Earnings call transcript: Kainos Group sees strong H2 2026 growth

Kainos Group PLC (KNOS) reported robust financial results for the second half of fiscal year 2026, ending March 31. The company achieved total revenue of 431 million GBP, marking a significant recovery from the previous year’s challenges. Despite the impressive revenue growth, the adjusted profit before tax (PBT) margin saw a slight decline due to various operational costs. Following the earnings announcement, Kainos shares rose by 0.43%, reflecting investor optimism about the company’s growth trajectory.

Kainos Group demonstrated a strong return to growth in FY 2026, overcoming previous fiscal challenges. The company reported significant revenue growth across its three business divisions: Digital Services, Workday Services, and Workday Products. This performance underscores Kainos’s strategic position in the market, particularly in the digital transformation and Workday implementation sectors.

Kainos Group’s earnings exceeded market expectations, with revenue significantly surpassing the forecast of 214.2 million GBP. The company’s performance in the second half of FY 2026 underscores its successful recovery and strategic growth initiatives.

Following the earnings report, Kainos’s stock price rose by 0.43%, reaching 818 GBP. This positive movement reflects investor confidence in the company’s growth prospects and strategic direction. The stock is currently trading closer to its 52-week high of 1,190 GBP, indicating a strong market position. Despite the recent uptick, shares remain down ~31% over the past year, though they’ve recovered 7.4% year-to-date. According to InvestingPro data, the company maintains a solid financial foundation, holding more cash than debt on its balance sheet—a key strength during uncertain market conditions.

Kainos has set ambitious targets for the coming years, including achieving a 100 million GBP annual recurring revenue (ARR) for its Workday Products division by December 2026. The company remains committed to expanding its market presence, particularly in the Americas and APAC regions, and is poised for continued growth in the digital services sector. Notably, Kainos has raised its dividend for 11 consecutive years, demonstrating commitment to shareholder returns. InvestingPro subscribers have access to 8 additional exclusive tips about KNOS, plus comprehensive analysis through the company’s Pro Research Report—one of 1,400+ available for top US and global equities.

Kainos executives highlighted the company’s strategic focus on growth and innovation. "Our performance in FY 2026 is a testament to our team’s dedication and our strategic initiatives," said the CEO. The leadership emphasized the importance of maintaining a strong balance sheet and exploring targeted M&A opportunities to drive future growth.

During the earnings call, analysts inquired about Kainos’s strategy to manage margin pressures and its plans for geographic expansion. The company reiterated its focus on operational efficiencies and strategic partnerships to sustain growth and profitability.

Speaker 0: Good morning, everyone, and thank you very much for taking the time to join Richard and I, here in Belfast. We’re here to talk about our full year results for the year ended 31st of March 2026. As always, before we start with the presentation, just some very quick housekeeping points. The presentation will last, for Richard and I, between 35 and 40 minutes. During the presentation, your microphones will be muted, and at the end of the presentation, FTI will moderate the Q&A session. We are recording this broadcast, and we will publish it to our website later today. In terms of preparing for today’s presentation, I asked Copilot to look at last year’s transcript in terms of the results, and it told me it was just over 7,000 words long.

Indeed, the word count was 19 words less if I exclude the page numbers. It was a very helpful addition to the information they provided. Over the next 40 minutes, we’re gonna cover kind of largely the same content. We’re gonna use 32 slides. We’re gonna use 7,000 words, there’s, I guess, really just one message that Richard and I want to convey today is that, you know, Kainos are back in growth mode. Let’s use those slides, those 40 minutes as a way of unpacking some of that detail. In terms of structure today, I’m gonna give a quick overview of the business and talk about performance in the last 12 months. Gonna dive into the divisional performance and talk about the underlying trends there as well, which is gonna take us through a detailed analysis on the finance.

I’m gonna finish off with a quick outlook statement before heading into the Q&A session. We use this slide regularly to convey, I guess, the 3 divisions that we have and the kind of growth profiles across them. The things that we kind of draw out from this ourselves internally is that we operate in really large markets. You know, if you look at the market size, that black circle across each of the graphs, you know, that’s over GBP 7 billion of TAM for us to get after. Our business is international in terms of scope. The 3 areas that we operate in give us the opportunity to achieve strong margins. The one thing after 15 years in each of these markets, we really do feel that we’re well-established in them.

The charts also, I think, tell the story of the challenges of FY 2025. You can kind of see that contrasting performance in the column in FY 2026, kind of back into growth mode. We work with some absolutely fabulous organizations. We are always very proud of the work that we do for them and the long-term nature of the relationships we have with our customers. We work with, at this stage, just over 1,250 customers from around the globe, and I do mean the globe, meaning it’s really an international client base we have. Almost half of our customers are based outside of the U.K.

In the past 12 months, we’re delighted to see that our existing clients have placed their trust in us and given us additional work, so our revenues from existing clients are up over GBP 70 million in the last 12 months. We’ve added over 150 new clients to the roster as well over that same period of time. Jumping straight into the details. I mean, this time last year we talked about the early signs of growth, something we were able to reinforce at the capital markets event in October, and our interim results in November underscored as well. We’re delighted to be able to share the results we have today and really underscoring that return to growth we have. The team have delivered, I think, just an absolutely excellent result.

To point some of the kind of relevant facts here, I mean, our sales booking has increased 32% up to GBP 505 million or half a billion GBP in terms of sales orders. That is at a record sales period for us. Because of that really strong sales performance, we’ve seen our revenue grow strongly as well, up to GBP 431 million in the last 12 months. It’s also given us a really strong backlog figure for the years ahead, over GBP 430 million. Great visibility into fiscal 2027, but also increased visibility into future years as well. Now, if we move beyond the headlines, you know, the sales performance wasn’t just in one area, it was across all three of our divisions. Digital Services sales up 29%.

Workday Services sales up 44%. Workday Products saw the ARR increase by 23%. We remain firmly on track for our GBP 100 million ARR target at the end of this year. The sales performance has also increased the revenue across all three of the divisions, and you can pick up those numbers from the chart on the left-hand side. The strong sales and revenue performance has also required us to significantly increase the use of contractors, we refer to as supply partners. That has had a moderating effect on our margin growth, and Richard will take you through the moving parts of that later in the presentation. Across the business, but particularly in Digital Services, we see strong traction within our customers for AI and data projects.

That’s most evident in Digital Services, where the revenue from AI-related projects is up 11% year-on-year. Kind of taking a step back from all the detail, for us, just a really strong set of growth-oriented figures on the screen here in front of you. Delighted to be able to tell them, and obviously just to commend the team for an excellent performance over the past 12 months. We use these 3 charts really to underscore how we think about our business. The durability of our revenue, the length of time that we have our clients to balance across different sectors and indeed across customers, and obviously the global nature of the business. On the left is the breakdown of our existing versus new customer revenues.

To have 86% of existing clients, existing client revenues is absolutely brilliant. For us, that gives us a really good view both in terms of our contracted backlog, but also kind of visibility of our customers’ plans and how we fit within those plans as well. We’ve got great customer satisfaction. Again, an NPS or Net Promoter Score of 61 has us in the excellent category, and it’s great to get that feedback from our clients about things that we’re doing well, helping them achieve their business objectives. In the middle chart, we have the sector balance, I think is really the correct term. We’re getting, you know, a really nice balance between private and public sector, a strong growing health sector as well. There’s also balance across customers.

The reality is we have now over 1,200 customers, so we have got a real broad spread of revenue from different sources. In the chart on the right, we break down the revenues across the regions. North America grew strongest, up 20% year-over-year. It’s now a third of our revenues. I have to say, we probably don’t say it enough in terms of our business that we don’t hide the fact that a third of our business comes from the U.S. We’re also seeing strong growth in t