It is a rare organisation which isn't trying to embrace digital transformation in one way or another these days and Kainos (KNOS) is an increasingly important force for change.

Whether it is helping firms engage better with customers, improve access to information and services, bolster efficiency or simply trim costs, the Belfast-based business has a proven model and a lengthening reputation for profitable growth.

Today’s update for the full year to 31 March 2019 was of the ‘in line’ variety, which explains why the share price remains flat at 562p. But this is after expectations and forecasts were raised following the very positive update in early February. Since then the stock has rallied 35%.


Consensus estimates are calling for revenues to grow 55% to £150m and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to rise 47% to £23.9m. Analysts at Canaccord forecast pre-tax profits of £23.2m, implying a 52% jump.


‘There would seem to be little question that the company will report a ninth consecutive year of growth in people, customers, revenue and adjusted pre-tax profit come the 28 May 2019,’ when it reports full year results proper, says TechMarketView analyst Duncan Aitchison.

FY March 2018 2019f 2020f 2021f
Revenue £96.7m £150.5m £166.9m £185.7m
Pre-tax profit £15.3m £23.2m £26.3m £30.2m
EPS 10.4p 15.6p 17.5p 20.1p
PE 54 36 32 28
Dividend yield 1.20% 1.50% 1.60% 1.80%
Source: Canaccord


Belfast-based Kainos is an IT business that basically does three things. First, it helps typically large organisations transition their processes and operations into the 21st Century digital world. Many UK government departments employ Kainos to help them do this including the Cabinet Office, Home Office, Driver & Vehicle Licencing Agency (DVLA), Department for Transport and the NHS.

The company also provides implementation and testing for users of Workday enterprise management tools.

The third leg is Evolve, an NHS IT system that includes things like electronic medical records (EMR), streamlining the service the NHS can deliver to patients.

Evolve is muddling along, hamstrung by widely reported NHS cuts that have pushed budget holders to focus investment on front line services rather than modernisation. It’s been this way for a couple of years or more, although longer-term Kainos remains optimistic of the opportunities.


‘Our rising conviction is that Kainos could potentially look ahead to several years of 10% to 20% organic revenue growth, as the company benefits from its status as a premier boutique digital transformation enabler for the UK government and enterprises,’ says Canaccord’s Kai Korschelt today.

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Issue Date: 16 Apr 2019