Kainos Group plc

boring everyone. You're very welcome. It's just turned 9.31 and I know some people are still joining, but I will be respectful of your time. So you're very welcome to join myself and Richard to give you the latest update. As you can see, I'm joining from home in Belfast. It may surprise you to hear this, but the big excitement in the mini house is not the XM7 results we talked about for the next hour, but actually a wedding anniversary. So my wife, Eileen and I celebrate our 30th wedding anniversary today. So nothing more celebratory in terms of beverages than a cup of coffee this morning, but who knows what this evening might bring. So in terms of the presentation, if you just bear with me, let me launch that onto the screen here.

That's now appearing on the screen.

If it's not, somebody I'm sure will at least let me know. So in terms of just some housekeeping at the very start, Richard and I, the presentation will take about 35 minutes. During the presentation, your connection will be muted. So please feel free to ask questions as you go along in the chat functionality in Teams. At the end of the presentation, FTI will moderate the Q&A session. We are recording this broadcast and we'll be using Teams to generate the transcript of the call. So I look forward to see how it interprets some of my soft Irish accent over the course of the next 30 minutes. We will edit that transcript for clarity and we'll publish that on our website later today. You will recall that we took the opportunity in November to refresh our slide deck and that's about adding more detailed information about Workday products and to retire some of the information that we felt wasn't useful or helpful in the past. In terms of just giving a sense of the business to me, we always use this slide to start off our presentations and the first thing that always strikes me when you use this slide is that we have three divisions that are performing really well. So strong growth, strong margins and widening opportunities. And to focus on that point about widening opportunities, I think it's really important to stress that we operate in both resilient and in high growth markets. And we're trying to capture the sense of opportunity in the market size information on the top left of each of these graphs. So collectively our three markets represent 4.5 billion pounds of opportunity. And if you compare the figures we're using today, With the same figures a year ago, there's been an increase of 1.2 billion in opportunity. There are two factors behind this growth. First, there is the underlying increase in spending in each of the markets. So that drives expansion. I'm thinking really of increases in government spending or Workday Inc's impressive growth as well. There's also expansion as a result of our activities or move into the police sector in the UK, for instance, or our appointment of the Workday phase one partner in the US. And in our view, these market opportunities are well established. You can trace the origins back to 2011. There's been real resilience shown over the years. Despite the concerns about the broader economic conditions, we continue to see very strong demand from existing customers, as well as from customers who are new to the market. And that's not just our view. You see that replicated across many of our peers and competitors. In terms of our customers, we're very proud of the customers that we have and the work that we do for them as well. Our customer cohort is now over 800 ambitious organisations and includes, as you can see, some incredibly well-known brands. So I'm just sorry we can only squeeze 30 of them onto this slide. And turning to the results and giving you the overview. It's been a really pleasing performance. We've delivered, once again, very strong growth, both at a group level, but also across each of the divisions. And we've captured that on the left-hand graphic. Our performance is because of our execution. We've looked out about that. But there's also high demand in the market. We continue to be capacity constrained. There are more opportunities out there than we have people to do them. but with a great balance of short-term demand and that kind of longer-term growth drivers I talked about on the previous slide. I have to say, we're just delighted to achieve Workday phase one partner status in the US. It's been a long-held ambition for us, so well done on the team on achieving this milestone. Strangely, we've been capacity constrained here as well, and I've only really been able to engage with Workday's net new sales team since the start of this year. I've only secured two new customers in that time period, but we will be expecting a higher deal flow through fiscal 24. And as we discussed back in May and November, we are investing heavily in our Workday products. We believe we can achieve a 100 million ARR by 2026, or ARR, at the end of March was 49 million pounds. And we passed 50 million, that kind of 50 million midpoint during April. And I think being over halfway to any target is always a very positive milestone. And we'll pick up the conversation about investments later in this presentation. And in addition to the strong revenue growth Looking at our KPIs, we've achieved strong profit growth, albeit slightly by our investments, strong bookings, excellent backlog, a cash balance of over £100 million. And finally, the powerhouse in our business are people we continue to retain and attract talented colleagues and our almost 3,000 employees across the business. And that theme of our people, their energy and expertise and experience drives our business. So our delivery model remains hybrid. Your colleagues work from home or they work from our offices. Office attendance is optional and does vary across different countries and different times of the week, but it's typically still below 20%. And over the past couple of years, we've been investing in our offices really to support our hybrid working, some more collaboration space, greater flexibility in our office configurations as well. And rather than mandating office attendance, we are creating opportunities for our colleagues to attend offices. So that could be to do with collaboration with one of our colleagues or to attend some of the social events we run in the office as well. And it comes as no surprise to you that we continue to focus on employee engagement. And during the year, we moved away from our Sunday Times best companies to work for annual survey to work a peak on the employment, sorry, the employee engagement platform. So we are surveying our colleagues every four weeks. That allows us to be responsive to the feedback they're giving us. And that focus on engagement and I guess a more cautious job changing work as well. So your retention rate increased to 88%. with further improvement over the last few months. Our staff numbers are up 11%, so we're now just under 3,000 people in council, and once again, going across all the different regions, but obviously highest growth in the US market. The building update we published a few weeks ago did generate some response, some queries about why not pursuing headcount growth was indicating some kind of reduced confidence in the future. So just to be clear, that's definitely not the case. So we've always had the view inside the company that whenever we get busy, and by busy we mean more than 20% year-on-year growth, then our performance gets a little ragged. That typically translates into reduced realisation, increased use of contractors and other short-term behaviours. Our focus over the last 12 months has been on restoring that operational excellence, and that impacts headcount and hiring in three different areas. First, in the core operational aspects. So over the course of the year, we've improved digital services utilization by 3% from 78% to 81%, which is roughly the same as adding 50 people to the team. At the same time, we've improved our effective rate by 9%, which obviously does not require additional people to deliver the additional revenue. Second, we've been rebalancing our workforce. So we've reduced the number of contractors in chaos from 318 down to 209. So a reduction of 34%. We've also increased our graduate recruitment because 250 graduates join us over the course of the next few weeks. So both these activities improve our cost structures kind of long-term. Thirdly, the recruitment market has cooled, which means we do not need to front load our hiring as much as I've done in the past. There are Less companies in the market for talent and candidates are being more considerate about their next job offer and chaos represents a very good secure next step. So that means our time to hire and our offer acceptance rates have improved. And alongside that higher retention I've talked about, we're seeing kind of less need to hire as quickly as we've done in the past.