- Business is booming with the NHS and other healthcare clients
- New innovation frameworks could lead to more proprietary IP
IT provider Kainos’ (KNOS) pre-tax profit more than doubled to £50.3m 2021, in what was its eleventh consecutive year of growth. Revenues increase by almost a third at the core digital services business, which develops custom service platforms. The group’s healthcare clients now account for a fifth of the overall topline, up from 13 per cent a year ago, boosted by new business from the NHS’ response to Covid-19.
The Workday Practice division, which supports the implementation of Workday (US:WDAY) software, posted a 18 per cent increase in organic sales, while its proprietary ‘Smart’ software reported revenue growth of more than a quarter to £24.2m. Kainos appears to be placing greater focus on establishing more original intellectual property, creating two new internal frameworks for idea generation.
Analysts at Investec forecast that adjusted pre-tax profits will reach £57.7m in 2022, rising to £60.5m in 2023. We doubt that digital transformation projects are likely to stall any time soon, and while a price to earnings ratio of 39 does not look cheap, Kainos remains a quality long-term growth story. Buy.
| KAINOS (KNOS) | ||||
| ORD PRICE: | 1,441p | MARKET VALUE: | £ 1.77bn | |
| TOUCH: | 1,434-1,442p | 12-MONTH HIGH: | 1,718p | LOW: 682p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 44 | |
| NET ASSET VALUE: | 71p | NET CASH: | £59.3m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 83.5 | 13.3 | 8.9 | 6.3 |
| 2018 | 96.7 | 14.3 | 10.0 | 6.6 |
| 2019 | 151 | 21.1 | 14.3 | 9.3 |
| 2020 | 179 | 23.2 | 15.5 | 3.5 |
| 2021 | 235 | 50.3 | 32.5 | 28.2 |
| % change | +31 | +117 | +110 | +706 |
| Ex-div: | 30 Sep | |||
| Payment: | 29 Oct |
Last IC View: Buy, 1,193p, 16 Nov 2020
