Regulatory Story
Go to market news section View chart   Print
RNS
Kainos Group plc  -  KNOS   

Preliminary Results

Released 07:00 29-May-2018

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

£96.7m

£83.5m

+16%

Adjusted pre-tax profit1

£15.3m

£14.3m

+7%

Statutory profit before tax

£14.3m

£13.3m

+8%

Cash

£29.0m

£23.7m

+22%

Sales orders

£130.7m

£94.8m

+38%

SaaS sales orders

£13.3m

£10.1m

+32%

Backlog2

£110.7m

£76.4m

+45%

Adjusted diluted earnings per share1

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 £130.7 million (2017: £94.8 million), of which Software-as-a-Service (SaaS) bookings represent £13.3 million (2017: 10.1 million).

-      Order growth translated into very strong growth in contracted backlog, to £110.7 million (2017: £76.4 million).

·        Continued diversification, with growth in international, commercial and software revenues.

-      International revenues increased to £20.2 million (2017: £17.1 million).

-      Commercial revenues grown to £29.1 million (2017: £24.4 million).

-      SaaS and software-related revenues now £15.9 million (2017: £15.3 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 £10.7 million (2017: £9.2 million) with 115 clients (2017: 92) now utilising the software.

-      Evolve sales orders increased to £10.0 million (2017: £7.8 million).

-      Maintained high level of R&D at £4.9 million (2017: £4.6 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 £29.0 million (2017: £23.7 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 £96.7 million (2017: £83.5 million). Adjusted pre-tax profits increased by 7% to £15.3 million (2017: £14.3 million), which included £4.9 million in R&D expensed in the year (2017: £4.6 million).

Sales orders for this period amounted to £130.7 million (2017: £94.8 million), a total that included £13.3 million (2017: £10.1 million) of SaaS product sales orders, an increase of 32%. The contracted backlog for the Group increased by 45% to £110.7 million (2017: £76.4 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 £29.1 million (2017: £24.4 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 £10.0 million (2017: £7.8 million4). However, the funding constraints that dominated 2017 resulted in Evolve revenue (excluding third party) decreasing by 24% to £8.1 million (2017: £10.6 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 £10.3 million (2017: £14.3 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 £29.0 million at 31 March 2018 (2017: £23.7 million), representing 96% cash conversion (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 £78.6 million (2017: £64.5 million). Digital Services revenue from customers in commercial sectors accounted for £21.3 million (2017: £19.7 million), an increase of 8%. Sales orders in Digital Services increased by 45% to £108.4 million (2017: £74.6 million) and backlog for the division increased by 96% to £70.6 million (2017: £36.1 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 £4.5m of revenue (2017: £1.4m) 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 £15.9 million (2017: £15.2 million)7. Sales orders for Digital Platforms (excluding third party) increased by 22% to £20.7 million (2017: £17.0 million) of which sales orders for the Group's SaaS platforms increased by 32% to £13.3 million (2017: £10.1 million).

7 Aggregate Digital Platforms revenue, including 3rd party decreased by 5% to £18.1 million (2017: £19.0 million).

Within Smart, revenue for the period increased by 66% to £7.8 million (2017: £4.7 million), of which £6.4 million relates to SaaS subscriptions (2017: £3.7 million). New sales bookings for the period amounted to £10.7 million (2017: £9.2 million), an increase of 17%. The Annual Recurring Revenue (ARR) for Smart at period end was £7.1 million (2017: £5.5 million); backlog for Smart is £14.2 million (2017: £11.7 million).

Despite the on-going funding constraints within the NHS, Evolve sales orders (excluding third party) for the period increased by 28%, amounting to £10.0 million (2017: £7.8 million). However, the historic lack of funding has resulted in a further reduction in Evolve revenue (excluding 3rd party), decreasing by 24% to £8.1 million (2017: £10.6 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 £10.3 million (2017: £14.3 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 £200 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 £15k and £75k 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 £96.7 million, representing a 16% growth on 2017 (£83.5 million). Digital Services revenue grew 22% to £78.6 million (2017: £64.5m) which was driven by growth in both Digital Transformation and Workday Services. Whilst the headline Digital Platform revenue reduced by 5% to £18.1 million (2017: £19.0 million), when excluding third party revenue, Digital Platform revenue increased 4% to £15.9 million (2017: £15.2 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 £31.3 million (2017: £27.8 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 £4.9 million (2017: £4.6 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 £2.8 million (2017: £1.7 million).

Adjusted pre-tax profit increased by 7% to £15.3 million (2017: £14.3 million). Statutory profit before tax increased by 8% to £14.3 million (2017: £13.3 million). The adjusted profit measures can be reconciled to the reported statutory numbers as follows:

 

 

2018

(£000s)

2017

(£000s)

 

 

 

Statutory profit before tax

14,251

13,320

Share-based payments                                                   

1,096

949

Adjusted profit before tax

15,347

14,269

 

 

2018

(£000s)

2017

(£000s)

 

 

 

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 £29.0 million of cash (2017: £23.7 million), no debt and net assets of £35.7 million (2017: £30.0 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 £25.8 million (2017: £19.8 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
(£000s)

2017
(£000s)

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
(£000s)

 

 

 

 

2017
(£000s)

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
(£000s)

2017
(£000s)

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

capital

 


(£000s)

Share

premium
 

 

(£000s)

Capital

reserve
 

 

(£000s)

Share-based

payment

reserve

(£000s)

Translation reserve

 

 

 (£000s)

Retained

earnings
 

 

(£000s)

Total

equity
 

 

(£000s)

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
(£000s)

2017
(£000s)

 

 

 

 

 

 

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
(£000s)

2017
(£000s)

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

12 months to 31 March

 

Digital Services

(£000s)

Digital Platforms

(£000s)

 

Consolidated

(£000s)

 

 

 

 

 

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 overheads9

 

(12,861)

Adjusted pre-tax profit

 

15,347

 

2017

12 months to 31 March

 

Digital Services

(£000s)

Digital Platforms

(£000s)

 

Consolidated

(£000s)

 

 

 

 

 

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 expenses9

 

(6,186)

(8,922)

(15,108)

Contribution

 

24,966

1,951

26,917

Central overheads9

 

(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 £1.5 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

 (£000s)

2017

 (£000s)

 

 

 

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

 (£000s)

2017

 (£000s)

 

 

 

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

(£000s)

2017

(£000s)

 

 

 

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

 Number

2017

 Number

 

 

 

Technical

780

749

Administration

129

80

Sales

55

55

 

964

884

 

 

The number of employees at 31 March 2018 was:

 

 

2018

 Number

2017

 Number

 

 

 

Technical

846

781

Administration

139

80

Sales

50

55

Contractors

134

59

 

1,169

975

5.            Tax on ordinary activities

 

2018

(£000s)

2017

(£000s)

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

(£000s)

2017

(£000s)

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

(£000s)

2017

(£000s)

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

(£000s)

2017

(£000s)

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

(£000s)

2017

(£000s)

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

(£000s)

2017

(£000s)

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

(£000s)

2017

(£000s)

Trade receivables

16,168

Allowance for doubtful debts

-

(15)

 

16,153

Other debtors

3,419

2,597

 

23,157

18,750

 

 

9.            Trade and other payables

 

2018
(£000s)

2017
(£000s)

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
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Preliminary Results - RNS