TIDMKNOS
RNS Number : 8810S
Kainos Group plc
11 November 2019
11 November 2019
Kainos Group plc
("Kainos" or the "Group")
Interim results for the six months ended 30 September 2019
Kainos Group plc (LSE: KNOS), a leading UK-based provider of IT,
consulting and software solutions announces its results for the six
months ended 30 September 2019.
FINANCIAL HIGHLIGHTS
H1 20 H1 19 Change
Revenue GBP86.9m GBP67.2m 29%
Adjusted pre-tax profit(1) GBP12.8m GBP10.1m 27%
Profit before tax GBP12.0m GBP8.7m 38%
Cash GBP41.3m GBP38.8m 6%
Sales orders GBP99.5m GBP90.2m 10%
SaaS sales orders GBP16.4m GBP6.4m 156%
Backlog(2) GBP131.0m GBP125.6m 4%
Adjusted diluted earnings per
share (note 8) 8.4p 6.6p 27%
Diluted earnings per share 7.9p 5.7p 39%
Interim dividend 3.5p 2.8p 25%
FINANCIAL AND OPERATIONAL HIGHLIGHTS
-- Performance in line with market expectations, with on-going positive momentum.
- Revenue growth of 29% to GBP86.9 million (H1 19: GBP67.2 million).
- Adjusted pre-tax profit increased 27% to GBP12.8 million (H1 19: GBP10.1 million).
- Sales orders up 10% to GBP99.5 million (H1 19: GBP90.2 million).
- Contracted backlog growth of 4% to GBP131.0 million (H1 19: GBP125.6 million).
-- Revenue diversification continues.
- International revenues up 86% to GBP17.9 million (H1 19: GBP9.6 million).
- Commercial revenues up 66% to GBP29.3 million (H1 19: GBP17.6 million).
- SaaS and software-related revenues up 34% to GBP13.2 million (H1 19: GBP9.9 million).
-- Very strong growth in Digital Services driven by new and existing customer demand.
- Revenue growth of 29% to GBP73.7 million (H1 19: GBP57.3 million).
- Significant on-going engagements in UK government's digital transformation programme.
- Further strengthening of position within Europe as the leading
boutique Workday partner and building presence in North
America.
-- Digital Platforms accelerating, with strong international expansion.
- Revenue growth of 34% to GBP13.2 million (H1 19: GBP9.9 million).
- Over 190 customers on Kainos Smart (H1 19: 139).
- Research and development expenditure of GBP1.9 million expensed (H1 19: GBP2.2 million).
-- Kainos now comprises 1,562 people (H1 19: 1,324) up 18%, with on-going recruitment activity.
-- Customer approval of Group services rated as "good" or better by 98% of customers.(3)
-- Announcement today of the acquisitions of Formulate and
Implexa, specialist consulting partners to Adaptive Insights:
financial and business planning software business which is part of
Workday.
-- Strong period-end cash of GBP41.3 million (H1 19: GBP38.8m).
1Adjusted measures are based on reported statutory profit
numbers excluding the effect of share-based payments and related
costs. Reconciliations between the reported and adjusted measures
are included in the Financial Review.
2 The value of contracted revenue that has yet to be
recognised.
3 Data collected from all completed feedback surveys conducted
with Kainos customers over the course of the period.
Brendan Mooney, CEO, commented:
"We are announcing another confident set of results, and remain
on track to deliver our tenth consecutive year of growth, which we
measure in terms of our people, customers, revenue and adjusted
pre-tax profit. This achievement is more pronounced against an
unsettled macro-economic backdrop.
Our Digital Services division has maintained its strong
momentum, fuelled by demand from existing and new customers, both
locally and internationally.
We continue to deliver major transformation programmes across UK
government and increasingly for our commercial clients. Within our
Workday-related business we continue to perform strongly in our
established UK and European markets and within our new geographies
of France and Canada.
This client-led demand has resulted in expansion across our
established offices, in our new offices Paris and Toronto and to
enhance our support for our international clients we now have
colleagues based in Sweden, Austria, Finland and Romania.
In our Digital Platforms division, Smart, our market-leading
Software as a Service (SaaS) platform for automated testing of the
Workday suite, has accelerated, continuing to add global brands as
customers and now with over 190 international organisations on the
platform.
Today we have also announced the acquisition of two specialist
consulting companies and we are delighted to welcome twenty one
colleagues as part of these transactions. The companies, Formulate
in the UK and Implexa in Germany, are experts in the Adaptive
Insights financial and business planning software that was acquired
by Workday, Inc. in 2018 for $1.6 billion.
Our success continues to be delivered by an exceptional group of
colleagues and supported by excellent relationships with our
ambitious customers. We remain focused on the needs of both as we
continue our growth journey.
The Group's pipeline of prospects continues to strengthen and
the Board believes that the Group is well-positioned for growth
both in the short term and in the coming years.
Finally, it is appropriate to acknowledge the recent retirement
of our long-standing Chairman, Dr John Lillywhite. John was
instrumental in the creation of Kainos in 1986 and served as
Chairman since 1998, leading the company to IPO in July 2015. John
leaves with our very best wishes for his retirement and with our
deepest thanks for all the support and guidance he has provided
over the past 33 years to the Company, to me personally and the
people within the Company.
Mr Tom Burnet, an independent non-executive Director of the
Company since 2015 has been appointed Chairman and we look forward
to working with Tom in his new role."
Ends
For further information, please contact
Kainos via FTI Consulting LLP
Brendan Mooney, Chief Executive Officer
Richard McCann, Chief Financial Officer
Investec Bank plc +44 20 7597 5970
Andrew Pinder / Patrick Robb
Canaccord Genuity +44 20 7523 4606
Simon Bridges / Andrew Potts
FTI Consulting LLP +44 20 3727 1000
Matt Dixon / Leah Dudley/ Kwaku Aning
About Kainos
Kainos Group plc is a UK-headquartered provider of Digital
Services and Digital Platforms.
The Group's Digital Services include full lifecycle development
and support of customised Digital Services for government and
commercial customers. Kainos is also the leading boutique partner
for Workday, Inc. ("Workday") in Europe, responsible for
implementing Workday's innovative Software-as-a-Service (SaaS)
platform for enterprise customers.
The Group's Digital Platforms comprise specialised digital
products in the mobile healthcare and automated testing arenas.
Smart is an automated testing platform for Workday customers;
Evolve Electronic Medical Records ("EMR") is the market leading
product for the digitisation of patient notes in the Acute sector
of the NHS.
Kainos has over 1,550 people across 12 offices in Europe and
North America.
Kainos is listed on the London Stock Exchange (LSE: KNOS).
For further information, please visit www.kainos.com.
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2019
BOARD CHANGES
During this reporting period, Dr John Lillywhite retired as
Chairman and Director of Kainos Group plc. John was instrumental in
the creation of Kainos in 1986, then a joint venture between ICL
(now Fujitsu) and Queen's University Belfast. He was appointed
Chairman in 1998, leading the company to IPO in July 2015 and has
continued to serve as Chairman of Kainos as a public company since
that time.
Mr Tom Burnet, an independent non-executive Director of the
Company since 2015 has been appointed Chairman of Kainos Group
plc.
DIVISIONAL REVIEW
Digital Services
The Digital Services division comprises two areas of
activity:
-- Digital Transformation: the delivery of customised digital
solutions, principally for central government and regional
government departments and agencies ("UK government") and for
commercial and healthcare organisations. The solutions provided are
highly cost-effective and make digital services more accessible and
easier to use for staff, citizens, customers and patients.
-- Workday Services: the provision of consulting, project
management, integration and post deployment services for Workday's
Enterprise Resource Planning (ERP) software suite, which includes
cloud-based software for Human Capital Management (HCM) and
Financial Management that enables enterprises to organise their
staff efficiently and to support financial reporting
requirements.
In total, Digital Services revenue for the six months ended 30
September 2019 grew by 29% to GBP73.7 million (H1 19: GBP57.3
million), with revenue from customers in commercial sectors
increasing 70% to GBP21.9 million (H1 19: GBP12.9 million). Sales
orders in Digital Services reduced by 7% to GBP76.3 million (H1 19:
GBP82.4 million) and backlog for the division reduced by 12% to
GBP79.4 million (H1 19: GBP90.3 million).
Digital Transformation revenue for the period grew by 21% to
GBP56.8 million (H1 19: GBP47.0 million), with revenue from
commercial customers growing 50% to GBP8.1 million (H1 19: GBP5.4
million), while revenue from government customers grew 23% to
GBP43.7m (H1 19: GBP35.6 million), and represented a total of 77%
of Digital Transformation revenues (H1 19: 76%).
In contrast, Workday Services revenues are largely derived from
commercial clients, representing 81% of revenue (H1 19: 73%).
Overall revenues grew 64% to GBP16.9m (H1 19: GBP10.3 million),
with commercial revenues growing 84% to GBP13.7 million (H1 19:
GBP7.5 million) and public sector revenues remaining constant at
GBP2.8 million (H1 19: GBP2.8 million).
Digital Services - Digital Transformation
While Digital Transformation spans commercial and healthcare
organisations, the largest area of activity is within UK
government. In our Annual Report in May 2019, the conclusion of
this section noted:
In the near term, there is an increased possibility that Brexit,
a general election and a spending review all occur within a similar
timeframe. Whilst this is unlikely to disrupt in-flight programmes,
it may cause the deferral of significant new programmes by a number
of months.
This guidance remains valid, with government departments
continuing with existing programmes, serving as a reminder that
even in uncertain times, the business of government does not stop.
Some departments are opting to defer some new programmes until they
obtain greater clarity around spending plans, including those
relating to the preparation for EU Exit.
Alongside this short term moderation of activity, the Group
believes that there will be significant IT change as a result of EU
Exit. With over 300 IT systems impacted this will present growth
opportunities - the challenge, as with Brexit in general, is
predicting when this will occur.
Within central government, Kainos continues to consolidate a
leading position across key accounts, extending services to deliver
a number of the most high profile digital programmes across the
Department for Environment, Food and Rural Affairs, the Ministry of
Justice, HM Land Registry, Driver and Vehicle Standards Agency,
Department for Transport and the Home Office.
Progress continues in the commercial sector, both within the UK
and in Germany where projects are underway with New Day, BP,
Telensa (UK), Concardis and Skeyos (Germany). The partnership with
NHS Digital continues to be significant, with the NHS App now
available across 95% of England, following its successful private
beta. Looking forward, the Group is optimistic about the increasing
adoption of digitisation by commercial customers and the increased
opportunity that it represents.
Simultaneously, the Group remains confident about the future of
digitisation in the UK public sector and that it is well positioned
to maintain a central role in public sector transformation. As
noted above, while existing programmes will continue as planned,
Brexit is likely to both result in the deferral of some new
digitisation programmes and generate significant EU Exit related
programmes.
Digital Services - Workday Services
Kainos first engaged with Workday in 2010 and is now one of the
most experienced participants in Workday's partner ecosystem.
Kainos remains the only boutique Workday partner headquartered in
the UK and one of only 33 partners globally accredited to implement
Workday's innovative SaaS platform.
Within Europe, Kainos continues to consolidate its position as
the leading Workday partner, driven by the acquisition of new
clients, further geographic expansion and high satisfaction levels
within the Kainos customer base(4) .
In terms of geographic expansion, Kainos opened offices in Paris
and Toronto in January 2019 to support growth within the French and
North American markets, respectively. This is in addition to
offices opened in Copenhagen (2017, to develop the Nordic markets
of Denmark, Sweden, Norway and Finland), Amsterdam (2015, covering
Belgium, Netherlands and Luxembourg) and Frankfurt (2017, covering
Germany, Austria and Switzerland). In addition to these offices,
Kainos also has staff based in Sweden, Finland, Austria,
Switzerland and Romania. Kainos now has 56 clients for Workday
Services in mainland Europe (H1 19: 34).
In North America, Kainos was appointed as an accredited partner
for Canada (October 2018), has already secured its first customers
and opened the Toronto office in 2019. Within the US, Kainos is
delivering Workday Financials projects for clients that have
substantial international operations alongside smaller engagements
within established Workday clients.
4 Recent transactions include the Appirio acquisition by Wipro
(2016), DayNine by Accenture (2016) and Ataraxis by HR Path (2018).
In 2016, Wipro acquired Appirio, a boutique Workday and Salesforce
consultancy, in 2019 Alight acquired the Workday elements of the
Appirio business from Wipro, for a reported $110 million, with 350
consultants joining Alight.
In addition to the delivery of Workday for new customers, Kainos
is increasingly involved in supporting the operation of customers
that are already live on the Workday platform. This annuity-style
revenue stream, described as Post Deployment Services, accounts for
GBP6.1 million (H1 19: GBP4.0 million) and has 88 customers (H1 19:
68 customers).
The number of accredited Workday consultants in the Group's
Digital Services division has increased by 55% to 305 people (H1
19: 197 people), with further recruitment underway.
Looking forward, growth prospects remain very strong, driven by
geographic expansion, increased penetration within core markets and
the further development of our Post Deployment Services offering.
These prospects are, in turn, underpinned by very strong annual
revenue growth by Workday Inc.
Digital Platforms
The Digital Platforms division comprises two discrete
platforms:
-- Smart Automated Testing (Smart): Smart is a proprietary
software tool that allows Workday customers to automatically verify
their Workday configuration both during implementation and in live
operation. Smart is the only automated testing platform
specifically designed for the Workday product suite. Smart is a
cloud-based SaaS solution licensed on a subscription basis to
customers.
-- Evolve Electronic Medical Record (Evolve EMR): Evolve EMR is
a proprietary software product that removes paper from the care
process by digitising NHS patient records, thereby enabling
efficient healthcare. Evolve EMR can be purchased either on-premise
or in a hosted cloud environment, with both perpetual and
subscription licensing options.
In aggregate, Digital Platforms revenue for the six months ended
30 September 2019 increased by 34% to GBP13.2 million (H1 19:
GBP9.9 million). Sales orders for Digital Platforms increased 198%
to GBP23.2 million (H1 19: GBP7.8 million) of which sales orders
for the Group's SaaS platforms increased by 156% to GBP16.4 million
(H1 19: GBP6.4 million). Backlog increased by 46% to GBP51.6
million (H1 19: GBP35.4 million).
Within Smart, revenue for the period increased by 63% to GBP8.5
million (H1 19: GBP5.2 million), of which GBP6.8 million relates to
SaaS subscriptions (H1 19: GBP4.3 million). New sales bookings for
the period amounted to GBP14.5 million (H1 19: GBP7.3 million), an
increase of 100%. The Annual Recurring Revenue (ARR) for Smart at
period end increased by 75% to GBP16.2 million (H1 19: GBP9.2
million).
The on-going funding constraints within the NHS continue to
create a headwind for Evolve within the UK, although significant
new projects are underway in Dublin and Gibraltar. For the
reporting period, revenue remained constant at GBP4.7 million (H1
19: GBP4.7 million), an increase of 1%. Sales orders amounted to
GBP8.7 million (H1 19: GBP0.5 million), creating an expectation of
modest growth in future reporting periods.
Digital Platforms - Smart
Smart is used by over 190 customers globally to automatically
verify their Workday configurations (H1 19: 139). Kainos currently
has four Smart modules: HCM, Security, Financials and Payroll with
an Auditing module soon to be added.
Workday, Inc. has a Platform-as-a-Service offering known as
Workday Cloud Platform (WCP), which is expected to have general
availability in H1 20. Kainos has been part of the early adopter
programme since 2017, and while WCP is at an early stage it may
offer new future growth opportunities - such as additional IP
development for Kainos or specialised development services to other
Workday customers and partners.
Looking forward, continued strong growth for Smart will be
powered by increased penetration of Smart in the Workday customer
base, by expansion of the Workday customer base itself and by the
development and adoption of new Smart modules.
Digital Platforms - Evolve
Evolve EMR continues to be a leading supplier to the NHS and is
now deployed at enterprise scale across 30 Health Trusts and
hospital groups, managing over 2.0 billion images with 39 million
patients registered on the system.
The dominant feature of the UK NHS market is that of restricted
funding, which has significantly reduced procurement activity
across the sector. As noted above, significant projects are
underway in Dublin and Gibraltar and within the existing client
base, there is growing interest in migrating to Cloud EMR as well
as investigating Cloud-based solutions in general.
Near-term, expectations are for a subdued market for Evolve.
OUR PEOPLE
Kainos believes that the future success of the organisation is
dependent upon the capability of the people working in the Group.
Kainos' People Development Plan focuses on the key objectives of
development, retention and recruitment.
The Group has 1,562 people working in Kainos (H1 19: 1,324) an
increase of 18%, of whom 9% are contractors (H1 19: 11%). Staff
retention across the Group rose to 87% during the period (H1 19:
86%).
Kainos continues to attract strong interest in key recruitment
markets, with 8,879 applicants in the period ended 30 September
2019 (H1 19: 9,282). In total, 232 people joined Kainos (H1 19:
244), representing 3% of the original applicants (H1 19: 3%).
The Kainos Digital Academy and associated programmes are central
to the development of staff. During the six month reporting period
4,740 training days were completed, an average of three per
employee. The Digital Academy has been central to the development
of new capabilities in Cyber Security, Data, Machine Learning and
Artificial Intelligence.
Employee wellbeing is a key priority and Kainos strives to be an
excellent employer, the success of which is reflected in holding
Sunday Times Top 100 Employer status continuously from 2012 to
2018, an accreditation that is entirely based upon employee
feedback. On Glassdoor, the website allowing current and former
employees to anonymously review companies, 79% of reviewers would
recommend working at Kainos.
Kainos continues to provide a comprehensive range of benefits to
support financial security, such as Private Health Insurance, Life
Insurance and Income Protection, and a comprehensive health plan,
Healthshield. This includes subsidised gym membership, personal
coaching, 24/7 counselling, health assessments and alternative
therapies to assist staff and their families' health and
wellbeing.
The Group operates a Share Incentive Plan for all staff and a
total of 2,155,859 free shares have been distributed to staff. In
addition, the Group operates SAYE share schemes through which
2,340,985 options have been granted to staff. In aggregate, these
schemes represent a total value of GBP22.5 million(5) .
The Group views it as part of its mission to promote awareness
of possible careers in digital technologies amongst young people.
Over the past five years, these outreach programmes have directly
benefited the lives of over 5,000 young people in the UK and
Ireland, catering for students from a range of socio-economic
backgrounds and with a high percentage of female students taking
part.
ACQUISITIONS
The company completed the acquisition of two specialist
consulting companies in November 2019. The companies, Formulate in
the UK and Implexa in Germany, are experts in the Adaptive Insights
financial and business planning software.
Adaptive Insights was acquired by Workday, Inc. in June 2018 to
help businesses better plan, execute and analyse data across the
enterprise in one system, by combining Adaptive Insights' Business
Planning Cloud with Workday's applications for finance and HR.
Established in 2016 and headquartered in Worcestershire in the
UK, Formulate has served as one of only eleven certified partners
to Adaptive Insights and is one of its largest partners worldwide.
Formulate has a workforce of sixteen people, combining both
software and consulting capabilities, and provides its services to
more than 100 customers across UK and Europe.
Established in Hamburg in 2014, Implexa is one of the leading
German Adaptive Insights partners, working in the German ERP and
Planning market and has a workforce of five people. It is one of
four accredited Adaptive Insights partners in Germany, and adds
Hamburg-based software and consulting capabilities to Kainos'
existing Frankfurt presence and capabilities.
Both acquisitions help Kainos to build and expand on its Workday
offering, and to grow its presence in key markets. By acquiring
both businesses Kainos strengthens its capabilities to both sell
and execute Adaptive Insights contracts across UK and wider
Europe.
SUMMARY AND OUTLOOK
The Directors believe that the Group's continued delivery
performance and sales execution, and consequent increase in
contracted backlog underpin near-term performance.
Over the longer term, Kainos remains well placed to deliver
further growth. The Group's Digital Services division continues to
benefit from the UK government's digitisation programmes, and from
the strong and sustained growth of Workday, Inc. In the Group's
Digital Platforms division, Smart remains in a commanding position
as the only automated testing product for Workday.
In summary, the Group sees continued stability and growth
opportunities for its Digital Services division and is encouraged
by the strong position of its Digital Platform SaaS offerings
globally. Going forward, the Group will remain focused on providing
exceptional careers for staff and exceptional digital products and
services for its customers.
(5) Calculated using a closing price of 501p per share, 22
October 2019.
FINANCIAL REVIEW
Kainos achieved revenue of GBP86.9 million (H1 19: GBP67.2
million), representing an increase of 29%. Digital Services revenue
underpinned this growth showing a 29% increase to GBP73.7 million
(H1 19: GBP57.3 million) which reflected strong growth in Digital
Transformation and very strong growth in Workday Services. Digital
Platform revenue increased by 34% to GBP13.2 million (H1 19: GBP9.9
million) reflecting very strong Smart revenue growth, which now
represents 10% of Group-wide revenue.
Gross margin increased slightly to 46.5% (H1 19: 45.9%) with
both Digital Services (44.2% vs 43.6%) and Digital Platforms (59.3%
vs 59.1%) showing margin enhancement, primarily reflecting a
reduction in the proportion of contractors used to 9% of the total
workforce (H1 19: 11%).
Operating expenses (excl. share-based payments) increased by 33%
to reach GBP27.7 million (H1 19: GBP20.8 million) reflecting
revenue growth and continued geographic and market expansion,
notably into Continental Europe and the UK Digital Services
Commercial sector. Investment in product development was GBP1.9
million (H1 19: GBP2.2 million), with 82% of the H1 20 spend
focused on Smart (H1 19: 58%). As previously, all product
development is expensed in the period incurred.
Adjusted pre-tax profit increased by 27% to GBP12.8 million (H1
19: GBP10.1 million) and net profit before tax by 38% to GBP12.0
million (H1 19: GBP8.7 million). The adjusted profit measures can
be reconciled to the reported statutory numbers as follows:
6 months 6 months 12 months
to to 30 Sep to
30 Sep 2018 unaudited 31 Mar
2019 unaudited GBP'000 2019 audited
GBP'000 GBP'000
Profit before tax 12,009 8,722 21,125
Share-based payments and related
costs 790 1,330 2,196
----------------------------------- ---------------- ---------------- --------------
Adjusted profit before tax 12,799 10,052 23,321
=================================== ================ ================ ==============
Profit after tax 9,633 6,960 16,939
Share-based payments and related
costs (net of associated taxes) 656 1,104 1,823
----------------------------------- ------- ------ -------
Adjusted profit after tax 10,289 8,064 18,762
=================================== ======= ====== =======
The effective tax rate for H1 20 (20%) remained in-line with H1
19 and FY 2019 (both 20%), reflecting the overseas jurisdictional
tax rates uplifting the UK corporation tax rate.
The Group continues to have a robust statement of financial
position at 30 September 2019 with GBP41.3 million of cash (H1 19:
GBP38.8 million) after completion of the Bankmore Square site
purchase (GBP7.4 million), no debt and net assets of GBP59.2
million (H1 19: GBP45.8 million). Bankmore Square planning
permission has been applied for, and various funding and design
options are under consideration.
Cash conversion, calculated by taking cash generated by
operations over EBITDA, was negatively impacted at 30 September
2019 (H1 20: 60%, H1 19: 93%) due to FY 2019 bonus payment timing
(H1 20 cash impact of GBP(2.2) million) and a movement of staff
costs from invoicing contractors to permanent employees (cash
impact of GBP(0.9) million). In addition, revenue growth resulted
in combined trade debtors and accrued income increasing from
GBP28.8 million to GBP40.6 million (+41%) between 30 September 2018
and 2019.
The impact of the adoption of IFRS16 is included in note 3.
Details of related party transactions are included in note 10.
Dividend
An interim dividend of 3.5 pence per share has been declared for
H1 20 (H1 19: 2.8 pence). This will be paid on 20 December 2019 to
shareholders on the register at the close of business on 29
November 2019, with an ex-dividend date of 28 November 2019.
RISKS & UNCERTAINTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from forecast and historic results.
The directors do not consider that the principal risks and
uncertainties have changed since the publication of the Group's
Annual Results on 28 May 2019. These are described in more detail
on pages 12 - 16 of the Annual Report (available on the Group's
website www.kainos.com).
Condensed consolidated statement of comprehensive income for the
six months ended 30 September 2019
Note 6 months to 6 months to 12 months to
30 Sep 2019 30 Sep 2018 31 Mar 2019 (audited)
(unaudited) (unaudited) GBP'000
GBP'000 GBP'000
Continuing operations
Revenue 5 86,889 67,179 151,294
Cost of sales 5 (46,509) (36,357) (82,189)
------------------------ ------------------ ------------------ -------------------- ------------------------
Gross profit 40,380 30,822 69,105
Operating expenses
excluding share-based
payments (27,744) (20,793) (45,895)
Share-based payments
and related costs (790) (1,330) (2,196)
------------------------ ------------------ ------------------ -------------------- ------------------------
Operating expenses (28,534) (22,123) (48,091)
------------------------ ------------------ ------------------ -------------------- ------------------------
Operating profit 11,846 8,699 21,014
------------------------ ------------------ ------------------ -------------------- ------------------------
Finance income 205 23 111
Finance expense (42) - -
Profit before tax 12,009 8,722 21,125
Taxation 6 (2,376) (1,762) (4,186)
------------------------ ------------------ ------------------ -------------------- ------------------------
Profit for the period 9,633 6,960 16,939
============================================ ================== ==================== ========================
Consolidated statement 6 months 6 months 12 months
of comprehensive to to to
income 30 Sep 30 Sep 31 Mar
2019 (unaudited) 2018 (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
------------------------ ------------------ ------------------ --------------------
Profit for the period 9,633 6,960 16,939
Other comprehensive
income:
Currency translation
difference 435 385 240
------------------------ ------------------ ------------------ --------------------
Total comprehensive
income
for the period 10,068 7,345 17,179
======================== ================== ================== ====================
Earnings per share 6 months 6 months 12 months
to to to 31
30 Sep 30 Sep Mar 2019
2019 (unaudited) 2018 (audited)
GBP'000 (unaudited) GBP'000
GBP'000
Basic 8 8.0p 5.9p 14.3p
Diluted 8 7.9p 5.7p 13.9p
Condensed consolidated statement of financial position at 30
September 2019
Note 30 Sep 2019 (unaudited) 30 Sep 2018 (unaudited) 31 Mar 2019
GBP'000 GBP'000 (audited)
GBP'000
Non--current assets
Right-of-use assets 4,860 - -
Property, plant and equipment 11 10,126 2,592 2,978
Investments 1,025 1,025 1,025
Other non--current assets 1,076 1,058 1,310
------------------------------- ----- ------------------------ ------------------------ ------------
17,087 4,675 5,313
------------------------------- ----- ------------------------ ------------------------ ------------
Current assets
Trade and other receivables 9 25,987 21,927 29,302
Prepayments 2,206 1,637 2,652
Accrued income 16,178 9,131 11,305
Cash and bank balances 41,311 38,842 42,488
------------------------------- ----- ------------------------ ------------------------ ------------
85,682 71,537 85,747
------------------------------- ----- ------------------------ ------------------------ ------------
Total assets 102,769 76,212 91,060
=============================== ===== ======================== ======================== ============
Current liabilities
Trade creditors and accruals (17,150) (12,429) (21,412)
Lease liabilities (1,508) - -
Deferred income (11,996) (8,789) (10,820)
Corporation tax (1,628) (1,914) (2,755)
Other tax and social security (6,135) (6,810) (6,514)
(38,417) (29,942) (41,501)
------------------------------- ----- ------------------------ ------------------------ ------------
Non-current liabilities
Other provisions (2,276) (444) (1,392)
Lease liabilities (2,906) - -
------------------------------- ----- ------------------------ ------------------------ ------------
(5,182) (444) (1,392)
------------------------------- ----- ------------------------ ------------------------ ------------
Total liabilities (43,599) (30,386) (42,893)
------------------------------- ----- ------------------------ ------------------------ ------------
Net assets 59,170 45,826 48,167
=============================== ===== ======================== ======================== ============
Equity
Share capital 607 602 605
Share premium account 3,780 3,225 3,596
Capital reserve 665 666 665
Share-based payments reserve 4,638 3,258 3,895
Translation reserve 225 (65) (210)
Retained earnings 49,255 38,140 39,616
------------------------------- ----- ------------------------ ------------------------ ------------
Total equity 59,170 45,826 48,167
=============================== ===== ======================== ======================== ============
Condensed consolidated statement of changes in shareholders'
equity for the six months ended 30 September 2019
Share Share Capital Share-based Translation Retained Total
capital premium redemption payments reserve earnings equity
reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
March 2018
(audited) 593 1,702 666 2,549 (450) 30,670 35,730
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Profit for the
period - - - - - 6,960 6,960
Other
comprehensive
income - - - - 385 - 385
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Total
comprehensive
income for the
period - - - - 385 6,960 7,345
----------------
Share-based
payment expense - - - 709 - - 709
Current tax for
equity-settled
share-based
payments - - - - - 716 716
Deferred tax for
equity-settled
share-based
payments - - - - - (206) (206)
Issue of share
capital 9 1,523 - - - - 1,532
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Balance at 30
September 2018
(unaudited) 602 3,225 666 3,258 (65) 38,140 45,826
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Profit for the
period - - - - 9,979 9,979
Other
comprehensive
income - - - - (145) - (145)
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Total
comprehensive
income for the
period - - - - (145) 9,979 9,834
---------------- ---------------- --------- --------
Share-based
payment expense - - - 637 - - 637
Adjustments in
relation to
prior periods - - - - - 33 33
Current tax for
equity-settled
share-based
payments - - - - - 183 183
Deferred tax for
equity-settled
share-based
payments - - - - - 198 198
Issue of share
capital 3 371 (1) - - - 373
Dividends - - - - - (8,917) (8,917)
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Balance at 31
March 2019
(audited) 605 3,596 665 3,895 (210) 39,616 48,167
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Profit for the
period - - - - 9,633 9,633
Other
comprehensive
income - - - - 435 - 435
---------------- -------- -------- ---------------- ----------- ---------------- --------- --------
Total
comprehensive
income for the
year - - - - 435 9,633 10,068
Share-based
payment expense - - - 743 - - 743
Current tax for
equity-settled
share-based
payments - - - - - 255 255
Deferred tax for
equity-settled
share-based
payments - - - - - (249) (249)
Issue of share
capital 2 184 - - - - 186
Balance at 30
September 2019
(unaudited) 607 3,780 665 4,638 225 49,255 59,170
================ ======== ======== ================ =========== ================ ========= ========
Condensed consolidated cash flow statement for the six months
ended 30 September 2019
6 months to 6 months to 12 months to
30 Sep 2019 30 Sep 2018 31 Mar 2019
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
Net cash from operating activities 7,207 9,342 22,520
--------------------------------------------------------- ----- ------------ ----------------- -------------
Investing activities
Purchases of property, plant and equipment 11 (7,797) (1,010) (2,016)
--------------------------------------------------------- ----- ------------ ----------------- -------------
Net cash used in investing activities (7,797) (1,010) (2,016)
--------------------------------------------------------- ----- ------------ ----------------- -------------
Financing activities
Dividends paid - - (8,917)
Payment of lease liabilities (792) - -
Proceeds on issue of shares 184 1,532 1,905
--------------------------------------------------------- ----- ------------ ----------------- -------------
Net cash (used)/generated in financing activities (608) 1,532 (7,012)
--------------------------------------------------------- ----- ------------ ----------------- -------------
Net (decrease)/increase in cash and cash equivalents (1,198) 9,864 13,492
Cash and cash equivalents at beginning of period 42,488 28,961 28,961
Effects of foreign exchange rate changes 21 17 35
--------------------------------------------------------- ----- ------------ ----------------- -------------
Cash and cash equivalents at end of period 41,311 38,842 42,488
========================================================= ===== ============ ================= =============
Net cash from operating activities 6 months to 6 months to 12 months to
30 Sep 2019 30 Sep 2018 31 Mar 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Profit for the period 9,633 6,960 16,939
Adjustments for:
Income tax expense 2,376 1,762 4,186
Share-based payment expense 790 1,330 2,196
Depreciation and amortisation 1,494 527 1,147
Loss on disposal of property, plant and equipment - - (22)
Increase in provisions - 97 1,045
Operating cash flows before movements in working
capital 14,293 10,676 25,491
Increase in receivables (908) (602) (11,215)
(Decrease)/increase in payables (4,927) (252) 10,146
--------------------------------------------------------- ----- ------------ ----------------- -------------
Cash generated by operations 8,458 9,822 24,422
Income taxes paid (1,251) (480) (1,902)
--------------------------------------------------------- ----- ------------ ----------------- -------------
Net cash from operating activities 7,207 9,342 22,520
========================================================= ===== ============ ================= =============
Notes to the condensed consolidated financial statements
1. Corporate information
Kainos Group plc ("Company") is a company incorporated and
domiciled in the UK (Company registration number 09579188), having
its registered office at 21 Farringdon Road, 2(nd) Floor, London,
EC1M 3HA. These condensed consolidated financial statements for the
six months ended 30 September 2019 comprise the Company and its
subsidiaries (together the "Group"). The nature of the Group's
operations and its principal activities are set out in the
Divisional Review and in note 5. The Group is headquartered in
Belfast.
These statements have not been audited but have been reviewed by
the Group's auditor pursuant to International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity"
issued by the Financial Reporting Council.
These condensed financial statements were approved for issue on
8 November 2019.
2. Basis of preparation
The condensed consolidated financial statements for the six
months ended 30 September 2019 have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS34 "Interim Financial Reporting" as adopted
by the European Union.
These condensed consolidated financial statements do not
constitute statutory accounts of the Group within the meaning of
Section 434 of the Companies Act 2006. The statutory accounts for
the year ended 31 March 2019 have been filed with the registrar of
companies. The auditor's report on those accounts was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statement under Section 498(2) or Section 498(3) of the
Companies Act 2006.
The annual statements of Kainos Group plc are prepared in
accordance with IFRSs as adopted by the European Union. These
consolidated financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Company operates.
Going concern
The directors have, at the time of approving the condensed
financial statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for at least 12 months from the date of the financial
statements. Thus, they continue to adopt the going concern basis of
accounting in preparing the financial statements.
3. Significant accounting policies
The accounting policies, presentation and methods of computation
applied by the Group in these condensed consolidated financial
statements are the same as those applied in the Group's latest
audited annual consolidated financial statements for the year ended
31 March 2019, except for; IFRS16 "Leases", effective 1 April 2019.
No other newly introduced standard or amendments to standards had a
material impact on the condensed financial statements.
3. Significant accounting policies (continued)
Leases
IFRS16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to lessee
accounting by removing the distinction between operating and
finance lease, requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases, except for
short term leases and leases of low value assets. In contrast to
lessee accounting, the requirements for lessor accounting have
remained largely unchanged.
The Group is not party to any material leases where it acts as a
lessor, but the Group does have property and motor vehicle
leases.
Details of the Group's accounting policies under IFRS16 are set
out below, followed by a description of the impact of adopting
IFRS16. Significant judgements applied in the adoption of IFRS16
include determining the lease term for those leases with
termination or extension options and determining an incremental
borrowing rate where the rate implicit in a lease could not be
readily determined.
Accounting policies under IFRS16 Leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group
continues to recognise the lease payments mainly as an operating
expense on a straight-line basis over the term of the lease.
Lease liability
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. Having adopted
the modified retrospective approach, the Group has used its
incremental borrowing rate.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The lease liability is presented as a separate line in the
consolidated statement of financial position.
Right-of-use asset
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to restore the
underlying asset to the condition required by the terms and
conditions of the lease, a provision is recognised and measured
under IAS37. These costs are included in the related right-of-use
asset.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset.
3. Significant accounting policies (continued)
The depreciation starts at the commencement date of the lease.
The Group does not have any leases that include purchase options or
transfer ownership of the underlying asset.
The right-of-use assets are presented as a separate line in the
consolidated statement of financial position.
Approach to transition
The Group has applied IFRS16 using the modified retrospective
approach, without restatement of the comparative information. In
respect of those leases the Group previously treated as operating
leases, the Group has elected to measure its right-of-use assets
arising from leases using the approach set
out in IFRS16.C8(b)(ii). Under this approach the right-of-use
assets are set equal to the lease liability, adjusted for prepaid
or accrued lease payments, including un-amortised lease incentives
to cover amounts expected to be paid.
The Group's weighted average incremental borrowing rate applied
to lease liabilities as at 1 April 2019 is 1.6%, reflecting the
lease term and the type of leased assets.
Practical expedients adopted on transition
The Group has made use of the practical expedient available on
transition to IFRS16 not to reassess whether a contract is or
contains a lease. Accordingly, the definition of a lease in
accordance with IAS17 and IFRIC4 will continue to be applied to
those leases entered into or modified before 1 April 2019.
The Group has also elected to use the following practical
expedients:
-- no recognition of right-of-use assets or lease liabilities
for low value leases or leases where less than 12 months remains of
the lease term;
-- a single discount rate has been applied to portfolios of
leases with reasonably similar characteristics;
-- hindsight has been used in determining the lease term.
Financial impact
The application of IFRS16 to leases previously classified as
operating leases under IAS17 resulted in the recognition of
right-of-use assets and lease liabilities. Operating lease
incentives previously recognised as liabilities have been
derecognised and factored into the measurement of the right-of-use
assets and lease liabilities.
Impact on transition
1 April 2019
GBP'000
Right-of-use assets 5,688
Lease liabilities (5,153)
Adjustment for prepaid and accrued
lease payments 349
Property provisions (884)
==================================== =============
GBP5.6 million of the right-of-use assets relate to property
leases.
3. Significant accounting policies (continued)
The table below presents a reconciliation from operating lease
commitments disclosed at 31 March 2019 to lease liabilities
recognised at 1 April 2019.
GBP'000
Operating lease commitments disclosed
under IAS17 at 31 March 2019 4,024
Short term and low value lease commitments
straight-line expensed under IFRS16 (824)
Effect of discounting (32)
Payments due in periods covered by extension
options that are included in the lease
term 1,985
----------------------------------------------- --------
Lease liabilities recognised 5,153
at 1 April 2019
============================================== =========
The recognition value for right-of-use assets is summarised
below:
GBP'000
Initial right-of-use assets at amounts
equal to the associated liability 5,153
Adjustment for prepaid and accrued lease
payments (349)
Adjustment for additional property provisions 884
Right-of-use assets recognised 5,688
at 1 April 2019
=============================================== =========
Income statement
During the six months ended 30 September 2019, the Group, in
relation to leases under IFRS16, has recognised depreciation and
interest costs of GBP0.9 million, instead of IAS17 operating lease
expenses of GBP0.8 million. There was no material deferred tax
impact.
Cash flow statement
Lease payments of GBP0.8 million have been reclassified from
operating activities to financing activities.
4. Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed financial statements, the
significant judgements made by management in applying the Group's
accounting policies and key sources of estimation uncertainty were
the same as those applied to the statutory accounts for the year
ended 31 March 2019. The only exceptions relate to the estimate of
the provision of income taxes which is determined in the interim
financial statements using the estimated average annual effective
income tax rate applied to the profit before tax of the interim
period.
5. Segmental reporting
All of the Group's revenue during the period to 30 September
2019 was derived from continuing operations. Kainos is structured
into two divisions: Digital Services and Digital Platforms.
Digital Services include full lifecycle development and support
of customised Digital Services for government and commercial
customers. Kainos is also the leading boutique partner for Workday,
Inc. in Europe, responsible for implementing Workday's innovative
Software-as-a-Service (SaaS) platform for enterprise customers.
Digital Platforms comprise specialised digital products in the
mobile healthcare and automated testing arenas. Smart is an
automated testing platform for Workday customers; Evolve Electronic
Medical Records ("EMR") is the market-leading product for the
digitisation of patient notes in the Acute sector of the NHS.
Segmental revenue and results
The following is an analysis of the Group's revenue and results
by reportable segment:
Digital Digital Platforms
6 months to 30 September 2019 (unaudited) Services GBP'000 Total
GBP'000 GBP'000
Revenue 73,665 13,224 86,889
Cost of sales (41,132) (5,377) (46,509)
--------------------------------------------------- ---------- ------------------ ----------
Gross profit 32,533 7,847 40,380
Direct expenses(6) (12,653) (4,850) (17,503)
Contribution 19,880 2,997 22,877
Central overheads(6) (10,078)
Adjusted pre-tax profit 12,799
--------------------------------------------------- ------------------------------ ----------
Share-based payments (790)
--------------------------------------------------- ------------------------------ ----------
Profit before tax 12,009
--------------------------------------------------- ------------------------------ ----------
6 months to 30 September 2018 (unaudited) Digital Services Digital Platforms
GBP'000 GBP'000 Total
GBP'000
Revenue 57,299 9,880 67,179
Cost of sales (32,312) (4,045) (36,357)
------------------------------------------------- ----------------- ------------------ ----------
Gross profit 24,987 5,835 30,822
Direct expenses(6) (7,763) (4,903) (12,666)
Contribution 17,224 932 18,156
Central overheads(6) (8,104)
Adjusted pre-tax profit 10,052
------------------------------------------------- ------------------------------------- ----------
Share-based payments (1,330)
------------------------------------------------- ------------------------------------- ----------
Profit before tax 8,722
------------------------------------------------- ------------------------------------- ----------
(6) Operating expenses excluding share-based payments includes
direct expenses, central overheads and finance income/expenses
5. Segmental reporting (continued)
Digital Digital Platforms
12 months to 31 March 2019 (audited) Services GBP'000 Total
GBP'000 GBP'000
Revenue 132,587 18,707 151,294
Cost of sales (73,961) (8,228) (82,189)
----------------------------------------- --- ---------- ------------------ ----------
Gross profit 58,626 10,479 69,105
Direct expenses(6) (16,926) (9,938) (26,864)
----------------------------------------- --- ---------- ------------------ ----------
Contribution 41,700 541 42,241
Central overheads(6) (18,920)
Adjusted pre-tax profit 23,321
---------------------------------------------- ---------- ------------------ ----------
Share-based payments (2,196)
---------------------------------------------- ---------- ------------------ ----------
Profit before tax 21,125
---------------------------------------------- ---------- ------------------ ----------
6. Taxation
The total tax charge for the six months ended 30 September 2019
is GBP2.4 million (six months ended 30 September 2018: GBP1.8
million). This tax charge equates to an effective tax rate of 20%
(30 September 2018: 20%). The expected annual tax rate for the year
to 31 March 2020 is 19% (31 March 2019: 20%).
7. Dividends
The dividends paid in the periods covered in these condensed
consolidated financial statements are detailed below:
6 months to 6 months to 12 months to
30 Sep 2019 30 Sep 2018 31 Mar 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for 2018 of 4.6p per share - - 5,535
Interim dividend for 2019 of 2.8p per share - - 3,382
Total - - 8,917
====================================================================== ============== ============== =============
A final dividend of 6.5 pence per share for the year to 31 March
2019 was paid on 25 October 2019 to shareholders on the register at
the close of business on 27 September 2019. An interim dividend of
3.5 pence per share has been declared for the six months to 30
September 2019. This will be paid on 20 December 2019 to
shareholders on the register at the close of business on 29
November 2019, with an ex-dividend date of 28 November 2019. These
condensed consolidated financial statements do not reflect the
final dividend paid or the interim dividend payable.
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders of the parent company by the
weighted average number of ordinary shares in issue during the
period.
6 months to 6 months to 12 months to
30 Sep 2019 30 Sep 2018 31 Mar 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Profit for the period 9,633 6,960 16,939
------------------------------------------------------------------------- ------------- ------------- -------------
Weighted average number of ordinary shares for the purposes of basic
earnings per share 119,905 117,948 118,318
Effect of dilutive potential ordinary shares from share options 2,627 3,377 3,250
Weighted average number of ordinary shares for the purposes of diluted
earnings per share 122,532 121,325 121,568
------------------------------------------------------------------------- ------------- ------------- -------------
Basic earnings per share 8.0p 5.9p 14.3p
Diluted earnings per share 7.9p 5.7p 13.9p
========================================================================= ============= ============= =============
Adjusted basic earnings per share is calculated by dividing the
profit attributable to ordinary equity holders of the parent
company, excluding exceptional items and share-based payments and
related costs (including associated taxes) by the weighted average
number of ordinary shares in issue during the period.
6 months to 6 months to 12 months to
30 Sep 2019 30 Sep 2018 31 Mar 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Profit for the period 9,633 6,960 16,939
Share-based payments
and related costs (net
of associated taxes) 656 1,104 1,823
------------------------------ ------------- ------------- -------------
Adjusted profit for
the period 10,289 8,064 18,762
------------------------------ ------------- ------------- -------------
Weighted average number
of ordinary shares for
the purposes of basic
earnings per share 119,905 117,948 118,318
Effect of dilutive potential
ordinary shares from
share options 2,627 3,377 3,250
Weighted average number
of ordinary shares for
the purposes of diluted
earnings per share 122,532 121,325 121,568
------------------------------ ------------- ------------- -------------
Adjusted basic earnings
per share 8.6p 6.8p 15.9p
Adjusted diluted earnings
per share 8.4p 6.6p 15.4p
============================== ============= ============= =============
9. Trade and other receivables
30 Sep 2019 30 Sep 2018 31 Mar 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Trade receivables 24,849 20,047 26,216
Allowance for doubtful debts (431) (366) (53)
------------------------------ ------------- ------------- ------------
24,418 19,681 26,163
Other receivables 1,569 2,246 3,139
Total 25,987 21,927 29,302
============================== ============= ============= ============
10. Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. There were no
director loan transactions during the period.
Trading transactions
During the period, group companies entered into the following
transactions with related parties who are not members of the
Group:
Sale of goods and services Purchase of goods and services
6 months to 30 Sep 2019 6 months to 12 months to 31 Mar 2019 6 months to 30 Sep 2019 6 months to 30 Sep 2018 12 months to 31 Mar 2019
(unaudited) 30 Sep 2018 (audited) (unaudited) (unaudited) (audited)
GBP'000 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
Cirdan
Imaging
Limited 370 221 750 - - -
Queen's
University
Belfast - - - 117 132 259
----------- ----------------------- ------------ ------------------------ ----------------------- ----------------------- ------------------------
Total 370 221 750 117 132 259
=========== ======================= ============ ======================== ======================= ======================= ========================
The following amounts were outstanding at the statement of
financial position date:
Amounts owed by related parties Amounts owed to related parties
30 Sep 2019 30 Sep 2018 31 Mar 30 Sep 30 Sep 2018 31 Mar
(unaudited) (unaudited) 2019 2019 (unaudited) 2019
GBP'000 GBP'000 (audited) (unaudited) GBP'000 (audited)
GBP'000 GBP'000 GBP'000
Cirdan Imaging Limited 230 502 199 - - -
Queen's University Belfast - - - - 20 -
Total 230 502 199 - 20 -
============================ ============= ============= =========== ============= ============= ===========
10. Related party transactions (continued)
Queen's University Belfast is a related party as one of the
Group's material shareholders. Cirdan Imaging Limited is a related
party due to the Group's shareholding of 9.9% in this company and
Paul Gannon is a common director of both companies.
11. Property purchase
During the period, the Group acquired a site for the development
of Kainos' future Belfast headquarters at Bankmore Square. The
purchase price of GBP7.4 million was fully funded by cash
resources.
12. Contingent liability
In the US, the commercial arrangement with Evolve IC and
Telehealth provider InTouch Health concluded on 31 March 2018.
InTouch Health terminated their commercial relationship with Kainos
to develop their own internal solution. Kainos has since referred
this matter to US legal counsel and has pursued legal recourse for
breach of contract by InTouch Health. In response, InTouch Health
has counterclaimed against Kainos. At this stage the directors'
assessment, based on independent US legal advice, is that the basis
for InTouch Health's counter-claim has little merit and it is not
probable that an economic outflow will be required to settle the
claim.
13. Subsequent events
On 8 November 2019, Kainos WorkSmart Limited acquired 100% of
the share capital of Formulate (Adaptive) Limited ("Formulate").
Formulate is a leading UK and European partner to Adaptive
Insights: a financial and business planning software business which
is part of Workday, Inc. Formulate will be consolidated into the
Group with effect from this date using IFRS3, with no significant
financial impact on the Group's financial performance for the year
ending 31 March 2020 ("FY20"). The impact on the statement of
financial position and cashflow statement of the Group for FY20
will be disclosed within the FY20 Annual Report.
On 8 November 2019, Kainos WorkSmart GmbH (a subsidiary of
Kainos WorkSmart Limited) hired the team which formerly worked for
Implexa GmbH ("Implexa"). Implexa is one of four accredited
Adaptive Insights partners in Germany, and adds Hamburg-based
software and consulting capabilities to Kainos WorkSmart GmbH's
existing Frankfurt presence and capabilities. This acquisition will
have no significant impact on the financial position or performance
of the Group during the financial year ending 31 March 2020.
Responsibility statement
We confirm that these condensed financial statements have been
prepared in accordance with International Accounting Standard 34
"Interim Financial Reporting" as adopted by the European Union, and
that the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure
and Transparency Rules of the Financial Conduct Authority,
namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report
By order of the Board
Richard McCann
Director
8 November 2019
INDEPENDENT REVIEW REPORT TO KAINOS GROUP PLC
We have been engaged by the company to review the condensed set
of financial statements included in the half yearly financial
report for the six months ended 30 September 2019 which comprise
the condensed consolidated income statement, the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of changes in shareholders' equity, the
condensed consolidated balance sheet, the condensed consolidated
cash flow statement and related notes 1 to 13. We have read the
other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" ("ISRE 2410") issued by the
Financial Reporting Council. Our work has been undertaken so that
we might state to the company those matters we are required to
state to it in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company, for our
review work, for this review report, or for the conclusions we have
formed.
Directors responsibilities
The half yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half yearly financial report, in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
company are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half yearly financial report has been prepared in
accordance with the accounting policies the Company intends to use
in the preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half yearly financial report for the six months ended 30
September 2019 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Richard Howard
Deloitte (NI) Limited
Chartered Accountants and Statutory Auditor
Belfast, United Kingdom
8 November 2019
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END
IR UKANRKOAARAA
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November 11, 2019 02:00 ET (07:00 GMT)
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