Software firm Kainos Group forecasts further uplift in trade

Kainos Group expects strong demand for its software products and services to continue after the company reported excellent half-year results on Monday.

Total revenue at the IT provider rose 26 percent year-on-year to £179.8 million in the six months ended September, following significant growth overseas and rising orders from the commercial sector.

Within its largest division, digital services, sales grew 17 percent thanks to thriving business from banking and insurance companies such as New Ireland, IMCO and Danske Bank.

Trade also benefited from new contracts with UK government agencies ranging from Companies House to the Driver and Vehicle Standards Agency and the Foreign, Commonwealth & Development Office.

This offset a decline in healthcare orders due to a delay in Covid-related contracts from the UK Department of Health as lockdown restrictions eased.

But the Belfast-based company saw the highest revenue growth in its Workday software-as-a-service business, with its services business boosted by rising demand in North America.

Kainos generates more than half of Workday Services’ revenue in this region, even though the division only entered the market in 2018, three years after its initial expansion into Northern and Central Europe.

This increased total international sales by 53 per cent to £61 million, meaning it now generates more than a third of its total sales outside the UK.

Although operating expenses grew faster than revenues, mainly due to investments in Workday products and acquisition costs, the group was still able to post a profit of £21.9 million, an increase of 9 percent on last year.

The FTSE 250 company predicts that demand for its services will remain high in the near term as more companies and institutions upgrade their digital operations.

Much of this growth is expected to come from the UK public sector and the National Health Service, for whom Kainos helped develop the NHS app.

However, the company warned that the combination of NHSx and NHS Digital agencies led to the delayed awarding of some projects.

Kainos CEO Brendan Mooney said, “As the digital transformation market enters its second decade, it continues to grow in importance for organizations operating in government, healthcare and commercial sectors.

“This interest translates into continued demand for the work we do for our clients, not just over the past six months, but also looking to the future.

‘Despite the economic uncertainty, there is an urgency among our customers to extend existing projects and to start up new projects.’

Analysts from Investec have maintained their buy rating for the software company, forecasting annual revenue of £371.6m alongside underlying profit of £66.8m.

Kainos Group Shares were up 3 per cent at £14.81 when trading closed on Monday, meaning their value has risen by nearly a fifth over the past month.