Are you a client?
Sign in to view the full news archive.
A tough FY25 ended on a more positive note for Kainos with the company recording low single-digit sequential revenue growth in the final quarter. This improved momentum is reported to have continued into the early weeks of the new fiscal to make Kainos positive, if cautiously so, on its prospects for the year ahead.
In line with the trading update issued a month ago (see here), the Belfast-HQ’d provider of software and services saw its turnover for the twelve months ended 31st March decrease by 3% yoy at constant currency to £367.2m. Adjusted pre-tax profit for the period fell sharply by 14% yoy to £65.6m, albeit this number was weighed down by both £8.4m of one-off restructuring costs incurred in Q4 and the impact of a £5.2 million investment made by the company last year to support its extended Workday partnership (see here). The former expense related to the now completed 7% reduction in Kainos’s global workforce.
The FY25 fortunes of the company’s three divisions - Digital Services, Workday Services and Workday Products – were mixed. Boosted by the aforementioned new strategic partnership, the latter saw its revenue jump by 26% yoy to £71.3m. Kainos remains squarely on track to achieve its annualised recurring revenue targets for Workday Products of £100m by 2026 and £200m by 2030.
The firm’s Workday Services unit, conversely, found the going considerably tougher last year with FY25 sales decline by 8% yoy on a like for like basis to £98.7m. This downturn was in a part as the result of intensifying competition with the number of accredited Workday partners increasing from approximately 60 to over 100 during the period.
Digital Services also struggled last year in the face of stiff market headwinds experiencing a 7% yoy top line reduction to £197.2m. This division, which accounted for 85% of Kainos’s UK revenue of £217.4m (FY24: £232.6m), was hit hard by the Public Sector spending hiatus caused by the General Election here last May. There was, however, positive progress made by the unit in Canada where the company was able to leverage expertise developed in the UK to drive a 71% increase in turnover to c.£9m.
Talking with Kainos CEO, Bendan Mooney this morning, he pointed to a number of factors beyond the strength of the Workday Products business that underpin his measured optimism regarding the outlook for the firm. Despite what promises to be a tough, soon to complete Government Spending Review round, he believes that UK Public Sector investment in digital transformation will hold up reasonably well. Furthermore, the company is making rapid progress in the AI-led projects arena with revenue from these activities up 61% yoy to £41.1m in FY25. This success also helped fuel the 80% increase in net new customer numbers last year which has created an expanded platform for growth in the months ahead.
The confidence in the firm’s prospects and management’s view that Kainos’s stock remains significantly undervalued has led the company to announce its intention the launch a buyback of an additional £30m of its ordinary shares. Market reaction to both this initiative and the FY25 results has, however, so far been muted. At the time of writing, the firm’s share price was down almost 5% on last night’s close.
Posted by: Duncan Aitchison at 09:55
Tags:
results
software
digital
public sector