Kin and Carta transforms and streamlines

Kin + Carta (KCT) is going through its own digital transformation – of sorts. It has sold all but two of its non-core Venture businesses in the last two months, along with three of its subsidiaries since August 2020 for a combined £30.6m. Negotiations for other non-core disposals are in advanced stages, as focus intensifies on its core digital transformation consulting business.

Adjusted revenue, disregarding the divested businesses, increased 12 per cent to £141m, while continuing pre-tax profit jumped 61 per cent to £13m. The group added 11 new clients through the period, with the effect that it now boasts 30 clients which each spend upwards of £1m a year. Significant clients include the UK Government’s Home Office, Santander and The Economist.

The main issue for the business is not demand for its services but supply of talented workers to exploit those opportunities. The September backlog was up 31 per cent to £78m and it has a record high pipeline of £135m. The potential deals could help the group achieve its aim of doubling net revenue over the next four years. Unfortunately, securing employees with the requisite skill-sets is an issue across the tech sphere.

The 23 per cent growth in the US, which now makes up 60 per cent of net revenue, is promising. Headcount there increased by 58 per cent, which shows the confidence the group has in its long-term growth prospects. And in a hybrid age the group’s services are becoming ever more relevant. However, an adjusted consensus rating of 35 times forecast earnings, although by no means unknown in the sector, suggests the market is also pricing in that US growth. Hold.  

Last IC view: Hold, 83p, 02 Oct 2019