The honeymoon period for Kainos (KNOS), which listed in July 2015, has proved shortlived: investors sent its shares down sharply after it published these half-year results. The good news is that the government, healthcare and enterprise software group inked about £35m in contracts, compared with £21m in the same period last year. This helped drive adjusted operating profits - stripping out IPO costs - up 16 per cent to £6.6m. The bad news is a government spending review that threatens to delay public sector investments.
Sales climbed 18 per cent in the group's largest division, digital services, as it benefited from rising government demand for paperless solutions. For instance, it modernised the Department of Transport's systems and signed up the Office for National Statistics. However, gross margins narrowed as Kainos relied on more subcontractors and weathered disruption from the general election.
A consortium of three NHS acute trusts purchased the healthcare segment's Evolve product, which digitises patient records. Gross profit there nearly tripled to £5.1m. The division also partnered with Apple (us:AAPL) to develop iPad apps for enterprise customers. By contrast, delays in closing deals and higher staff training costs weighed on gross profits in Kainos' private sector Workday business.
Broker Investec expects EPS of 9.4p in the year to 31 March 2016 (up from 8.4p in FY2015).
| KAINOS (KNOS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 251p | MARKET VALUE: | £296m | |
| TOUCH: | 249-253p | 12-MONTH HIGH: | 299p | LOW: 167p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 16p | NET CASH: | £9.7m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014† | 28.8 | 5.7 | 4.3 | nil |
| 2015 | 37.2 | 5.2 | 3.5 | 1.8 |
| % change | +29 | -9 | -19 | - |
Ex-div: 3 Dec Payment: 8 Jan †Kainos listed in July 2015 | ||||
