Software firm Kainos Group forecasts further uplift in trade

Kainos Group boosted by global expansion and bumper growth in orders from financial services firms

  • Total revenue at Kainos rose by 26% to £179.8m in the six months to September
  • Trade also benefited from new contracts signed with UK public sector bodies
  • Kainos now generates more than one-third of total turnover outside the UK

Kainos Group expects strong demand for its software products and services to continue after the firm reported bumper half-year results on Monday.

Total revenue at the IT provider rose by 26 per cent year-on-year to £179.8million in the six months ending September, following significant overseas growth and surging orders from the commercial sector.

Within its largest division, digital services, turnover grew by 17 per cent on the back of roaring trade from banking and insurance businesses like New Ireland, IMCO and Danske Bank.

Expansion: Kainos Group’s half-year revenues rose by 26 per cent to £179.8million following significant overseas growth and surging orders from the commercial sector

Sales also benefited from new contracts with UK public sector bodies, such as Companies House, the Driver and Vehicle Standards Agency and the Foreign, Commonwealth & Development Office.

This offset a drop in orders from the healthcare industry due to a slowdown in Covid-related contracts from the UK’s Department of Health as lockdown restrictions were relaxed.

But the Belfast-based firm achieved the steepest improvement in revenues at its Workday software-as-a-service businesses, with its services arm boosted by soaring demand in North America.

Kainos generates over half of its Workday Services sales in this region, even though the division only entered the market in 2018, three years after initially expanding into Northern and Central Europe.

This helped its total international revenues climb by 53 per cent to £61million, meaning it now generates more than one-third of total turnover outside the UK.

Though operating expenses grew at a faster pace than revenues, primarily because of investment in Workday products and acquisition costs, the group was still able to post a £21.9million profit, a 9 per cent increase on last year.

The FTSE 250 company forecasts that demand for its services will remain elevated in the short term as more businesses and institutions upgrade their digital operations.

Much of this growth is expected to come from the UK public sector and National Health Service, for whom Kainos helped develop the NHS App.

However, the firm warned that the combination of NHSx and NHS Digital bodies was leading to the delayed rewarding of some projects.

Kainos chief executive Brendan Mooney said: ‘As the digital transformation market enters its second decade, it continues to grow in importance for organisations operating in government, in healthcare and in the commercial sector.

‘This importance is translating into continued demand for the work that we do for our customers, not just in the last six months but also looking to the future.

‘Despite the economic uncertainty, there is an urgency from our customers about extending existing projects and starting new projects.’

Analysts at Investec have maintained their buy recommendation for the software firm and are forecasting full-year revenues of £371.6million alongside underlying earnings of £66.8million.

Kainos Group shares were 3 per cent higher at £14.81 when trading closed on Monday, meaning their value has advanced by almost a fifth in the past month.