Kainos : Annual report

CONTENTS

Strategic report

01 Highlights

02 Kainos at a glance

1. Chief Executive Officer's statement

1. Our markets

1. Our business model

1. Our strategy
2. Operational review

1. Our environmental, social and governance (ESG) commitments

1. Financial review

1. Key Performance Indicators (KPIs)

1. Risk factors and uncertainties

Financial statements

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

87 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. Company information

Operational highlights

We have delivered a very strong business performance, reflecting strong sector demand, the ongoing trust and support of our customers and the dedication of our people. We have recorded our 11th consecutive year of growth, with strong financial metrics.

• Revenue growth of 31% (28% organic) to £234.7 million (2020: £178.8 million).
• Adjusted pre-tax profit increased 124% to £57.1 million (2020: £25.5 million).
• Bookings up 6% to £258.8 million (2020: £243.6 million).
• Contracted backlog growth of 15% to £206.2 million (2020: £180.0 million).
• Highly cash generative with cash conversion5 of 112% (2020: 97%) and period-end net cash of £80.9 million
  (2020: £40.8 million).

We continue to deliver on our ambition to be a responsible business.

• Customer approval rating6 remains high at 98% (2020: 97%).
• Strong recruitment has increased our staff numbers to 2,024 (2020: 1,715), with employee retention increasing to 92% (2020: 90%).
• We have made significant progress in our climate action programme, achieving carbon neutrality for the year.

Both of our operating divisions have delivered an excellent performance.

• Within Digital Services, we continue to support significant ongoing digital transformation programmes across the public sector, healthcare and in the commercial sector. This has driven very strong revenue growth of 32% to £161.6 million (2020: £122.5 million).
• Our Workday Practice continues to be the leading European Workday specialist and we are building strongly in North America. We have recorded very strong revenue growth of 30% (18% organic) to £73.1 million (2020: £56.3 million). Within this, Smart revenues increased by 27% to £24.2 million (2020: £19.1 million).

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

• Overall, our revenues are: 45% public sector, 35% commercial, 20% healthcare.
• International revenues are up 48% to £59.0 million (2020: £39.9 million).
• Commercial revenues are up 29% to £81.1 million (2020: £63.1 million).
• Healthcare revenues are up 106% to £48.1 million (2020: £23.3 million).
• SaaS and software-related revenues are up 27% to £31.6 million (2020: £24.9 million).

Financial highlights

Revenue (m)

Statutory profit before tax (m)

Adjusted pre-tax profit1 (m)

Cash2 (m)

Bookings (m)

Software as a Service (SaaS) bookings (m)

Backlog3 (m)

Adjusted diluted earnings per share1 (note 10)

Diluted earnings per share

Total dividend4

Our operating divisions

We are a UK-headquartered IT provider, operating through two specialist business divisions, Digital Services and our Workday Practice.

Digital Services

Our Digital Services division helps our customers to solve their business problems by using technology, enabling them and their users to work smarter, faster and better.

Working collaboratively with customers around the world, our innovative and transformative solutions are secure, accessible, cost-effective, and take a user-first approach. We leverage the benefits of the public cloud and enable customers to utilise their data to drive decision-making.

In the public sector, we have delivered projects helping more than 60 million citizens, while saving our customers hundreds of millions of pounds.

In the commercial sector, customers trust us to provide digital transformation that evolves their services, delivers efficiencies, increases their capabilities and future-proofs their businesses.

In healthcare, we help providers deliver a service that is faster, more cost-effective and patient-centric.

We deliver services to over 140 clients, including HM Land Registry, the Department for Environment, Food and Rural Affairs ('Defra'), NHS Digital, Concardis (Germany) and New Day (UK).

Workday Practice

Our Workday Practice is closely linked to Workday Inc's software suite, which includes cloud-based software for Human Capital Management ("HCM"), Financial Management and Planning, enabling enterprises to organise their staff efficiently and support their financial reporting requirements.

Workday Services

In our Workday Services business, we provide consulting, project management, integration and post-deployment services for Workday's software suite. We work with clients globally and have an exceptional relationship with Workday.

With over 100 international clients, we are proud to work with Kion Group (Germany), ASOS plc (UK), Takeaway.com (Netherlands), Match.com (USA), Raiffeisen Bank (Switzerland) and LKAB (Sweden).

Smart

Smart is our proprietary software tool. It allows Workday customers to automatically test and verify that their unique Workday configuration is operating effectively, both during implementation and in live operation. Smart is the leading automated testing platform specifically designed for Workday and is implemented as a cloud-based Software as a Service ("SaaS") solution, on a subscription basis.

Over 240 clients use Smart, including Salesforce (USA), Whole Foods (USA), Xero (New Zealand), Netflix (USA), CapitalOne (USA), BlackBerry (Canada), Primark (Ireland) and The Met (USA).

Digital Services

£161.6 million

(69% of Group total)

5-year growth: 24% CAGR