Kainos’s (KNOS) top-line growth for the year to March 2019 came courtesy of a 69 per cent improvement within digital services – its largest business – to £133m. Such progress stemmed from positive momentum across both of digital services’ sub-divisions – ‘digital transformation’ and ‘Workday implementation’.
Digital transformation – which provides customised online digital solutions for government departments and commercial organisations – enjoyed a 70 per cent rise in sales, notwithstanding ongoing Brexit-related uncertainty. Moreover, Kainos reckons that the EU divorce could spell “significant IT change”, generating further expansion opportunities.
Meanwhile, digital platforms saw revenues rise just 3 per cent to £18.7m. Performance here was tempered by ‘Evolve Electronic Medical Records’, which endured a 27 per cent decline to £7.5m (albeit in line with guidance). The NHS funding landscape remains difficult, but Kainos believes in Evolve’s long-term potential, given the “considerable paper challenge” faced by many English health trusts.
Echoing the half-year stage, Kainos’s gross margin dipped from 48 per cent to 46 per cent – partly reflecting a greater number of contractors employed to support digital services’ revenue ascent, representing around 12 per cent of total headcount. Management plans to reduce this to around 5 per cent.
Investec expects adjusted EPS of 16.8p for the March 2020 year-end, against 15.4p in 2019.
| KAINOS (KNOS) | ||||
| ORD PRICE: | 604p | MARKET VALUE: | £731m | |
| TOUCH: | 604-608p | 12-MONTH HIGH: | 610p | LOW: 334p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 42 | |
| NET ASSET VALUE: | 40p | NET CASH: | £42.5m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015* | 60.8 | 11.8 | 8.9 | na |
| 2016 | 76.6 | 14.3 | 10.7 | 6.0 |
| 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 |
| % change | +56 | +48 | +43 | +41 |
| Ex-div: | 26 Sep | |||
| Payment: | 25 Oct | |||
| *Kainos listed its shares in July 2015 | ||||
