Kainos Group plc (LON: KNOS), a UK-based IT services and solutions provider, announced its interim results for the six months ended September 30, 2025, revealing a mixed performance marked by revenue growth alongside a decrease in pre-tax profits.
The company's strategic investments and market dynamics played a significant role in shaping these results.
Revenue increased by 7% to £196.1 million, up from £183.1 million in the first half of 2025. However, statutory profit before tax decreased by 17% to £28.4 million, compared to £34.2 million in the prior year.
Adjusted pre-tax profit also saw a decline of 16%, landing at £32.0 million. Diluted earnings per share followed suit, dropping 17% to 16.7p.
Despite the profit dip, Kainos increased its interim dividend per share by 5% to 9.8p, showcasing confidence in its underlying business strength.
Bookings surged by 27% to £227.9 million, and the contracted backlog grew by 12% to £396.9 million, indicating robust future revenue streams. Product annual recurring revenue (ARR) also saw a healthy 19% increase, reaching £77.5 million.
The decrease in profitability is attributed, in part, to a full period of investment to support their Workday partnership, increased National Insurance contributions, and the use of contractors and third-party suppliers to manage short-term delivery demand.
These factors squeezed margins, with the adjusted profit margin declining to 16% from 21% in the prior year. Cash reserves decreased to £105.5 million, reflecting restructuring costs and increased working capital needs due to revenue growth.
To bolster shareholder value, the board announced its intention to launch a further share buyback program of £30.0 million, effective from November 19, to be executed over six months.
Key growth drivers included the continued expansion of Workday Products, which is on track to meet significant ARR targets. Digital Services also grew, buoyed by the healthcare sector and North American expansion, including the acquisition of Davis Pier in Canada.
Furthermore, Workday Services returned to revenue growth, driven by progress in European and North American markets and expansion into new regions.
CEO Brendan Mooney stated, “This was a positive six months for Kainos, underpinned by our success in securing several new contracts with new and existing customers. This positions us for accelerated growth in the second half, with each of our divisions set to increase revenue. We therefore anticipate a strong performance for Kainos as a whole.”
Analyst Summary: Bull and Bear Cases
Bull Case:
- Revenue increased by 7% to £196.1 million.
- Interim dividend per share was increased by 5% to 9.8p, showing confidence in business strength.
- Bookings surged by 27% to £227.9 million, and the contracted backlog grew by 12% to £396.9 million.
- Product annual recurring revenue (ARR) saw a healthy 19% increase to £77.5 million.
- A new £30.0 million share buyback program was announced, signaling long-term confidence.
- Key divisions, including Workday Products and Digital Services, showed strong growth and expansion.
Bear Case:
- Statutory profit before tax decreased by 17% to £28.4 million.
- Adjusted pre-tax profit and diluted earnings per share fell by 16% and 17%, respectively.
- The adjusted profit margin declined significantly to 16% from 21% in the prior year.
- Profitability was impacted by strategic investments, increased National Insurance contributions, and higher costs for contractors.
- Cash reserves decreased to £105.5 million due to restructuring costs and working capital needs from revenue growth.
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