Home

Deck

Kainos Group · KNOS · LSE

Kainos is a Belfast-headquartered IT services group earning $475M of revenue from three engines — UK government digital project work, Workday platform implementation services across Europe, and a small but fast-growing portfolio of SaaS tools that plug into a customer's Workday tenant.

$11.15
Price
$1.36B
Market cap
$475M
Revenue (FY25)
$94M
Workday Products ARR
Listed July 2015 on the London Stock Exchange; peaked near $28 in November 2021; now $11.15 — 61% below the all-time high after a four-year derate.
2 · The tension

Two stories about the same company collide on 18 May 2026.

  • The cycle turned. H1 FY26 (Apr–Sep 2025) bookings hit a record $296M (+27%); revenue +7%; operating margin recovered to 13.3% from H2 FY25's 6.4% trough. The 20 April 2026 trading update flagged double-digit H2 revenue growth and headcount up 21% to 3,475 — services firms don't add 690 net hires without booked demand.
  • Or the reset is permanent. Workday Inc. nearly doubled its certified-partner roster from ~60 to >100 in FY25, and management explicitly attributed the 12% Workday Services revenue decline to "more aggressive pricing." That is 27% of group revenue inside an ecosystem where the platform owner sets the supply curve — pricing resets do not unwind even when bookings recover.
  • The print resolves it. Twelve days from today, the FY26 H2 operating margin is the single number that decides whether 6.4% was the cycle trough or the new normal — collapsing four other watch items into one disclosure.
The market has validated the return-to-growth half of the story and not yet the return-to-margin half. The stock sits 30% below its $15.47 52-week high heading into the print.
3 · The hidden SaaS engine

A software business is compounding inside an IT services P&L.

  • Compounded through the worst year. Workday Products ARR reached $94M in FY25 (+20%) at a 78% gross margin across 550+ customers — while group revenue fell 4%. The same software book grew +19% YoY in H1 FY26 with bookings up 57%.
  • Built-on-Workday rewires distribution. Since July 2024 Workday's salesforce — reach of ~10,500 enterprise customers — co-sells the products on commission. Pay Transparency, sold exclusively through this channel, landed 35 clients in five months ahead of the EU directive transposition deadline on 7 June 2026.
  • Three of 100+ partners are triple-certified. Kainos is one of three Workday partners certified across services, software and Extend. The $259M FY30 ARR target — tripling in six years — rests on this distribution moat, not on the customer-retention metric (NRR) management retired at 102% in FY24 and has not disclosed since.
At ~$1.18B EV the implied multiple on the products book is roughly 3× ARR. Pure-play SaaS peers trade 4–8×.
4 · Money picture

Trough year, fortress balance sheet, payout running at the limit.

11.6%
Op margin FY25 down from 16% peak
$72M
Free cash flow FY25 3-yr avg 1.4× net income
$173M
Net cash 16% of market cap
100.5%
Dividend payout ratio GAAP, FY25

Revenue fell 4% but operating profit fell 30% — utilisation absorbed the hit; the day rate held. Cash conversion 112%, FCF margin 15%, ROIC 39% even at trough. The pinch is at capital return: dividends plus buyback ($75M) ran ahead of FCF ($72M) for the first time, and a second $39M buyback launched in November 2025 expires the day of the FY26 print on 18 May.

5 · The forensic flag

A first-time $11M restructuring add-back lifted the adjusted-vs-GAAP gap from 19% to 35%.

  • Only $4M of it was cash in FY25. The remaining $7M unpaid accrual then dropped H1 FY26 cash conversion to 48% versus a 75% target as it actually got paid. The cash effect lands in the wrong period; the optic landed in the right one.
  • The pattern arrived with the founder. Brendan Mooney returned as CEO in December 2024 after a 14-month failed Sloan succession; FY25 was both the first restructuring add-back and the first auditor-partner rotation under KPMG. The audit report stayed unqualified, but the precedent is now in the bridge.
  • The 18 May print tests recurrence. If the FY26 adjusted-PBT bridge contains a fresh "exceptional" line, restructuring starts looking recurring and underlying earnings power is overstated. If it doesn't, the $11M is one-and-done and the bear's loudest argument loses its anchor.
Companies in restructuring don't add 690 net hires. The 21% headcount surge to 3,475 in eight months is the sharpest disconfirming signal already in the data.
6 · Bull & Bear

Lean watchlist — the print on 18 May resets the equity in either direction.

  • For. The SaaS engine compounded through the worst services year (ARR +20%, gross margin 78%) on the back of a Workday channel only one of three partners is triple-certified to use.
  • For. H1 FY26 margin already recovered to 13.3% from the 6.4% trough; bookings hit a record $296M (+27%); the 20 April trading update beat consensus on revenue and matched on adjusted PBT — the chassis is recovering before the headline tape.
  • Against. Workday Services (27% of group) is being repriced inside an ecosystem where the platform owner sets the supply curve, and the $11M restructuring add-back has put a fresh non-GAAP line into the bridge that the FY26 print will need to retire.
  • Against. The Workday Products thesis depends on an NRR metric management retired at 102% in FY24 and has not disclosed since. Without it, the $259M FY30 target is unverifiable and the SaaS multiple is unearned.
My view — the bull holds the better near-term tape and the better business; the bear holds the better forensic case and the unfixable disclosure gap. Lean Long if 18 May prints H2 op margin above 14% with a clean adjusted bridge; Avoid if a fresh non-recurring line appears.

Watchlist to re-rate: H2 FY26 operating margin clearing 14%. Workday Products ARR clearing $130M on schedule with NRR disclosed at ≥110%. Buyback authority renewed at the 22 September 2026 AGM with shares cancelled, not held in treasury.