Sparks - Kainos Group

After a tough couple of years, Kainos’ H126 trading update confirms that trading is moving in the right direction. The company has seen sequential improvements in performance and now expects FY26 (y/e 31 March 2026) revenue to be at the upper end of consensus (range £378-393m). The company is mobilising new projects across all three divisions and is recruiting as well as using contractors in the short-term to staff them; consequently the company expects to deliver adjusted PBT in line with consensus (£66.4m).  Within Digital Services, the hiatus in government spending  seems to be over. Kainos has won several significant programmes in the healthcare and public sectors, including contracts with the Home Office, NHS England and the DVSA, which should boost revenue in H226. The commercial sector (which made up only 6% of group revenue in FY25) remains weak, with performance down y-o-y. Workday Products continues to deliver strong growth and passed the $100m ARR mark in July (it has a target to hit ARR of £100m by 2026). The next product, Pay Transparency, will launch in Q326. Strong sales in Workday Services, which has been experiencing heightened competition, will result in a return to growth in FY26, with improved results in core European and North American markets and progress in Australia, New Zealand and Mexico. On current consensus, Kainos is trading on a P/E of 17.8x FY26e and 15.3x FY27e.