Although Kainos (KNOS) revealed adjusted half-year profits and a gross margin that were broadly static against the 2016 comparatives, a positive beat was provided by a 94 per cent rise in sales orders, together with a substantial rise in the accompanying backlog. Cash generation, although appreciably down year on year, remained robust at £4.1m, while the underlying cash conversion rate should improve over the second half due to the timing of bonus payments.
The IT group continued to diversify its revenues, with 26 per cent of the top line stemming from overseas. And its Workday partnership progressed rapidly, with 16 new deals signed in Europe against only five for the same period a year earlier. Workday offers cloud-based software for human resources and financial management. Of Kainos’s two key divisions, digital services achieved 5 per cent sales growth to £32.7m – helped by two new devolved government wins in Scotland and Wales. Commercial customers also contributed £11.4m – up 24 per cent year on year.
By comparison, the digital platforms business saw a 7 per cent decline in revenues, led by a reduction in lower-margin third-party revenue. But, excluding third-party impacts, sales orders rose by 102 per cent to £8.1m. The Smart platform, which allows customers to verify their Workday configurations automatically, now has 103 global customers – a 61 per cent increase from a year earlier.
Analysts at Investec forecast pre-tax profit of £15.1m and EPS of 10.2p for the year to March 2018, up from £14.3m and 9.5p in FY2017.
| KAINOS (KNOS) | ||||
| ORD PRICE: | 304p | MARKET VALUE: | £360m | |
| TOUCH: | 297-304p | 12-MONTH HIGH: | 305p | LOW: 190p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 33 | |
| NET ASSET VALUE: | 31p* | NET CASH: | £27.3m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 40.6 | 6.5 | 4.4 | 1.9 |
| 2017 | 41.4 | 6.8 | 4.7 | 2.0 |
| % change | +2 | +5 | +7 | +5 |
| Ex-div: | 7 Dec | |||
| Payment: | 29 Dec | |||
