Sparks - Kainos Group

Kainos reported a positive H126 in line with its recent trading update. Revenue of £196.1m was 7% higher y-o-y and adjusted PBT declined 16% y-o-y to £32.0m, reflecting higher contractor costs to fulfil projects in the short-term, higher NI and the costs of the Workday partnership. Digital Services (53% of revenue) grew 6% y-o-y, with Healthcare up 33% and public sector down 3%. New contracts signed in H126 should lead to meaningful growth from both sectors in H226. The company has deprioritised new business in the commercial sector (now only 3% of group revenue).  Workday Products (20% of revenue) grew 14% y-o-y with ARR reaching £77.5m at period end (+19% y-o-y). The $100m ARR target was hit in July and the company is targeting ARR of £100m by the end of 2026 and £200m by the end of 2030. Workday Services (27% of revenue) returned to growth (+4% y-o-y), with bookings up 35% y-o-y and the contracted backlog up 2% y-o-y. The company closed H126 with net cash of £105.5m, after £20.9m-worth of shares were bought back in the period. The current £30m buyback scheme runs until the 18th and a further £7.1m have been bought back so far in H226. A new £30m programme will kick off on 18th November. Management expects FY26 adjusted PBT to be in line with consensus, which is currently £66.4m. The stock gained 22% to 866p on the day of the September trading update  and since then has risen to 927p, putting it on a P/E of 23.0x FY26e and 19.9x FY27e.