2022

Annual Report

WE ARE A UK-HEADQUARTERED IT PROVIDER, OPERATING THROUGH TWO SPECIALIST BUSINESS DIVISIONS, DIGITAL SERVICES AND OUR WORKDAY PRACTICE.

Our Digital Services division develops and supports custom digital service platforms for public sector, commercial and healthcare customers. Our solutions transform the delivery of these services, ensuring they are secure, accessible and cost-effective, and that they provide better outcomes for users.

Our Workday Practice is focused on the deployment of Workday Inc's Finance, HR and Planning software to leading organisations across the public, commercial and healthcare sectors. We are one of Workday's most respected partners, experienced in complex deployment and integrations and trusted by our customers to launch, test, expand and safeguard their Workday systems. We are also the leader in automated testing of customers' unique Workday configurations.

Our people are central to our success.

We employ more than 2,600 people across 22 countries in Europe and the Americas.

Kainos is listed on the London Stock Exchange (LSE: KNOS).

For further information, please visit www.kainos.com

CONTENTS

Strategic report

01 Highlights

04 Kainos at a glance

  1. Chief Executive Officer's statement
  1. Our markets
  1. Our business model
  1. Our strategy
  1. Operational review
  1. Our environmental, social and governance (ESG) commitments
  1. Financial review
  1. Key Performance Indicators (KPIs)
  1. Risk factors and uncertainties

Corporate governance

54 Directors' Report and Corporate Governance Statement

  1. Directors' Remuneration Report
  1. Annual Report on Remuneration
  1. Audit Committee Report
  1. Nominations Committee Report

Financial statements

92 Independent Auditor's Report to the members of Kainos Group plc

99 Consolidated income statement

  1. Consolidated statement of comprehensive income
  2. Consolidated statement of financial position
  3. Consolidated statement of changes in equity
  4. Consolidated statement of cash flows
  5. Notes to the consolidated financial statements
  1. Company statement of financial position
  2. Company statement of changes in equity
  3. Notes to the Company financial statements
  1. Definition of terms
  1. Company information

1 Kainos Annual Report 2022

HIGHLIGHTS

"WE HAVE RECORDED OUR 12TH CONSECUTIVE YEAR OF GROWTH ACROSS A WIDE RANGE OF KEY METRICS. OUR VERY STRONG BUSINESS PERFORMANCE REFLECTS ROBUST UNDERLYING MARKET DEMAND, HIGH LEVELS OF CUSTOMER ENGAGEMENT AND THE ONGOING COMMITMENT OF OUR COLLEAGUES."

2022 Financial highlights

Revenue (m)

Product Annual Recurring Revenue (ARR) (m)

£302.6

£34.3

2021 £234.7

+29% 2021 £23.6

+45%

Statutory profit before tax (m)

£46.0

Contracted backlog (m)

£259.7

2021 £50.3

-9%2021 £206.2

+26%

Adjusted pre-tax profit (m)

£58.8

Diluted earnings per share

28.5p

2021 £57.1

+3% 2021 32.1p

-11%

Cash (m)1

£76.6

Adjusted diluted earnings per share

38.1p

2021 £80.9

-5%2021 36.8p

+4%

Bookings (m)

£349.8

Total dividend per share2

22.2p

2021 £258.8

+35% 2021 28.2p

+21%

  1. FY21 includes treasury deposits of £18.0 million.
  2. Total dividend for FY21 includes a special dividend of 6.7p per share (paid September 2020), interim dividend of 6.4p per share (paid December 2020) and final dividend of 15.1p per share. Total dividend for FY22 includes interim dividend of 7.1p per share and proposed final dividend of 15.1p per share.

Kainos Annual Report 2022 01

HIGHLIGHTS CONTINUED

Operational highlights

12th consecutive year of growth across a wide range of key metrics.

  • Revenue growth of 29% (26% organic) to £302.6 million (2021: £234.7 million).
  • Adjusted pre-tax profit increased 3% to £58.8 million (2021: £57.1 million) as margins moderated following increased investment and the further normalisation of costs.
  • Bookings up 35% to £349.8 million (2021: £258.8 million).
  • Contracted backlog growth of 26% to £259.7 million (2021: £206.2 million).
  • Following dividend payments and acquisition expenses, period-end cash amounted to £76.6 million (2021: £80.9 million); with cash conversion at 83% (2021: 112%).

+35%increase in bookings

We continue to add to the talents of our global team.

  • We now have 2,692 people (2021: 2,024) based across 22 countries. This reflects strong recruitment in our core markets which has been enhanced through the year with the expertise of 153 new colleagues who joined via the acquisitions of Cloudator, Une Consulting, Blackline Group
    and Planalyse.
  • Against the backdrop of a global shortage in digital skills, our employee retention has reduced to 86% (2021: 92%). Our focus remains on being a great employer and we have retained our Sunday Times, 'Top 100 Best Companies to Work For' accreditation and were awarded '50 Best Places To Work in the UK' by Glassdoor.

+153new colleagues

Excellent customer service drives customer satisfaction and retention, underpinning revenue growth.

  • Customer approval rating3 remains high at 98% (2021: 98%).
  • Existing customer revenue increased by 34% to £267.7 million (2021: £199.7 million).
  • Customer numbers increased to 731 (2021: 546), an increase of 34%.

+34%increase in customer numbers

We continue with our ambition to be a responsible organisation.

  • We retained our carbon neutral status for 2022 and remain on track to achieve carbon net zero by 2025.
  • Our gender balance improved, with the proportion of women in Kainos increasing to 33% (2021: 30%), ahead of the industry average of 19%4; we remain committed to further improvement.
  • We delivered over 1,100 work placements including targeted programmes aimed at improving gender diversity, supporting social mobility and for those students with special educational needs.

On track to achieve 2025 carbon net zero by

  1. Data from all completed customer surveys in the year. There are five possible designations: 'Poor', 'Satisfactory', 'Good', 'Very Good' or 'Excellent'; the rating reflects the percentage of customers that rate our performance 'Good' or better.
  2. BCS diversity report 2021: Women in IT.

02 Kainos Annual Report 2022

In Digital Services, we continue to deliver significant digital transformation programmes across the public sector, healthcare and commercial sector.

  • This extensive project portfolio has driven very strong revenue growth of 24%, with revenues growing to £199.8 million (2021: £161.6 million).
  • Customer demand remains very high across all sectors as digital transformation continues to be a business priority.

Our Workday-related products, Smart Test and Smart Audit, achieved very strong growth, particularly in North America.

  • Smart product revenues grew 32% to £31.9 million (2021: £24.2 million); at the same time the Annual Recurring Revenue (ARR) increased 45% to £34.3 million (2021: £23.6 million).
  • We continued to invest in our Smart products, increasing our R&D expenditure by 67%, to £6.0 million (2021: £3.6 million), all of which was expensed during the year.

+24%increase in revenue growth +67%increase in R&D expenditure

We continue to be the leading pan-European Workday specialist and we have established a significant presence in the North American market.

  • Our Workday Services recorded very strong revenue growth of 45% (29% organic) to £70.9 million (2021: £49.0 million).
  • Focused on the opportunity in North America, we have doubled our presence and now have 323 colleagues. (2021: 142) based across USA, Canada and Argentina.

Our focus on sector diversification has ensured that we have built a robust and well-balanced business across sector and region.

  • Overall, our revenues: 41% Commercial, 37% Public Sector and 22% Healthcare.
  • Commercial revenues are up 53% to £123.8 million (2021: £81.1 million).
  • Public sector revenues are up 5% to £111.0 million (2021: £105.5 million).
  • Healthcare revenues are up 41% to £67.9 million (2021: £48.1 million).
  • International revenues are up 48% to £87.0 million (2021: £59.0 million).

colleagues in in the USA,

Commercial revenues increased +53%

323 Canada and Argentina

Kainos Annual Report 2022 03

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Kainos Group plc published this content on 28 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 August 2022 07:16:06 UTC.