Kainos Group plc

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 results for the year ended 31st of March 2026. As always, before we start 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. So in terms of preparing for today's presentation, I asked co-work to look at last year's transcript in terms of results and it told me it was just over 7000 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. So over the next 40 minutes, we're going to cover kind of largely the same content. We're going to use 32 slides. We're going to use 7,000 words. But there's, I guess, really just one message that Richard and I want to convey today is that chaos are back in growth mode. So let's use those slides, those 40 minutes, as a way of unpacking some of that detail. In terms of structure today, I'm going to give a quick overview of the business and talk about performance in the last 12 months. I'm going to dive into the divisional performance and talk about the underlying trends there as well. Richard's going to take us through a detailed analysis on the finance and I'm going to finish off with a quick outlook statement before heading into the Q&A session. We use this slide regularly to convey, I guess, the three 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. If you look at the market size, that black circle across each of the graphs, that's over 7 billion of time for us to get after. Our business is international in terms of scope and the The three areas that we operate in give us the opportunity to achieve strong margins. And the one thing after 15 years in each of these markets, we really do feel that we're well established in them. The church also, I think, tell the story of the challenges of fiscal 25, and you can kind of see that contrasting performance in the column in fiscal 26, kind of back into growth mode. We work with some absolutely fabulous organizations and 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, I mean it's really an international client base. We have almost half of our customers are based outside of the UK. 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 70 million pounds in the last 12 months. And 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 the interim results in November. underscored as well. So we're delighted to be able to share the results that we have today and really underscoring that return to growth that we have. So the team have delivered, I think, just an absolutely excellent result. And to pull out some of the kind of relevant facts here, I mean, our sales booking has increased 32% up to 505 million or half a billion pounds in terms of sales orders. That is a record sales period for us. And because of that really strong sales performance, we've seen our revenue grow strongly as well, up to £431 million in the last 12 months. And it's also given us a really strong backlog figure for the years ahead, over £430 million, greater visibility into fiscal 27, but also increased visibility into future years as well. If we move beyond the headlines, 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%, and workday products saw the ARR increase by 23%, and we remain firmly on track for 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. And 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. So can I take 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 three charts really to underscore how we think about our business. So the durability of our revenue, so the length of time that we have, our clients, the balance across different sectors and indeed across customers, and then 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 client revenues is absolutely brilliant. And 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. So again, an MPS or net performance score of 61 has us in the excellent category and it's great to get that feedback from our clients with things that we're doing well, helping them achieve their business objectives. In the middle chart, we have the sector balance and balance I think is really the the correct term, we're getting a really nice balance between private and public sector, a strong and 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. And the chart on the right, we break down the revenues across the regions. So North America grew strongest, up 20% year on year. It's now a third of our revenues. And I have to say, we probably don't say enough in terms of our business that we do hide the fact that a third of our business comes from the US. And we've also seen strong growth in the UK region as well as in Europe. The driving force behind our business is always our people, their energy, their expertise and their experience. And lots of figures again on this slide. I wanted to draw your attention really to the graph on the bottom left, which describes the growth in staff numbers over the past 12 months. I really just two points to make on this graph. The first one is the increase in the overall workforce up 21%. It's that growth theme coming through in terms of our hiring plans as well. The second point is around that light blue segment you see inside the chart. That is the number of contractors in the workforce. We obviously have those figures over the last six years. So today there are over 290 contractors working on our various projects. So they're an important part of the scaling activity we have to respond to that strong sales and revenue growth. And to me, the use of contract staff is really just the highest dynamics of different hiring patterns. For us, it's about four weeks to hire a contractor, get them in and deployed onto projects. For us, it takes about five months for us to hire a permanent member of staff. If you look back over that time period, you can see that contractors back in 2021 were 15% of our workforce. Today, there are 7%. And you can also see that over time, that number reduces. So we do expect to see the mix of our staffing going forward to change, more employee-based staff members, as opposed to useful contract staff. In terms of locations, you can kind of see a strong growth in the Americas. That's partly to do with our colleagues joining us from Davis Pier, 119 people joined as part of that, but the US and Canada is a strong growth opportunity for us.

And that is reflected in those hiring numbers today. In terms of our responsibilities, we are really conscious of

doing more than just kind of building our businesses, about our commitment around climate action. And after a six year journey, we've finished up achieving our net zero scores. We have reduced our carbon impact over that time period very successfully. We are pleased that we continue to make progress around the gem and our imbalance in the technology workforce, but also inside Kainos. We see our female members of staff now up to 37% of the total workforce. I really like to focus on this final segment around education. So we do believe that today's young person is going to have a significant impact in the technology landscape in the future. And we also believe that, I guess the news flow around graduate jobs and graduate employment kind of disappearing, that AI is replacing those jobs. I think it's just wrong. We see significant opportunity for today's young person because they see a really important contribution. So if I think about our earn as you learn programme, where the people join us from school. We've done an AI enabled course for them to give them all the tooling they need to deliver AI programs. And they've been really impressive on what they've done with that work. So for us, you see it in our numbers there, we hired almost 130 young people into the company last year. In the course of this year, we expect to hire another 200 early careers colleagues as well. So moving across the divisional performance and starting off with workday products, it's been just another excellent year by the team. The revenue chart on the RSI rate does talk to that point about the consistency, that progressive pattern of growth over the last five years. But switching our attention to fiscal 26, as always, ARR is the key metric that we look to. It's up 23%. year and year and we continue to make progress towards those ARR targets we talked about a lot. The 100 million pound ARR by the end of this year and 200 million ARR by the end of 2030. So the team have told us that they're going to hit the 100 million target in December, which probably means they're going to hit it in November, perhaps the week of our interim results. That'll be a nice kind of backdrop around that. And we're really looking forward to achieving that milestone. So one thing that really probably you haven't had time to unpack, is looking at the ARR number. So we increased the ARR by £5 million in H1 and by £12 million or further £12 million in H2. So really it was a strong H2 performance by the team. Across the portfolio, all the products performed really well. Test continues to be our largest product and audit and EDM are our fastest growing, growing 46% and 100% respectively. Over the last 12 months, we've been working hard to add experienced talent to our Workday products leadership team as we build towards that £200 million milestone. But before I get to talk about the people who are joining the organisation, I really just want to take an opportunity to recognise and thank our colleague Malaghy Smith, who created our Workday products business back in 2014, alongside running our Workday services business as well. You know, I have to say it's just been a remarkable achievement. It lessened 1% of software companies ever actually achieve the £100 million, $100 million ARR target. And the achievement that we're able to talk about today is very much down to Malagi's intellect and his energy. His vision and his leadership has been such a pleasure to watch him build one of the UK's most successful software businesses, which really is on a charge at the moment. So thank you, Malachy. I look forward to continue to work with you as you transition to your advisory role across the group, focus on new areas with significant growth opportunity for us. In terms of the new team, Malachy has been leading the recruitment of that over the last 12 months. And as you can see there, we have signed up a chief marketing officer who joined us from Google, chief revenue officer who's joining us from Splunk. a Chief Product Officer who has joined us from UiPath and a Chief Customer Officer who has joined us from Minecast. The final member of that team, Derek Brown, joins us from Quantexa and will be starting on the 1st of June. In terms of pay transparency, you'll recall this is sold exclusively by Workday through a reseller engagement, so it's had a good start to life. We've signed about 30 customers in what really was our Q4, first three months of this calendar year and that momentum has continued into into Q1. Over the last few months there has been some slippage on the legislation implementation, which is really extending the opportunity from beyond the current year fiscal 27 into fiscal 28 as well. So delighted to see that kind of widening of the opportunity. I'll give you an example of that. At the moment, Poland is on track to sign and put the legislation in at the start of June. Germany is widely expected to slip. It could well be the second half of 2027 before they're able to implement the legislation. Those dates are changing almost on a weekly basis, but you can kind of see that there's a significant opportunity and it's now extended over a longer period of time. As noted on the slide, our investment level has increased in the last six months as we've built out the paid transparency solution. As always, our R&D investment is expensed to the PM now in the year. We've used this slide before, both at the capital markets event and at our interim results, and talk about the Clear Skies programme. And for those of you not familiar with it, Workday is very focused as an organisation on building functionality into their platform that supports all or most of their users. So they want to avoid building on this kind of regional or seen as being industry specific. The Clear Skies program is the name they give to this partner program, which encourages partners like ourselves to build functionality, products, agents, apps into areas that Workday are not planning to build. And to kind of unpack the diagram on the top right, so that dark blue, the no-fly zone, is where Workday are currently innovating, sort of building product right there today. And they don't want partners to be involved there. The light blue is, we describe as the flat risk zone. So there are no near-term plans for Workday to build in these areas, but they do expect to be interviewing there in the future. And finally, then there is the clear sky area where Workday want to see partners innovate and they will help curate and give advice about the application areas inside that white space. And that curation is really important because it gives us great insight into what's going on. So the fact that Workday are across our 10,000 customers means they have really good insight to share with us. It also means that they're going to manage which partners build which products across our white space. And pay transparency, I've mentioned already, is a good example of this process working in real life. Back in the summer of 2024, Workday approached us. There was an increasing number of requests around pay transparency and the EU Pay Transparency Directive. They had decided not to build that and asked if we want to get involved in building that solution. So it's always an obvious thing for for us to build, 70% of the information required to fulfill the EU pay directive is held inside Workday. So we said yes, obviously built the product and launched it in November of last year. In terms of looking at the bottom of that slide, the workday have come to us and given us some further ideas in terms of innovation. They start off with a list of 10. We shortlist that down to five and we'll find that further down to three. And the bottom of the slide really gives you a sense about the innovation pipeline we have for ideas inside Kainos. In total, just over 60 ideas are currently going through an evaluation process. Some of those are generated from customers, some from our services colleagues, and some from Workday products colleagues as well. The one idea that we have in Build is due to launch late summer. That's a Kainos generated idea, and we'll be able to disclose more of that closer to the launch date. In terms of that pipeline, it's a strong pipeline. Most ideas in the insight and filtering category will probably just stay there and die there. There'll be very few ideas making it through to the validation prototype stage, but we see a good flow of ideas and a good way for us to put those ideas in the hands of customers. Skyscanner are just a brilliant customer and they have an instantly recognizable brand as well. They're a user of Test, of All, and of Shield. But the quote at the top of the slide is really just a great summary of the value that test delivers to clients, greater coverage, greater accuracy and all for less effort. You know, Skyscanner from the very start of the engagement back in 2022, we're really focused on getting value from tests, so really engaged around how could they best use test inside their operations. As a result, they're getting some fantastic results in terms of reduced effort. So their figures is they're reducing the manual testing effort by 97%, down from six weeks to just a few hours in terms of testing, which is just a great case study to be sharing here today, but also with prospective customers as well. In terms of workday services, just another really excellent sales performance across the company, a really excellent sales performance by the team. A 44% increase is just a stunning figure to be reporting here today. There was a strong H2 kind of component to that. We closed 68 million pounds of deals in the second half, 54 million in the first half, and it really provides us a great foundation for fiscal 27. And in terms of that performance, I think it's really been a case of focus by the team. You know, the team worked really hard to work out which customers, which opportunities work best for us. So focusing on those that are more complex, we're going to demonstrate our value to our clients by helping them get live as quickly as possible. That focus has meant that we've been more effective in terms of competing in the marketplace, despite that higher number of partners were introduced 18 months ago. That's kind of flowing through to our sales success. In fiscal 26, we closed twice as many high value deals as we did fiscal 25. And we defined a high value deal as one that is over a million dollars in size. So it's great to see that performance coming through as a result of the focus. Something to kind of highlight, and I'm sure we'll come back to it in the Q&A as well. Over the last two years, we've been increasing the amount of fixed price engagements we've been undertaking. So it's now just over 37%. of our total revenues inside the division. The annuity style arrangements, so kind of year-long arrangements as well, are about 19% of revenue as well, so £21 million in the current year. So being able to have that kind of visibility around our business allows us to be more planned and more thoughtful about how we staff those engagements as well. So we do expect to see those trends continue. Our fixed price engagements grew 41% in H2, the yearly style arrangements, increased 11% year on year. So back in November, we had the growing opportunity for us to deliver services linked to our own products, particularly around employee document management and pay transparency. And the year just closed, those consulting services around our own products amounted to 3.1 million pounds. But with the rapid adoption of EDM in particular, which doubled in size over the course of last year, and PTA, which is obviously launching at the moment, we do expect to see our own product revenues increase by a factor of 100% over the course of the next year. So that's going to be a meaningful revenue stream in the year, but also in the increasing in future years as well. And since our last update back in November, we have established our Workday AI Center of Excellence, which has got three areas of activity. The first is looking at how we can deploy Workday more quickly for clients, enhancing their time to value, so getting them live more quickly, and also allowing us to bring differentiation as to how we go about those deployments and allowing us to manage how we recognize our margin as well. The second area is around helping our clients use the AI features that are built into Workday's core platform to help them adopt them and use them for their benefit inside the organisation. And the third area, and the most important one for us, is about how do we surface ideas from across our customer base, from across our colleagues, that may be appropriate for us to develop into future products. I touched on that on the Clear Skies slide as well. So very much complimentary with what we're doing with Workday products, let's surface these ideas, assess their viability, and where appropriate, build an agent, an app, or a product to bring that to our customers. Trimble are an organization most people on this call will not have heard about. They are a 12,000 person organization headquartered out of Westminster in Colorado. And they work in the, they refer to as the connecting the physical and digital worlds across construction, agriculture, and transportation. They came to us looking for a partner to help them deploy absence management and payroll across their entire organization, but particularly with the complexity across Europe. They have over 4,000 of their team based in Europe in over 40 countries across the world and in almost all 27 member states in the EU. So it's a very complex organization. HR legislation, lots of complexity in there as well. And at the time, before they started the project with us, Trimble talked about using a plethora of apps and systems, sometimes even using Excel to record different information. So a very fragmented, very manual process, no single view of their global workforce and also could be very error prone as well. So we deployed workday absence management and workday time tracking, allowing them to automate and harmonise their systems across all their different locations. So every tax regime, every leave entitlement, every labour law, all running on the single system.