deduction 82 (12)
Deferred tax
Change in estimated tax deductions related to share-based payments - (4)
Adjustments in respect of previous periods 28 (39)
Deferred tax on stock option 578 190
-------------------------------------------------------------------- --------------- -----------
Total tax recognised directly in equity 688 135
==================================================================== =============== ===========
6. Dividends
2018 2017
(GBP000s) (GBP000s)
Amounts recognised as distributions to equity holders in the period:
Interim dividend for 2018 of 2p per share 2,371 -
Final dividend for 2017 of 4.4p per share 5,215 -
Interim dividend for 2017 of 1.9p per share - 2,248
Final dividend for 2016 of 4.2p per share - 4,960
7,586 7,208
====================================================================== =========== ===========
The proposed final dividend for 2018 is subject to approval by
shareholders at the AGM and has not been included as a liability in
these financial statements. The final dividend, if approved by
shareholders, will be 4.6p and payable on 19 October 2018 to
shareholders on the register on 21 September 2018, with an
ex-dividend date of 20 September 2018.
7. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable of ordinary shareholders to the parent company by the
weighted average number of ordinary shares in issue during the
period.
2018 2017
(GBP000s) (GBP000s)
Profit for the period 11,666 10,416
------------------------------------------------------------------------------------------- ----------- -----------
Thousands Thousands
Weighted average number of ordinary shares for the purposes of basic earnings per share 117,231 117,200
Effect of dilutive potential ordinary shares from share options 3,668 2,773
Weighted average number of ordinary shares for the purposes of diluted earnings per share 120,899 119,973
------------------------------------------------------------------------------------------- ----------- -----------
Basic earnings per share 10.0p 8.9p
Diluted earnings per share 9.6p 8.7p
=========================================================================================== =========== ===========
Adjusted basic earnings per share is calculated by dividing the
profit attributable to ordinary equity holders of the parent
company, excluding exceptional items and share-based payments
(including associated taxes) by the weighted average number of
ordinary shares in issue during the period.
2018 2017
(GBP000s) (GBP000s)
Profit for the period 11,666 10,416
Share-based payments (including associated taxes) 910 949
------------------------------------------------------------------------------------------- ----------- -----------
Adjusted profit for the period 12,576 11,365
------------------------------------------------------------------------------------------- ----------- -----------
Thousands Thousands
-----------
Weighted average number of ordinary shares for the purposes of basic earnings per share 117,231 117,200
Effect of dilutive potential ordinary shares from share options 3,668 2,773
Weighted average number of ordinary shares for the purposes of diluted earnings per share 120,899 119,973
------------------------------------------------------------------------------------------- ----------- -----------
Adjusted basic earnings per share 10.7p 9.7p
Adjusted diluted earnings per share 10.4p 9.5p
=========================================================================================== =========== ===========
8. Trade and other receivables
2018 2017
(GBP000s) (GBP000s)
Trade receivables 19,738 16,168
Allowance for doubtful debts - (15)
------------------------------ ----------- -----------
19,738 16,153
Other debtors 3,419 2,597
------------------------------ ----------- -----------
23,157 18,750
============================== =========== ===========
9. Trade and other payables
2018 2017
(GBP000s) (GBP000s)
Trade creditors and accruals 13,039 8,683
Deferred income 6,993 6,320
Corporation tax 3,157 2,075
Other tax and social security 6,028 3,573
29,217 20,651
=============================== ============ ============
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs, including
payroll. For most suppliers no interest is charged on payables.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR VDLBLVEFBBBF
(END) Dow Jones Newswires
May 29, 2018 02:01 ET (06:01 GMT)
Kainos (LSE:KNOS)
Historical Stock Chart
From Apr 2024 to May 2024
Kainos (LSE:KNOS)
Historical Stock Chart
From May 2023 to May 2024