Annual Report
2022
Kainos Annual Report 2022
1
Kainos is listed on the London Stock Exchange
(LSE: KNOS).
For further information, please visit
www.kainos.com
WE ARE A UK-HEADQUARTERED
IT PROVIDER, OPERATING
THROUGH TWO SPECIALIST
BUSINESS DIVISIONS, DIGITAL
SERVICES AND OUR WORKDAY
PRACTICE.
CONTENTS
Strategic report
01 Highlights
04 Kainos at a glance
06 Chief Executive Officer’s statement
08 Our markets
10 Our business model
13 Our strategy
16 Operational review
22 Our environmental, social and
governance (ESG) commitments
40 Financial review
42 Key Performance Indicators (KPIs)
44 Risk factors and uncertainties
Corporate governance
54 Directors’ Report and Corporate
Governance Statement
65 Directors’ Remuneration Report
76 Annual Report on Remuneration
84 Audit Committee Report
90 Nominations Committee Report
Financial statements
92 Independent Auditor’s Report to the members
of Kainos Group plc
99 Consolidated income statement
99 Consolidated statement of comprehensive income
100 Consolidated statement of financial position
101 Consolidated statement of changes in equity
102 Consolidated statement of cash flows
103 Notes to the consolidated financial statements
147 Company statement of financial position
148 Company statement of changes in equity
149 Notes to the Company financial statements
152 Definition of terms
152 Company information
Kainos Annual Report 2022
01
2022 Financial highlights
HIGHLIGHTS
1 FY21 includes treasury deposits of £18.0 million.
2 Total dividend for FY21 includes a special dividend of 6.7p per share (paid September 2020), interim dividend of 6.4p per share (paid December 2020)
and final dividend of 15.1p per share. Total dividend for FY22 includes interim dividend of 7.1p per share and proposed final dividend of 15.1p per share.
Revenue (m)
£302.6
2021 £234.7 +29%
Statutory profit before tax (m)
£46.0
2021 £50.3 -9%
Adjusted pre-tax profit (m)
£58.8
2021 £57.1 +3%
Cash (m)
1
£76.6
2021 £80.9 -5%
Bookings (m)
£349.8
2021 £258.8 +35%
Product Annual Recurring Revenue (ARR) (m)
£34.3
2021 £23.6 +45%
Contracted backlog (m)
£259.7
2021 £206.2 +26%
Diluted earnings per share
28.5p
2021 32.1p -11%
Adjusted diluted earnings per share
38.1p
2021 36.8p +4%
Total dividend per share
2
22.2p
2021 28.2p +21%
“ WE HAVE RECORDED OUR 12TH CONSECUTIVE YEAR OF
GROWTH ACROSS A WIDE RANGE OF KEY METRICS. OUR
VERY STRONG BUSINESS PERFORMANCE REFLECTS
ROBUST UNDERLYING MARKET DEMAND, HIGH LEVELS
OF CUSTOMER ENGAGEMENT AND THE ONGOING
COMMITMENT OF OUR COLLEAGUES.”
Kainos Annual Report 2022
02
HIGHLIGHTS CONTINUED
Operational highlights
12th consecutive year of growth across a wide
range of key metrics.
• Revenue growth of 29% (26% organic) to
£302.6 million (2021: £234.7 million).
• Adjusted pre-tax profit increased 3% to
£58.8 million (2021: £57.1 million) as margins
moderated following increased investment and
the further normalisation of costs.
• Bookings up 35% to £349.8 million
(2021: £258.8 million).
• Contracted backlog growth of 26% to £259.7 million
(2021: £206.2 million).
• Following dividend payments and acquisition
expenses, period-end cash amounted to
£76.6 million (2021: £80.9 million); with cash
conversion at 83% (2021: 112%).
We continue to add to the talents of our global team.
• We now have 2,692 people (2021: 2,024) based
across 22 countries. This reflects strong recruitment
in our core markets which has been enhanced
through the year with the expertise of 153 new
colleagues who joined via the acquisitions of
Cloudator, Une Consulting, Blackline Group
and Planalyse.
• Against the backdrop of a global shortage in digital
skills, our employee retention has reduced to 86%
(2021: 92%). Our focus remains on being a great
employer and we have retained our Sunday Times,
‘Top 100 Best Companies to Work For’ accreditation
and were awarded ‘50 Best Places To Work in the
UK’ by Glassdoor.
We continue with our ambition to be a responsible
organisation.
• We retained our carbon neutral status for 2022 and
remain on track to achieve carbon net zero by 2025.
• Our gender balance improved, with the proportion
of women in Kainos increasing to 33% (2021: 30%),
ahead of the industry average of 19%
4
; we remain
committed to further improvement.
• We delivered over 1,100 work placements including
targeted programmes aimed at improving gender
diversity, supporting social mobility and for those
students with special educational needs.
Excellent customer service drives customer
satisfaction and retention, underpinning
revenue growth.
• Customer approval rating
3
remains high at 98%
(2021: 98%).
• Existing customer revenue increased by 34% to
£267.7 million (2021: £199.7 million).
• Customer numbers increased to 731 (2021: 546),
an increase of 34%.
2025
On track to achieve
carbon net zero by
+35% increase in bookings +34% increase in customer numbers
+153 new colleagues
3 Data from all completed customer surveys in the year. There are five possible designations: ‘Poor’, ‘Satisfactory’, ‘Good’,
‘Very Good’ or ‘Excellent’; the rating reflects the percentage of customers that rate our performance ‘Good’ or better.
4 BCS diversity report 2021: Women in IT.
Kainos Annual Report 2022
03
In Digital Services, we continue to deliver
significant digital transformation programmes
across the public sector, healthcare and
commercial sector.
• This extensive project portfolio has driven very
strong revenue growth of 24%, with revenues
growing to £199.8 million (2021: £161.6 million).
• Customer demand remains very high across all
sectors as digital transformation continues to be
a business priority.
Our Workday-related products, Smart Test and
Smart Audit, achieved very strong growth,
particularly in North America.
• Smart product revenues grew 32% to £31.9 million
(2021: £24.2 million); at the same time the Annual
Recurring Revenue (ARR) increased 45% to
£34.3 million (2021: £23.6 million).
• We continued to invest in our Smart products,
increasing our R&D expenditure by 67%, to
£6.0 million (2021: £3.6 million), all of which was
expensed during the year.
We continue to be the leading pan-European
Workday specialist and we have established a
significant presence in the North American market.
• Our Workday Services recorded very strong revenue
growth of 45% (29% organic) to £70.9 million (2021:
£49.0 million).
• Focused on the opportunity in North America,
we have doubled our presence and now have 323
colleagues. (2021: 142) based across USA, Canada
and Argentina.
Our focus on sector diversification has ensured that
we have built a robust and well-balanced business
across sector and region.
• Overall, our revenues: 41% Commercial, 37%
Public Sector and 22% Healthcare.
• Commercial revenues are up 53% to £123.8 million
(2021: £81.1 million).
• Public sector revenues are up 5% to £111.0 million
(2021: £105.5 million).
• Healthcare revenues are up 41% to £67.9 million
(2021: £48.1 million).
• International revenues are up 48% to £87.0 million
(2021: £59.0 million).
+67% increase in R&D expenditure+24% increase in revenue growth
323
colleagues in in the USA,
Canada and Argentina
Commercial revenues increased
+53%
Kainos Annual Report 2022
04
KAINOS AT A GLANCE
Our operating divisions
We are a UK-headquartered IT
provider, operating through two
specialist business areas, Digital
Services and our Workday Practice.
Digital Services
Our Digital Services division helps our
customers to solve their business
problems by using technology,
enabling them and their users to work
smarter, faster and better.
Working collaboratively with customers
around the world, our innovative and
transformative solutions are secure,
accessible, cost-effective, and take a
user-first approach. We leverage the
benefits of the public cloud and enable
customers to utilise their data to drive
better decision-making.
In the public sector, we have delivered
projects helping more than 60 million
citizens, while saving our customers
hundreds of millions of pounds.
In the commercial sector, customers
trust us to provide digital
transformation programmes that
evolve their services, delivers
efficiencies, increases their capabilities
and future-proofs their businesses.
In healthcare, we help providers deliver
a service that is faster, more cost-
effective and patient-centric.
Digital Services
£199.8 million
(66% of Group total)
5-year growth: 28% CAGR
Revenue
by operating
division
FY22
Workday Services
£70.9 million
(23% of Group total)
5-year growth: 50% CAGR
Smart product suite
£31.9 million
(11% of Group total)
5-year growth: 42% CAGR
We deliver services to over 130 clients,
including the Foreign, Commonwealth
and Development Office (UK), the
Defence and Science Laboratory (UK),
NHS England (UK), Concardis
(Germany) and Hello Fresh (Germany).
Workday Practice
Our Workday Practice is closely linked
to Workday, Inc.’s software suite, which
includes cloud-based software for
Human Capital Management (HCM),
Financial Management and Planning,
enabling enterprises to organise their
staff efficiently and support their
financial reporting requirements.
Workday Services
In our Workday Services business, we
provide consulting, project
management, integration and post-
deployment services for Workday’s
software suite. We work with clients
globally and have an outstanding
relationship with Workday, Inc.
With over 100 international clients,
we are proud to work with Kion Group
(Germany), Shopify (Canada), Kone
(Finland), TransferWise (UK), ASOS plc
(UK), Takeaway.com (Netherlands)
and Match.com (USA).
Smart product suite
We have developed two proprietary
software tools, Smart Test and
Smart Audit.
OUR PURPOSE IS TO HELP OUR CUSTOMERS WITH THEIR
MOST CHALLENGING PROJECTS AND, TOGETHER WITH
OUR PARTNERS, HELP THEM BUILD THE CAPABILITY TO
SUCCEED IN THE DIGITAL AGE.
Smart Test allows Workday customers
to automatically test and verify that
their unique Workday configuration is
operating effectively, both during
implementation and in live operation.
Smart Test is the leading automated
testing platform specifically designed
for Workday.
Smart Audit is our compliance
monitoring tool that allows Workday
customers to maintain operational
controls over their Workday HCM and
Financials environments, particularly
in the areas of Segregation of Duties,
Privileged Access Controls and
Personal and Sensitive employee data
protection.
Both tools are implemented as
cloud-based Software as a Service
(SaaS) solutions and customers utilise
them on a subscription basis.
Smart Test was launched in 2013
and is now used by over 300 clients,
including Salesforce (USA), Whole
Foods (USA), Xero (New Zealand),
Netflix (USA), CapitalOne (USA),
Servicenow (USA), Aegon
(Netherlands) and Condé Nast (USA).
Smart Audit was launched in 2021
and is now used by over 40 clients,
including SpencerStuart (USA),
Chanel (UK), Rand Corporation (USA),
BlueCross BlueShield (USA) and QBE
(Australia).
Kainos Annual Report 2022
05
Revenue
by sector
FY22
Revenue
by region
FY22
Public 37%
(2021: 45%)
UK & Ireland 71%
(2021: 75%)
Commercial 41%
(2021: 35%)
North America 19%
(2021: 16%)
Healthcare 22%
(2021: 20%)
Central Europe 9%
(2021: 8%)
Rest of world 1%
(2021: 1%)
STRATEGIC REPORT
Active
customers:
731
(2021: 546)
Customers rating our
service as good or better:
98%
(2021: 98%)
Revenue from existing
customers:
88%
(2021: 85%)
Number of staff
and contractors:
2,692
(2021: 2,024)
People by region:
UK & Ireland
72%
Central Europe
15%
Americas
13%
Employee retention:
86%
(2021: 92%)
Offices:
20
Amsterdam, Antwerp,
Atlanta, Belfast,
Birmingham,
Buenos Aires,
Copenhagen, Denver,
Derry, Dublin, Gdańsk,
Hamburg, Helsinki,
Indianapolis, London,
Oslo, Paris,
San Francisco,
Stockholm and Toronto.
Kainos Annual Report 2022
06
CHIEF EXECUTIVE OFFICER’S STATEMENT
Resilience and gratitude
Our performance during 2021 must be viewed through
the lens of a prolonged pandemic – lockdowns, working
from home and, eventually, the controlled and gradual
easing of restrictions.
To look backwards creates the opportunity, once again,
to express our thanks and admiration for all of those
involved in the front-line response to the health and
economic crisis that the pandemic caused. Our sense of
gratitude is amplified for our customers in the NHS as
they prioritised the health of the nation above all else.
Our appreciation is also directed towards our
colleagues who, throughout the year, continued to
support all our customers, ensuring that they could
continue to deliver critical services to their citizens,
patients, customers or employees. That appreciation
was mirrored from our customers, as we once again
recorded a 98% customer approval rating.
Alongside the resilience of our colleagues and
customers, we are also grateful for the strength and
resilience of our business. We recorded another
excellent performance, a reflection of the trust our
customers place in Kainos and the expertise,
experience and energy of our colleagues, who have
been the driving force behind all that we have achieved.
An excellent business performance
The digital transformation market has been growing
quickly for the past decade and the pandemic has
further demonstrated how important it is for
organisations to invest in their digital capabilities,
both internally and externally. Our customers have
responded and continue to prioritise their critical
digital programmes and we continue to help them
deliver these ambitious projects.
This strong demand has resulted in our revenues
growing to £302.6 million, a 29% increase, and our
adjusted pre-tax profit growing 3% to £58.8 million.
As expected, our profit growth moderated as
recruitment, training and marketing costs returned to
normal levels and as we experienced increased salary
costs and the increased use of contract staff. During the
year we also accelerated our investment in our Smart
products, both in research and development and in sales
and marketing, all of which was expensed in the year.
We continued to add to the talents of our global team,
as numbers increased by 33% to 2,692 colleagues.
This increase was the result of very strong recruitment
as well as welcoming the expertise of 153 new
colleagues who joined us through the acquisitions of
Cloudator (Nordics), Une Consulting (Argentina), the
Blackline Group (USA) and Planalyse (Netherlands).
Our teams are now based in 22 countries.
Our Digital Services division recorded growth of 24%
to £199.8 million. We continued to deliver significant
programmes in partnership with the UK Government
and with leading healthcare and commercial clients.
As always, our growth is a result of demand from
existing clients, such as New Ireland and Genomics
England, and new clients including Hello Fresh and
National Highways.
We are keen to open up new opportunities for Digital
Services and our investments continue to make
progress. Our engagements in Central Europe and
Canada have continued to grow, with our revenues
now £5.5 million, from £2.6 million a year ago. Our Data
and AI practice grew 95% to £15.8 million, with our
Intelligent Automation practice delivering revenues of
£1.0 million, having been launched in mid-2020.
“ A REVIEW OF THE PAST YEAR
CANNOT BE COMPLETE
WITHOUT RECOGNISING THE
SUPPORT, CONFIDENCE AND
TRUST THAT EVERYONE HAS
PLACED IN KAINOS.”
Kainos Annual Report 2022
07
Our Workday Services team continues to help forward-
thinking organisations such as Kone, Kion Group and
Takeaway.com deploy Workday, Inc.’s innovative
Software-as-a-Service (SaaS) platform to support
their people and finance requirements. We remain the
leading European partner within the Workday
ecosystem and continue to make significant progress
addressing the opportunity in North America, where
our teams in Canada, Argentina and the US have more
than doubled, growing from 142 to 323 colleagues in
the past year.
Over the course of the year our Smart product
revenues grew 32% to £31.9 million. Our products,
Smart Test (automated testing) and Smart Audit
(compliance monitoring) are used by organisations
like Netflix, Salesforce and Match.com. We believe that
there is the opportunity to grow our Smart product
revenues to £100 million and as a result we invested
further in product development (increased by
£2.4 million to £6.0 million) and in our sales and
marketing capacity during the year.
A responsible business
We have maintained our focus on positive climate
action. We have been carbon-neutral for the past two
years and remain firmly on track to achieve carbon net
zero by 2025. Over 60% of our workforce are now in
offices that use renewable energy sources, with work
underway to make further progress in the year ahead.
Gender diversity remains a challenge within the wider
industry, where just 19% of roles are undertaken by
women. During the year, the proportion of women in
Kainos increased from 30% to 33% reflecting focused
recruitment campaigns. It is good progress, but
sustained effort is required to achieve our gender
parity target.
We seek to inspire the next generation of digital talent
and to improve the diversity of the sector. Last year
over 1,100 school students participated in our work
placement programmes, where we had targeted
programmes aimed at improving gender diversity,
social mobility and for those students with special
educational needs. At university, our digital bursaries
will support 60 young people from backgrounds that
are traditionally under-represented at university.
A confident outlook
The digital transformation market has been growing
strongly for over a decade, with the pandemic
accelerating the need for organisations to invest in
their digital capabilities. Our leading position within our
core markets allows us to look confidently to the future.
Our confidence is strengthened with the success of our
additional growth initiatives. Within Digital Services,
international expansion, our Data and AI practice,
and our Intelligent Automation practice provide a
platform for further growth. Workday, Inc.’s focus on
international expansion creates a strong backdrop
for our European growth plans; at the same time our
growing scale in the North American market provides
an excellent foundation in the largest Workday market
globally. With our Smart products, we have the
opportunity to accelerate the adoption of our software
across the Workday ecosystem, creating a significant
software business.
The pandemic has demonstrated that our sector is
resilient, but it has also demonstrated that the future
can be unpredictable. Notwithstanding our confidence,
challenges remain: the Russia-Ukraine war, the possible
resurgence of Covid-19, inflation and the global
shortage of digital talent dominate the short-term
landscape. Without minimising the significance of any
of these factors it feels that, collectively, they represent
a lower risk than a global pandemic.
A sense of gratitude
Our performance as a business is influenced by many
factors, but it is our relationships with our customers
and the talents of our colleagues that truly shape our
future. The strength and depth of both have continued
to grow this year and add to our sense of excitement
about the future.
That sense of anticipation is combined with a sense
of gratitude.
We continue to be grateful for all the support,
confidence and trust that everyone has placed in
Kainos. Thank you.
Dr Brendan Mooney
Chief Executive Officer
STRATEGIC REPORT
Kainos Annual Report 2022
08
5 Government Digital Strategy: December 2013.
In the UK public sector, there is a long-term drive to make
public services ‘digital by default’ and intuitive to use.
Users typically prefer digital services, which are faster, more
accurate and available at a time that suits them.
This also aligns with the imperative to make services cheaper
and more effective. The substantial pressures on public
finances since the financial crisis have now been exacerbated
by the cost of responding to Covid-19.
Creating effective digital services significantly reduces cost.
For many government services, the average cost of a
telephone transaction is 20 times higher than a digital
transaction; this rises to 30 times for a postal transaction and
50 times for a face-to-face interaction
5
. Digitisation is also
likely to reduce the risk of failed transactions, and therefore
the business cost of having to repeat the same process
multiple times.
The government’s thinking about IT outsourcing has changed
substantially since the financial crisis. While outsourcing a
service can still be the correct approach, the government now
prefers to procure individual components of the service and
integrate those components itself, which gives it direct control
over the scope, quality and cost of the service. Government
departments rely on specialist agile partners like Kainos to
help in the building and ongoing operation of the technical
elements of the service. This trend has resulted in public
sector spending on digital transformation projects increasing
from £456 million in 2015 to £1.9 billion in 2022.
In the commercial sector, businesses have similar pressures
and preferences, and are seeking to re-establish control over
the scope, agility and cost of their customer-centric systems.
In a repetition of the pattern in the public sector, commercial
organisations draw on the specialist skills of agile partners
like Kainos. In the UK, the commercial sector outspends the
public sector by more than three to one and therefore
presents a substantial opportunity for us.
The NHS is our principal healthcare client. The complexity of
its operating environment has often resulted in under-
investment in technology to support the efficient provision of
healthcare services. At a local level, NHS Trusts often prefer to
purchase existing software systems that support their day-to-
day operations. At a national level, there is a growing
preference to adopt a similar approach to that in use across
government, building digital services in partnership and at
speed with companies like Kainos. This change of emphasis is
reflected in the creation of the £800 million Digital Capability
for Health framework (in 2021); Kainos is one of 12 approved
suppliers on that framework.
How we are responding
We remain focused on supporting our existing clients as they
deliver their ambitious multi-year digital transformation
programmes. In terms of acquiring new clients, while we wish
to see all sectors grow, we are prioritising engagements in the
commercial sector, reflecting the scale of the opportunity and
the benefits of having a balanced spread of business.
Internationally, we are also looking to expand by acquiring
new commercial sector customers.
THERE ARE SEVERAL COMPELLING
LONG-TERM TRENDS DRIVING
DEMAND FOR OUR SERVICES. WE
HAVE DESIGNED OUR STRATEGY TO
TAKE ADVANTAGE OF THESE TRENDS,
GIVING US CONFIDENCE IN OUR
GROWTH PROSPECTS. WE HAVE
DETAILED THESE FURTHER IN THE
SECTION, OUR STRATEGY.
Alongside the long-term trends detailed in the
following sections, Covid-19 has prompted a
significant shift to remote working, which is likely to
remain an important feature of the workplace even
after the pandemic fades. Many organisations have
discovered that their legacy systems do not function
well in a distributed environment and need updating.
This is accelerating investment in digital capabilities
as organisations adapt to this new environment.
It is too early to determine if this is a short-term
increase in spending or likely to be a long-term trend.
Regardless, it is resulting in an immediate increase in
opportunity for both our Workday Practice and Digital
Services divisions.
DEMAND FOR DIGITAL
TRANSFORMATION, BUILDING
BESPOKE SYSTEMS
OUR MARKETS
TREND
Kainos Annual Report 2022
09
6 The amount of UK Public Sector FY22 spend that relates to central
government and that we classify as ‘digital spend’, primarily through the
frameworks of G-Cloud (£1,323 million) and Digital Outcomes (£596 million).
7 This is an estimate of the services market where Kainos is a Phase 1
partner, plus the post-deployment opportunity in the USA.
8 Estimated global Workday automated testing market.
STRATEGIC REPORT
Technological advances continue to open new possibilities in
our markets. For example, artificial intelligence, machine
learning, intelligent automation and the rapid growth in data
all have the potential to change the way that organisations
operate and deliver their products and services.
How we are responding
We believe new technologies could lead to significant new
revenue streams for our business in the coming years.
We have a structured innovation process for supporting
the development of new business concepts and revenue
streams. Our Data and Artificial Intelligence practice was
the first graduate of this process in 2019, followed in 2020 by
the Intelligent Automation practice. The pace of their growth
emphasises the scale of the opportunity in these areas.
We also invest in understanding early-stage technology
developments through our research team. Current areas of
foresight and investigation include ambient computing,
smart environments and places and the ethical use of data
and AI. Ideas from this research will likely form the next
cohort of candidates for our innovation process.
Workday, Inc.’s success in attracting new customers is a
key driver for our Workday Practice. Workday, Inc. is
growing rapidly, with its most recent results to 31 January
2022 showing revenue growth of 19%. This compares with
growth in the ERP market which is estimated at 8.2%
per annum.
The rapid uptake of Workday, Inc.’s product reflects its
competitive advantages. Workday, Inc.’s primary
competition, Oracle and SAP, have software that has its
heritage firmly rooted in the 1970s. Workday, launched in
2005, is built to operate as a Software-as-a-Service suite
of applications that are cloud-based, mobile-first and
reflect the way modern organisations want to manage
their employees and their finances. In addition, weekly
updates mean Workday customers are always using the
latest version of the software, preventing systems from
becoming outdated.
Workday, Inc. has also taken a different approach when
building its implementation partner ecosystem. While SAP
and Oracle both have several thousand implementation
partners, Workday, Inc. has appointed just 39 partners to
deploy its software across its customer base, which now
numbers over 9,500 customers, including more than 4,100
core HR and finance customers. Kainos first engaged with
Workday, Inc. in 2011 and is now one of the most
experienced participants in Workday, Inc.’s partner
ecosystem. Kainos remains the only specialist Workday
partner headquartered in the UK.
Other important drivers of growth for us in our Workday
Practice include:
• existing Workday customers wanting to implement
additional modules;
• geographic expansion beyond our strong presence in
Europe;
• displacing competitive partners from existing customer
engagements;
• Workday, Inc. adding new modules and capabilities to its
system;
• building our own software components to provide niche
solutions close to the Workday product. This includes
Smart Test, our leading automated testing product and
Smart Audit, our compliance monitoring tool for
Workday environments; and
• utilising Workday Extend, which is a newly introduced
capability by Workday, Inc. that will enable us to develop
apps that allow clients to broaden the capabilities of
their Workday systems.
How we are responding
Our strategy for growth includes international expansion,
to access the large and growing base of Workday customers
across Europe and particularly in the US, where over 75%
of Workday customers are located. We also continue to
increase market share with existing Workday customers,
while growing our portfolio of Workday products such as
Smart Test and Audit.
DEMAND FOR DIGITAL
TRANSFORMATION,
IMPLEMENTING WORKDAY
NEW TECHNOLOGIES CREATING
NEW OPPORTUNITIES
The competitive environment
The competitive environment in our markets is largely
stable, with few companies either entering or exiting.
A strong track record of delivery is vital for success in
both Digital Services and our Workday Practice,
providing very important credibility with potential
customers and creating a meaningful barrier to entry.
Digital Services
• Addressable market
6
: £1,919 million (2021: £1,768 million).
• Example competitors: Deloitte, Capgemini, BJSS,
Atos, Equal Experts, NTT Data.
Workday Services
• Addressable market
7
: £884 million (2021: £751 million).
• Example competitors: Alight,
One Source Virtual, Collaborative Solutions.
Smart for Workday
• Addressable market
8
: £410 million (2021: £384 million).
• Example competitors: Worksoft, Turnkey, CloudBera.
TREND
TREND
Kainos Annual Report 2022
10
OUR BUSINESS MODEL
What we do
We provide sophisticated IT services to major public sector, commercial and healthcare customers.
Our Digital Services engagements are often large and complex and represent critical projects for our customers.
Projects in the Driver and Vehicle Standards Agency, Companies House and the Food Standards Agency are
excellent examples of projects that are viewed as part of the UK’s national IT infrastructure.
In our Workday Practice, we help forward-thinking organisations deploy Workday to organise their staff efficiently
and support their financial reporting requirements. These customers are often large and operate internationally,
which is why we have our teams based in 22 countries.
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2
WHO WE ARE
We are a UK-headquartered IT
provider, operating through
two specialist business
divisions: Digital Services
and Workday Practice
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Our purpose is to help our
customers with their most
challenging projects and,
together with our
partners, help them build
the capability to succeed
in the digital age
How we create value
Our purpose drives everything we do and every decision we make.
Kainos Annual Report 2022
11
How we operate
Digital Services
We win new public sector and healthcare projects
primarily through our position on major frameworks, for
example, the Digital Outcomes and Specialisms (DOS)
framework. We are the most successful supplier on DOS,
having won more than twice the amount of business of
the number two supplier over the last three years
9
.
In the commercial sector, we benefit from our
practitioner-led sales teams, who have a deep
understanding of what we can deliver for customers.
As a result of our expertise, we are relied on by partners
such as Amazon Web Services (AWS) and Microsoft to
help solve complex client challenges.
Having secured a project, we focus on service design
and then build, test and implement the solution.
This is often done at pace, where timescales can
be short, often ranging from six to nine months.
Major transformational projects have multiple stages,
with core functionality rolled out first, then further
stages to build on that functionality or to add follow-on
services. Projects can therefore generate revenue over
many years.
Once we secure an initial piece of work for a customer,
we tend to generate high levels of repeat business across
multiple parts of their organisation as we earn their trust
by demonstrating our ability to solve their problems.
Workday Practice
Workday, Inc. always contracts directly with its end
customer following a sales campaign. During that sales
campaign, Workday, Inc. will typically recommend a
shortlist of possible consulting partners to the client who
will then undertake the project directly with the client.
Globally, there are 39 Workday implementation partners.
We are usually recommended because of our international
presence, or because of our deep knowledge in Workday
modules such as HCM, Financials, Planning or Extend.
In addition to acquiring new Workday customers, we
may also secure work from existing Workday customers,
who want to switch from their current partner when
implementing the next phase of their system.
Workday is comprised of an extensive range of modules,
providing different functionality. Most customers
begin with the Financial, the Planning or the HCM (HR)
modules, then add further modules over time. Winning a
customer therefore often generates a multi-year
revenue stream.
Our commercial model
In both Digital Services and Workday Practice, we
primarily charge clients on a time and materials basis
for consultancy services.
In addition to our services, we derive revenue
from charging for our own proprietary software.
These revenue streams relate primarily to our cloud-
based SaaS solutions, Smart Test (automated testing)
and Smart Audit (compliance monitoring), although we
anticipate there will be additional products in the future.
Both products have contracts that are typically three
years in duration, with a subscription fee charged
annually in advance.
Our sources of competitive advantage
Our people
Our people are the key to our success. We hire the very
best experienced talent and bring in young people with
potential from school or university. By investing in their
learning and development and providing interesting
and challenging work on projects that are often of
national importance, we help them to excel. We have a
very low attrition rate, which means many people
choose to stay and develop their careers at Kainos.
Our reputation
We have a strong reputation in our markets, based
on a long track record of successful delivery for our
customers. This reputation is critical for winning new
work and for attracting the talent we need to grow.
This is demonstrated in Digital Services, as noted
earlier, by being the most successful supplier on the
Government DOS framework. In the Workday Practice,
we are the leading partner in Europe, consistently
receiving emphatic feedback on our high levels of
customer service.
Our customer relationships
We look for customers who want a partner who can add
value to their business, and who are more interested in
the long-term cost of ownership rather than the lowest
possible up-front price.
In the public and healthcare sectors, we tend to work
with the departments and agencies which have a large
portfolio of transformation projects. These projects
are, in turn, supported by significant budgets, since a
multi-year transformation project is typically up to
£30 million in value, while more complex projects can
exceed £100 million. Our Workday Practice customers
range from SMEs to some of the world’s most
recognisable brands.
9 Cumulative spend on DOS, three years, 2019-2022. 1. Kainos £330 million; 2. Capgemini £150 million,
3. BJSS £143 million, 4. Deloitte £138 million, 5. Accenture £88 million.
STRATEGIC REPORT
Kainos Annual Report 2022
12
OUR BUSINESS MODEL CONTINUED
Every six months we survey our customers for feedback
on our performance. This feedback tells us that we
achieve best-in-class customer service, with 98% of
our customers rating our service as good or better.
This underpins our repeat revenue, with over 88% of our
revenue each year coming from existing customers.
Our partner relationships
We have an excellent relationship with Workday, Inc.,
having been a partner since 2011 and we have
supported Workday, Inc. global expansion,
implementing their software platform for clients
across the world. At the same time, we have built a
high-growth international business with revenues of
more than £100 million.
We feel the same sense of excitement with our
partnerships with Microsoft and AWS. With 96% of the
world’s IT expenditure still entrenched in on-premise
technology, there is significant work to transform
organisations to being cloud-enabled. We have been
working closely with these market-leading vendors for
several years and in addition to our delivery excellence
we are positioned as thought leaders.
Our intellectual property
We have a range of proprietary products, such as Smart
Test and Smart Audit for Workday, and we continue to
invest in extending the capabilities of these products.
Our innovation and research activities also focus on
the application of new technology such as artificial
intelligence, machine learning and automation and we
are already delivering engagements in these areas.
The value we create
We create a broad range of financial and non-financial
value for our stakeholders.
For our people
We provide rewarding, well-paid employment in a
dynamic environment, where people can work with
colleagues who are often world-class in their fields.
As we grow, we create new opportunities for our people
to grow with us.
For our customers
We help our customers to improve their services, save
money and manage their organisation more effectively.
For our partners
We support Workday, Inc.’s business growth by
successfully implementing its system for its customers.
Similarly, we also generate growing volumes of
business for our partners Microsoft and AWS.
For our shareholders
Rapidly growing revenue and profits, strong cash flow
and a capital-light business model support our ability to
generate high returns, invest for further growth and pay
an attractive dividend to shareholders.
For society
As a rapidly expanding creator of skilled, highly paid
work, we generate tax revenues that support public
services. At the same time, we help NHS and public
sector customers to make the best use of taxpayers’
money by helping them replace ageing, inefficient,
manually intensive systems with cost-effective modern
digital services that are rapidly becoming the preferred
interaction channel for citizens and patients.
From an environmental perspective, we are delighted
to have achieved carbon neutrality in 2021 and are
on schedule to achieve our ambition of being carbon
net zero by 2025. We commit to neutralising our
2022 emissions through a mixture of offsetting and
removal projects.
Beyond our climate-related commitments, we are
proud of our track record in being a responsible
organisation. This includes the above activities as well
as our work in supporting our communities, with strong
graduate and school-leaver recruitment, and our
outreach programmes which have benefited over
7,400 young people.
More details are contained within the Environmental,
Social and Governance (ESG) section of this report.
Kainos Annual Report 2022
13
Our ambition is to be a global, independent company
operating towards the disruptive end of technology,
that will thrive not just today, but for generations.
In building for the long-term, we aspire to provide
our people with rewarding and fulfilling careers.
As part of our ambition, we believe that we can
achieve sustained growth in terms of revenue,
adjusted pre-tax profit and cash flow.
We have, deliberately, developed from a national to an
international organisation, both internally and in the
customers and markets that we serve. We expect our
international presence to continue to expand in terms
of people, customers and markets.
It is our preference to grow organically; we will
undertake acquisitions only in exceptional
circumstances, for instance, where we need to
obtain unique skills.
We also look to ensure that we have a well-balanced
business, which is not overly reliant on any one
customer, market or sector. This occasionally requires
us to prioritise smaller, early-stage opportunities
ahead of established market growth. We are
comfortable with taking this long-term view.
OUR STRATEGY
STRATEGIC REPORT
WE ARE A GROWTH-ORIENTATED BUSINESS AND WHILE WE ARE ALWAYS
CONFIDENT OF GROWING OUR MARKET SHARE IN SUBDUED MARKETS, WE
NATURALLY ORIENTATE TOWARDS HIGHER GROWTH, DYNAMIC MARKETS.
IT IS IN THESE MARKETS WHERE THE TALENTS OF OUR PEOPLE SHINE THE
BRIGHTEST AND OPPORTUNITIES FOR GROWTH ARE THE STRONGEST.
People
The three key pillars of our strategy
Markets
Customers
People
The fundamental component of our strategy is our
people. Our business is successful because of the talent,
skill and motivation of our colleagues as they deliver on
commitments to internal and external customers.
Progress in FY22 Priorities for FY23
Headcount increased by 668, to a total of 2,692 colleagues.
This included 159 people who joined from school or college.
Maintain high standards when recruiting new applicants.
Invest in skills and career development of all colleagues
in Kainos.
Maintained our Sunday Times ‘Best Companies to Work For’
Top 100 ranking.
We were ranked in the ’50 Best Places to Work in the UK’, by
Glassdoor.
Maintain or improve our employee engagement scores as
measured independently.
Ensure that employee retention remains high.
We will add to our existing talented workforce by
recruiting high calibre people from school, college and
industry; and we will continue to invest in developing
their skills and careers and we will continue to strive to
be a great employer.
Financial KPINon-financial KPI
Kainos Annual Report 2022
14
Markets
Digital Services
Our focus is to:
• continue to grow within the public and healthcare
sectors, being engaged in ambitious
transformation projects across UK Government
and the NHS;
• repeat our digital transformation success within
the UK commercial sector, with a focus on financial
services; and
• expand internationally, focused initially within
Germany and Canada where we already have
established delivery teams, have built business
development expertise and have an existing
Workday Practice client base.
OUR STRATEGY CONTINUED
Customers
Our business model is based on the conviction that by
delivering consistently to our customers we will build
long-lasting, mutually beneficial relationships that will
see us thrive as a business.
These relationships are built on our reputation for
delivery and exemplary customer service. By being
Progress in FY22 Priorities for FY23
Customer satisfaction levels recorded as 98%.
Net revenue retention recorded as 134%.
Maintain high levels of customer satisfaction, resulting in high
levels of net revenue retention.
Progress in FY22 Priorities for FY23
Public sector revenues increased by 6% to £108.4 million
(2021: £102.2 million).
Healthcare revenues increased by 52% to £66.3 million
(2021: £43.7 million).
Maintain growth trajectory in both sectors, supporting existing
clients and projects, and adding new long-term clients in line
with our delivery capacity.
Commercial sector revenues increased by 60% to £25.1 million
(2021: £15.7 million).
Continue to build reputation and references in the sector to
maintain our accelerated growth.
Central Europe revenues increased by 101% to £5.2 million
(2021: £2.6 million).
North American activity started during the year, generating
£0.3 million in revenues.
Continue to build reputation and references within both
regions.
Refine sales and marketing approach as market penetration
increases.
Build in-region delivery capability in line with success.
responsive to and supportive of our customers’ complex
and changing business needs, we reinforce the strength
of our relationships.
Therefore, our purpose is to help our customers with
their most challenging projects and, together with our
partners, help them build the capability to succeed in
the digital age.
Workday Practice
Our focus is to:
• continue to grow in our existing, established markets
as Workday continues to expand within these
markets;
• gain market share, replacing incumbent providers to
existing Workday customers through a reputation for
higher service levels;
• expand internationally, opening offices in countries
with large and growing numbers of Workday
customers; and
• extend Smart and develop other products within the
Workday ecosystem, where our blend of software
skills and Workday experience makes us uniquely
positioned.
Financial KPINon-financial KPI
Kainos Annual Report 2022
15
New opportunities
Our focus is to:
• continue to invest in our Data and Artificial
Intelligence and Cloud practices, building capability
and creating international, high growth businesses;
• support the early progress of our Intelligent
Automation practice, ensuring the foundations are in
place to create a significant long-term business;
STRATEGIC REPORT
Progress in FY22 Priorities for FY23
Workday Services revenues increased by 45% to £70.9 million
(2021: £49.0 million).
Smart product revenues increased by 32% to £31.9 million
(2021: £24.2 million).
Maintain growth trajectory in all regions, supporting existing
clients and projects, and adding new long-term clients in line
with capacity.
We were appointed to 30+ customers where earlier phases of
the project were undertaken by a different partner.
Continue to excel in customer service.
International revenues increased 46% to £81.5 million
(2021: £55.7 million).
Four international acquisitions completed in Argentina,
Netherlands, USA and the Nordics, adding 153 new colleagues.
Maintain growth trajectory in all regions.
Continue to welcome our new colleagues to Kainos, combining
their capabilities with existing Kainos teams.
Ensure consistent, high-quality service to new clients
originated by the acquisitions.
• Smart R&D investment increased 67% to £6.0 million
(2021: £3.6 million).
Annual Recurring Revenue for Smart products increased 45%
to £34.3 million (2021: £23.6 million).
Accelerate growth trajectory of Smart products.
Launch our third Smart product, gaining significant early
adoption.
Progress in FY22 Priorities for FY23
Launched in 2019, our Data and Artificial Intelligence practice
is now 120 people, and has grown revenues by 95% to
£15.8 million (2021: £8.1 million).
Maintain growth trajectory.
Manage investment levels in line with total ‘new opportunities’
investments.
Launched in 2020, our Intelligent Automation practice is
now 25 people and has grown revenues to £1.0 million
(2021: <£0.1 million).
Maintain growth trajectory.
Refine sales and marketing approach as we build increased
scale in customers.
Launched in 2017, our Cloud practice now encompasses
160 people, with revenues of £11.7 million (2021: £6.8 million),
a growth of 73%.
Maintain growth trajectory.
Extend offerings internationally, focused on Canada and
Germany in the first instance.
In 2021, we launched our Digital Advisory practice, it now
includes 10 people on the team.
• Within the innovation process, there were 10 ideas evaluated:
• Seven ideas stopped at investigation stage.
• Three ideas moved to investment stage.
– One was approved (Digital Advisory).
– One is undergoing further investigation.
– One was stopped.
• Data and AI was approved for further investment.
• Intelligent Automation was approved for further investment.
Establish early adopter clients.
Increase the number of submissions to the innovation process.
• establish our Digital Advisory practice; and
• through our innovation process, identify and
promote ideas that have the potential to become
sizeable revenue streams in the future.
Kainos Annual Report 2022
16
OPERATIONAL REVIEW
Our overall performance
Our established track record in helping ambitious
organisations deliver large-scale digital transformation
programmes is particularly relevant in a post-pandemic
world. The underlying digitisation trend has been
accelerated by the pandemic and we have continued to
support new and existing customers as they respond to
changing demands in their organisations.
Our high level of activity with our customers has
translated into an excellent set of results for our
financial year.
Revenue grew by 29% to £302.6 million (2021: £234.7
million) with adjusted pre-tax profit increasing by 3%
to £58.8 million (2021: £57.1 million). As expected, our
profit growth moderated as recruitment, training and
marketing costs returned to normal levels; as we
experienced increased salary costs and the increased
use of contract staff; and as we increased investment
in our software products.
Our sales performance underlines our success in
winning business while continuing to operate on a
remote basis – extensions to existing contracts,
additional projects placed by existing customers and
winning new customers. Bookings increased 35% to
£349.8 million (2021: £258.8 million), which resulted in
a 26% increase in the contracted backlog to £259.7
million (2021: £206.2 million).
On 31 March 2022, following dividend payments and
acquisition expenses, we had a strong cash balance
of £76.6 million (2021: £80.9 million including treasury
deposits), representing 83% cash conversion
(2021: 112%).
Our people
We are clear that our success is driven by the ability,
energy and expertise of the people in Kainos.
Our employee engagement levels remain high.
Once again, our people have voted us into the Top 100
in the Sunday Times ‘Best Companies to Work For’
survey and in early 2022 we were awarded ‘50 Best
Places to Work For in the UK’ by Glassdoor, the online
career community.
During the year, 86% of our colleagues made the
choice to stay and develop their career within Kainos
(2021: 92%). While we remain focused on improving
as an employer, we also recognise that these reduced
levels of retention are also reflective of a global
shortage of digital skills.
Since last year, our headcount has grown by 668
to 2,692 people (2021: 2,024), including 153 new
colleagues who joined through our acquisitions. Of our
colleagues, 12% are contractors (2021: 15%). By region,
UK & Ireland increased to 1,940 people (+399), Central
Europe increased to 415 people (+74) and the
Americas increased to 337 people (+195).
Our customers
We believe that by delivering consistently to our
customers we build long-term relationships. This is a
perspective shared by our customers, who continue to
have a very positive view of our performance – 98% of
respondents to our customer surveys rated our service
as ‘good’ or above (2021: 98%).
Existing customers continue to trust us to deliver their
most challenging projects, and this is reflected in our
revenues, with 88% of revenues coming from our
existing clients (2021: 85%). We have also gained new
customers during the year, and we now work with 731
customers (2021: 546).
From a sector perspective we have a well-diversified
business, with 41% of our revenues from commercial
clients (2021: 35%), 37% from public sector
organisations (2021: 45%), and 22% from healthcare
customers (2021: 20%).
Our international client base has also expanded and
as a result our international revenues have grown by
48% to £87.0 million (2021: £59.0 million). Regionally, UK
& Ireland accounts for 71% of our business (2021: 75%),
North America for 19% (2021: 16%), Central Europe for
9% (2021: 8%), with the rest of the world representing
1% (2021: 1%).
“EXISTING CUSTOMERS CONTINUE TO
TRUST US TO DELIVER THEIR MOST
CHALLENGING PROJECTS, AND THIS IS
REFLECTED IN OUR REVENUES, WITH
88% OF REVENUES COMING FROM OUR
EXISTING CLIENTS (2021: 85%).”
Kainos Annual Report 2022
17
STRATEGIC REPORT
Digital Services performance
Our Digital Services division builds solutions that are
highly cost-effective and make public-facing services
more accessible and easier to use for the citizen,
patient and customer.
Revenues grew by 24% to £199.8 million (2021: £161.6
million), while our bookings increased by 36% to
£215.0 million (2021: £157.7 million); correspondingly
the backlog increased by 11% to £132.7 million
(2021: £119.4 million).
With more opportunities in our addressable markets
than we have people to deliver them, we have been
prioritising which work we undertake. At the top of that
list is our existing project and customer commitments,
followed by prioritising new engagements in the
commercial and healthcare sectors as we work
towards a more balanced sector coverage within the
division. All sectors grew during the year, with public
sector now representing 54% of divisional revenues
(2021: 63%), healthcare 33% (2021: 27%) and
commercial sector 13% (2021: 10%).
Public sector
Our public sector customers have remained
committed to their digital transformation programmes
and they remain ambitious in the scope of services
that they wish to digitise. As a result, revenues
increased by 6% to £108.4 million (2021: £102.2 million).
Within central government, we continue to consolidate
our strong position across key accounts, securing new
contracts to deliver digital programmes including Data
Products for HM Passport Office (£92 million, five
years) and with Defra to deliver their Europe and Trade
Delivery Portfolio, and Future Farming and Countryside
Programme (£54.5 million, two years).
Commercial sector
In the UK, the commercial sector expenditure on IT is
over three times that of the public sector. While this
represents significant opportunity, to increase our
likelihood of success, we have initially chosen to focus
our activity on financial services.
Like all large organisations post-pandemic, those
within banking and insurance are increasing their
levels of investment in digital transformation.
This, coupled with our growing references in the sector,
has driven a rapid increase in activity as we have
helped established customers like Concardis and
New Ireland and new customers such as IMCO, Danske
Bank and Federated Hermes Limited.
Reflecting these higher activity levels, our revenues
increased 60% to £25.1 million (2021: £15.7 million).
Healthcare sector
Our healthcare revenues increased by 52% to £66.3
million (2021: £43.7 million).
We have enjoyed strong partnerships with both NHS
Digital and NHS X, who have now been merged to form
NHS England’s new Transformation Directorate. In the
past year, our work has been a blend of providing
ongoing support to Covid-19 initiatives and, increasingly,
to broader healthcare provision and how technology can
support the NHS with its ambitious digital plans. In this
regard, we are delighted to be named on the £800 million
Digital Capability for Health framework.
International expansion outside of UK and Ireland
With the UK as an early adopter of digital
transformation, we believe that there is a significant
opportunity to replicate our home market success
internationally. Our initial focus is primarily on
commercial customers in Germany and Switzerland,
with organisations such as Hello Fresh and Concardis
and in the commercial and public sector in Canada
with Investment Management Corporation of Ontario
(IMCO) and Government of Canada.
Our international revenues are reported in the figures
in the above sectors, but for clarity, international
revenues for the division have increased by 112% to
£5.5 million (2021: £2.6 million).
24%
DIGITAL SERVICES REVENUES GREW BY
24% TO £199.8 MILLION (2021: £161.6
MILLION), WHILE OUR BOOKINGS
INCREASED BY 36% TO £215.0 MILLION
(2021: £157.7 MILLION)
Kainos Annual Report 2022
18
OPERATIONAL REVIEW CONTINUED
Digital Services outlook
We remain extremely positive about the future of
digitisation in the UK public sector and within the NHS,
both immediately and over the long-term. We are
confident that based upon our strong reputation and
successful track record, we are well positioned to
maintain a central role in this transformation drive.
The digitisation pressures and opportunities within
the commercial sector are similar, and therefore the
growth prospects for us are substantial. Our progress
in the past year provides confidence that we will
deliver significant growth in the years ahead.
We are similarly optimistic about the international
opportunity, utilising the skills and expertise gained as
a leading digital transformation specialist in the UK
and focusing on international regions where we
already have established delivery teams, sales
expertise and our Workday Practice client base.
Workday Practice performance
Having first engaged with Workday, Inc. in 2011,
we are now one of their most experienced partners.
We are the only specialist Workday partner
headquartered in the UK and one of only 39 partners
globally who are accredited to implement Workday’s
innovative SaaS platform.
Revenue for the period grew by 41% to £102.8 million
(2021: £73.1 million) and backlog for the division
increased by 46% to £127.0 million (2021: £86.7 million),
reflecting an increase in bookings of 33% to £134.8
million (2021: £101.1 million).
The number of accredited Workday consultants at
Kainos increased by 53% to 638 (2021: 416).
Workday Services
Within Europe, we continue to consolidate our position
as the leading Workday partner. This leadership
position is the result of high satisfaction levels within
our customer base, our geographic expansion and,
more recently, the acquisition of Cloudator.
Our international growth started in Europe in 2015
when we opened our office in Amsterdam; we now have
colleagues based across 17 European countries (2021:
13). Having entered the North American market in
2018, we now have 323 people (2021: 142) focused on
clients in the region.
Within the ecosystem there is an established trend of
larger partners buying smaller organisations
10
, and we
anticipate further transactions will occur in the future.
The reduction in the number of partners provides
further growth opportunities for Kainos.
In addition to the delivery of Workday for new
customers, we are increasingly involved in supporting
customers already live on the Workday platform.
We describe this annuity-style revenue stream as
Post Deployment Services.
Revenue for the year grew by 45% to £70.9 million
(2021: £49.0 million); backlog increased by 46% to
£51.1 million (2021: £34.9 million); and bookings
increased 31% to £78.2 million (2021: £59.9 million).
Acquisitions
In June 2021, we completed the acquisition of
Cloudator (55 people), the largest Workday partner in
the Nordic region. In September 2021 Buenos Aires-
based Une Consulting (42 people) was also acquired,
further strengthening our Workday capability in North
and South America. In January 2022 we acquired
US-based spend management specialist Blackline
Group (50 people) and in February 2022 we acquired
Planalyse (six people) a well-regarded Workday
Adaptive Planning partner based in the Netherlands.
Through these acquisitions, we are delighted to have
added the expertise of 153 new colleagues.
In total, the acquisitions completed during the period
contributed revenue of £7.7 million (2021: £nil). The net
cash outflow in the period (cash paid less cash
acquired) was £16.8 million.
10 Recent transactions include the Ataraxis acquisition by HR Path (2018). In 2019 Alight acquired the Workday-related business elements of Wipro, for a
reported $110 million (350 consultants). In 2020, Accenture acquired US-focused Sierra-Cedar (275 consultants) and Cognizant completed the
acquisition of Collaborative Solutions (c.1,000 consultants).
41%
REVENUE FOR THE PERIOD GREW BY
41% TO £102.8 MILLION (2021: £73.1
MILLION) AND BACKLOG FOR THE
DIVISION INCREASED BY 46% TO £127.0
MILLION (2021: £86.7 MILLION)
Kainos Annual Report 2022
19
STRATEGIC REPORT
Smart product suite
Workday is a comprehensive SaaS platform, but we
believe that there are opportunities to develop software
components that are complementary to the platform
and enable customers to further increase the benefit
that they can realise from their investment in Workday.
In 2014, Kainos launched Smart Test which is used by
organisations to automatically verify their Workday
configurations. Smart Test currently consists of six
modules: HCM, Security, Financials, Payroll, Recruitment
and Advanced Compensation, with a further three
modules due to launch during 2022 and 2023. In
Workday, Inc. inaugural Innovation Awards, Smart Test
came first in the Product Innovation category. Smart
Test is used by over 300 global customers, including
Netflix, Johnson & Johnson and WWE.
Smart Audit became generally available in August
2021 and has already been deployed to over 40
customers including Match.com, University of Virginia
and Viasat. Smart Audit is a compliance monitoring
tool that allows Workday customers to maintain
operational controls over their Workday environments.
Our pre-built controls focus on safeguarding against
Segregation of Duties conflicts, providing robust
Privileged Access Controls and protecting Personal
and Sensitive employee data.
In total, Smart product bookings increased 37% to
£56.6 million (2021: £41.2 million). This very strong
sales performance resulted in revenue increasing 32%
to £31.9 million (2021: £24.2 million), of which £28.9
million relates to SaaS subscriptions (2021: £21.0
million); the Annual Recurring Revenue was £34.3 million
(2021: £23.6 million), an increase of 45% and backlog
increased 47% to £75.9 million (2021: £51.8 million).
Workday Extend
Workday, Inc. has a Platform-as-a-Service offering
known as Workday Extend, (previously Workday Cloud
Platform) which became generally available to
customers in May 2020. Kainos has been part of the
Workday Extend early adopter programme since 2017.
Workday Extend allows customers to build additional,
specialised functionality on the Workday platform to
further enhance their Workday deployment. As experts
in Workday Extend, we have helped organisations such
as Hilti and Aggreko build Workday Extend applications.
In addition to these services-based assignments,
Workday Extend provides the opportunity to build
further products. During 2021 we have built and
deployed applications such as Return to Work,
Vaccination Management and Rewards and
Recognition. While the focus of these initial
deployments has been to demonstrate the capability
of Workday Extend, we believe that there are
opportunities to create paid-for applications.
Workday Practice outlook
Our strong performance provides further evidence of
the strength of the Workday market. With Workday,
Inc.’s main competitors, Oracle and SAP, soon to mark
50 years in the ERP market, we believe that Workday’s
more innovative product suite can continue to gain
significant market share for many years to come.
This is reflected in Workday, Inc.’s bold goal of
achieving $10 billion revenue by 2026.
In addition, we believe that we can outpace this
rapid market growth by continuing our international
expansion and by replacing other Workday partners
in engagements where they are under-serving their
customers.
For Smart Test and Smart Audit, and other products
that we may develop, our growth will be powered by the
increase in Workday clients and by higher penetration
of our products into the Workday client base.
“WE BELIEVE THAT WE CAN OUTPACE
THIS RAPID MARKET GROWTH BY
CONTINUING OUR INTERNATIONAL
EXPANSION AND BY REPLACING OTHER
WORKDAY PARTNERS IN ENGAGEMENTS
WHERE THEY ARE UNDER-SERVING
THEIR CUSTOMERS.”
Kainos Annual Report 2022
20
Innovation, research and development
Successful businesses continue to challenge
themselves and we are keen to improve our existing
offerings, develop new business ideas and assess
business and technology concepts that are likely to
impact our clients in the future.
Including our product investment, our research and
development expenditure for the year amounted to
£6.2 million (2021: £4.2 million), which was wholly
expensed in the year.
Innovation framework
We take the view that our people, who are often deeply
engaged with our customers, are best placed to
identify interesting problems. To support them, we
have developed an innovation framework that spans
the Company and comprises a body of knowledge,
tools, methods and approaches for innovating, and
processes to develop opportunities and ideas.
a) Spark & Scale
We create the conditions for our staff to identify
interesting problems (finding the Spark) and support
the development of ideas from conception through to
launch (supporting the Scale). This can range from
applying cutting-edge technologies to existing
customer problems, to identifying and testing a
potential partnership or a new business offering.
Our dedicated innovation team are on hand to
explore the idea, developing an informed judgement
of its early commercial potential. The Spark & Scale
process is typically an investment of up to 20 days,
with some external expenditure.
b) Practice Incubator
Through our dedicated incubator, we accelerate the
creation of new practices, which focus on bringing
new technologies to customers through dedicated,
highly skilled practitioners. Proposals for new
practices are evaluated by a panel composed of
experienced Kainos leaders. If successful, new
practices are given a formal investment package,
typically composed of development time, specialist
recruitment and external expenditure.
For example, our Intelligent Automation practice,
graduated from this process and was launched in
August 2020. Now a team of 25 people, including
externally recruited experts, has seen us undertake
small, focused engagements for existing and new
clients. We have every belief that our Intelligent
Automation practice will follow the success of our
Data and Artificial Intelligence practice, which is
now 120 specialists.
c) Technical and market research
To support innovation activities and strategic decision
making across Kainos, we have invested in a team
dedicated to technical and market research. The team’s
activities include providing foresight and research into
emerging technologies, interpreting developing trends
and identifying market insights.
The team is continuing research into: the advances of
machine learning and AI, such as reinforcement
learning; sustainability, including green technology and
applying sustainable models to our services; fog, edge
and distributed systems for the creation of smart
environments, devices and places; the ethical use of
data and AI; advances and emerging concepts in the
development of healthcare technology; and a range
of other emerging concepts, including quantum
computing and ambient intelligence, with a goal
of understanding when they should approach
maturity and the impact they will have on our
business and clients.
OPERATIONAL REVIEW CONTINUED
“TO SUPPORT INNOVATION
ACTIVITIES AND STRATEGIC
DECISION MAKING ACROSS
KAINOS, WE HAVE INVESTED IN A
TEAM DEDICATED TO TECHNICAL
AND MARKET RESEARCH.”
Kainos Annual Report 2022
21
Partnerships
In addition to internally sourced ideas, we nurture
relationships with a broad network of partner
organisations. We are active in start-up ecosystems,
working with entrepreneurial young companies.
Our people mentor and support their teams, helping
to increase success prospects for their business, and
with the aspiration of identifying and developing joint
commercial opportunities.
We also work with academic research partners and
leading industry organisations, such as the Turing
Institute, Digital Catapult, the Confederation of
British Industry and the Institution of Engineering
and Technology as well as working with our strategic
partners on further-from-market technology
and research.
Close-to-customer innovation
Technology continues to develop at pace, and we look
to continuously improve our delivery approach for our
customers. These improvements reflect our most
recent experience in delivering projects, as well as
using the improvements in the platforms from
Workday, Microsoft, AWS, UI Path, and other partners.
Within Digital Services, our continued investment makes
us leaders in cloud native software and data
engineering, delivering technology, practices and
principles that enable our customers to achieve long-
term success with digital and data transformation.
Through our Digital Advisory Practice, we work on
customer innovation, bringing our leading technical
expertise and wide network of partners to bear on
real-world problems, quickly delivering value for users.
Workday, Inc. frequently releases software and
functionality updates for their platform, and we ensure
that these latest developments are reflected in our
delivery approach and methodology. We also assess
new modules, particularly Workday Extend, which
allows customers to add unique functionality to their
Workday system.
STRATEGIC REPORT
Kainos Annual Report 2022
22
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS
Introduction
We have used the UN Sustainability Development Goals
(SDGs) as a framework to assess and guide our efforts
as a responsible Company. Specifically, we have
focused on five SDGs
We are proud of our track record of being a responsible
business. We achieved carbon neutrality in 2021 and
commit to continuing that in 2022, through offsetting
and removal projects.
We are delighted that our employees are also
shareholders. Every year, we gift shares to all
permanent employees, and we also operate a save-as-
you-earn shared-based scheme
11
. In 2022 we allocated
375,288 shares under all our share schemes, bringing
the total allocated since 2015 to 9,929,522 shares.
Responsibilities
The Kainos Board has nominated the following
Directors to oversee ESG activities within the Company:
• Environment: Chair, Tom Burnet, supported by the
CEO, Dr Brendan Mooney.
• Social: CEO, Dr Brendan Mooney.
• Governance: Senior Independent Director,
Andy Malpass.
Each Director regularly meets with the appropriate
internal teams to ascertain progress, set priorities and
contribute to the plans in each area.
Environmental: protecting and restoring
our planet
We are delighted that we have achieved carbon
neutrality
12
in 2021 and are on track to achieve our
ambition of being carbon net zero
12
by 2025. We have
made our submission to the Science Based Target
initiative (SBTi) and expect feedback by mid-2022, which
will further inform our existing carbon reduction plans.
Environmental sustainability
Our focus is to ensure that we understand, manage
and reduce the harmful environmental impact of our
business activities. In addition to our own operations,
we aim to make a wider impact by helping our
customers, employees, and suppliers to achieve their
own low carbon futures. For many of our customers, our
digital solutions significantly reduce the carbon impact
of the ageing, inefficient and manually intensive
systems that we are replacing.
In our reporting, we adhere to the Streamlined Energy
and Carbon Reporting Regulation (SECR), the Task
Force on Climate-related Financial Disclosures (TCFD)
and the sustainability accounting standard for the
Software & IT services sector as defined by the
Sustainability Accounting Standards Board (SASB).
We confirm that we continue to comply with all our
environmental legal requirements across all our
activities. In 2022 there were zero breaches of any
environmental regulations (2021: zero).
Implementation of the Task Force on Climate-related
Financial Disclosures (TCFD) framework
Our focus during 2022 was securing offsetting projects
achieving carbon neutrality and ensuring that we
remain on track for achieving carbon net zero by 2025.
Understanding our emissions and setting reduction
targets underpins this aim. We continue to account for
our emissions in line with the GHG Protocols and this
year, we completed our submission to the Science-
Based Targets initiative (SBTi). We expect the response
by mid-2022.
We completed our climate change disclosure, for the
second year via the Carbon Disclosure Project (CDP).
This platform aligns with TCFD recommendations,
enabling us to begin implementing the framework, to
support the reporting requirements for TCFD.
Our disclosures, consistent with the TCFD
recommendations, are summarised in the following
tables. Further detail is available in our 2022 submission
to CDP
13
, alongside our previous detailed disclosures.
In the next Annual Report, following receipt of
feedback from our SBTi submissions and internal
assessments, we expect to continue to enhance and
further develop our reporting in line with TCFD
requirements, undertake modelling of climate-related
risks and update our Risk Register to enhance the
way in which climate risk is integrated.
11 We operate share-gifting schemes in UK, Ireland and Poland and have cash equivalent schemes in all our other locations. At a closing share price on
31 March 2022 of 1,323 pence, our 2022 allocation is valued at £5 million.
12 Carbon neutral through purchasing avoidance and reduction offsets from the voluntary market. Net zero by reducing emissions in line with targets and
investing gradually in market removals, transitioning fully in 2025.
13 CDP responses.
“WE ARE PROUD OF OUR TRACK RECORD
OF BEING A RESPONSIBLE BUSINESS.
WE ACHIEVED CARBON NEUTRALITY IN
2021 AND COMMIT TO CONTINUING
THAT IN 2022, THROUGH OFFSETTING
AND REMOVAL PROJECTS.”
Kainos Annual Report 2022
23
STRATEGIC REPORT
Governance
a) Describe the Board’s
oversight of climate-
related risks and
opportunities.
Our Board has overall responsibility and accountability for the implementation of our
climate action strategy, its associated reduction of our carbon impact and business
opportunities.
In 2022 our Board will determine the most appropriate structure for the Directors to
monitor the ongoing performance and delivery of the plan.
b) Describe management’s
role in assessing and
managing climate-
related risks and
opportunities.
The responsibility for our climate action plan has been devolved to the CEO, with day-to-
day co-ordination led by our Sustainability Group.
Climate-related risks are brought to the attention of the Audit Committee, who raise
matters, as appropriate, to the main Board.
Strategy
a) Describe the climate-
related risks and
opportunities that the
organisation has
identified over the short,
medium and long-term.
Potential areas of risk
While we have placed a high priority on reducing our climate impact and we believe that
the likelihood of climate-related risks occurring as ‘medium-to-high’, we have assessed the
impact of these events on our business as being ‘low-to-moderate’.
Physical. Extreme weather events could result in damage to our office locations, restrict
business travel, disrupt cloud and internet connectivity providers, cause regular interruption
to power supply, or disruption to supply chains, for instance the supply of laptops.
Transition. We could experience reputational damage if we fail to meet our climate targets; or
the increased cost for carbon offsetting programmes may result in additional business cost.
Potential areas of opportunity
During 2021 our Sustainability Group assessed the potential opportunities in responding to the
climate crisis. Ideas were shared across our internal climate action community (which has 248
members) for feedback and development. The highest priority ideas will be developed in 2022.
Products and Services. There is the potential to help our customers achieve a lower
carbon future by moving their services to the cloud or redesigning their services to be
more energy efficient.
Reputation. Enhanced reputation and business opportunity by becoming a sustainability
leader in the technology sector.
b) Describe the impact of
climate-related risks
and opportunities on the
organisation’s
businesses, strategy,
and financial planning.
As noted above, our initial assessment of the impact of climate-related risks to our business
are low-to-moderate. To date, climate-related risks have not been a material consideration
in the financial planning process. Kainos is a service business where the main costs are
employee-related.
Following the receipt of feedback from our SBTi submission, in mid-2022, we will review
each of the climate risks for materiality and expand our Risk Register to accommodate the
significant risks.
We have an internal innovation process (see section ‘Innovation, research and
development’), which is currently evaluating a carbon-reduction solution, that we believe
can accelerate cloud adoption within our customers. We will complete the evaluation of this
solution during 2022.
c) Describe the resilience
of the organisation’s
strategy, taking into
consideration different
climate-related
scenarios, including a
2-degree lower scenario.
We have not yet completed the scenario planning for different climate-related scenarios.
We expect to complete this work in late 2022.
The modelling results will be used to further develop our approach to climate risks and to
anticipate any opportunities within those scenarios.
Kainos Annual Report 2022
24
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
Risks
a) Describe the
organisation’s processes
for identifying and
assessing climate-
related risks.
Our approach to assessing risks is described in more detail in the Risk factors and
uncertainties section of this report.
We added the climate-related risk to our reputation, should we not act or act too slowly, to
our register in 2021, as a principal risk. All principal risks are overseen by our Audit
Committee, which assesses the material risks to our business and the plans to mitigate and
manage their potential impact. The impact of this risk as well as the process for identifying
and managing risk is detailed in the Risk factors and uncertainties section of this report.
b) Describe the
organisation’s processes
for managing climate-
related risks.
In line with our overall approach, outlined in the Risk factors and uncertainties section, we
review our Risk Register twice each year, with further updates, where required, provided to
the Audit Committee. Climate-related risks are reviewed as part of this process.
c) Describe how processes
for identifying, assessing,
and managing climate-
related risks are
integrated into the
organisation’s overall
risk management.
The responsibility of identifying risks is allocated to the Executive and Leader teams within
Kainos, which represents a community of over 70 of our most senior leaders.
Those risks that are assessed as significant are allocated a dedicated owner to ensure that
a mitigation plan is put in place.
For example, ensuring that all our internal systems are cloud-hosted will be the
responsibility of our Chief Information Officer.
Metrics and targets
a) Disclose the metrics
used by the organisation
to assess climate-related
risks and opportunities
in line with its strategy
and risk management
process.
We await the feedback on our SBTi submission, which is expected mid-2022, and which
will inform our implementation plan and related metrics for our aim to be carbon net zero
by 2025.
At present we use the GHG Protocol Corporate Accounting and Reporting standard
(revised edition) and emission factors from the UK Government’s GHG Conversion
Factors for Company Reporting 2019 to calculate our absolute emissions and relevant
intensity ratios.
b) Disclose Scope 1,
Scope 2 and, if
appropriate, Scope 3
GHG emissions, and
the related risks.
We calculate and disclose our emissions from Scope 1 and Scope 2, in compliance with
SECR regulations. We also disclosed full Scope 3 emissions as well as the specific Scope 3
emissions as they relate to business travel. Our emissions are externally verified.
Further information about our emissions is contained in the following sections.
c) Describe the targets
used by the organisation
to manage climate-
related risks and
opportunities and
performance against
targets.
We achieved carbon neutrality in 2021 and remain on track to achieve carbon net zero in
2025 for full Scope 1, 2 and 3 emissions.
The response to our SBTi submission will provide further input to our detailed
implementation plan and targets – our expectation is that we will need to reduce our
emissions by 50% from our 2019 baseline.
Kainos Annual Report 2022
25
STRATEGIC REPORT
CDP (previously Carbon Disclosure Project)
During the year we made our second submission
to CDP, the not-for-profit charity that runs the
global disclosure system for investors, companies,
cities, states and regions to manage their
environmental impacts.
As part of that submission, CDP generates a ‘score
report’ which allows participants to understand their
score and identify actions to improve their climate
governance. The CDP awarded our submission a
C rating, with our scoring increasing in three of the
categories. The C rating places us in the awareness
band, acknowledging our transparency and
understanding of our climate impact.
We are currently preparing our next submission and
we expect our updated assessment to be available in
late-2022.
Carbon footprint
As in previous years, we rely on external environmental
experts to assess and advise on our environmental
impacts. We are working with Watershed to measure
and report on our emissions.
Our carbon impact for the year, detailed across Scope
1, 2 and 3, was as follows:
• Scope 1 comprises emissions from the direct
burning of fossil fuels. We generated 112 tonnes
of carbon dioxide equivalent (CO
2
e), relating
to oil-based central heating in our premises
(2021: 112 tonnes).
• Scope 2 describes emissions that result during the
generation of purchased energy. These emissions
largely relate to our offices. We generated 15 tonnes
CO
2
e within the UK and a further 69 tonnes
worldwide (total: 84 tonnes CO
2
e) (2021: 179 tonnes).
• Scope 3 emissions relating to business travel.
In 2022, our emissions in this category increased
to 382 tonnes CO
2
e (2021: 8 tonnes).
• Scope 3 (full) emissions generated indirectly from
business activities. In 2022, 7,539 tonnes CO
2
e
were generated (2021: 5,779 tonnes), inclusive of
business travel.
Compared against the prior year, our total emissions
increased by 30%, largely linked to the 33% increase in
staff numbers and their direct costs (laptops, external
training) but also impacted by the increased use of our
offices, increased commuting and the resumption of
some business-related travel.
Compared against our base year (2019), our emissions
are significantly reduced. Our Scope 1, 2 and Scope 3
business travel in 2019 was 5,524 tonnes CO
2
e; the
same emissions for the past year represented 578
tonnes CO
2
e, a reduction of 90%. Similarly, our total
emissions for last year represent a c.27% reduction from
our base year, despite our staff numbers increasing by
57% over the same timeframe. As a result, our carbon
intensity figure, tonnes CO
2
e per employee has reduced
from 3.19 tonnes CO
2
e to 0.28 tonnes CO
2
e.
During the year we improved the energy efficiency of our
offices, recording a 32% reduction despite increased
usage. We have also been migrating our office electricity
supply to be from renewable sources, with our offices in
Belfast, Gdańsk and Birmingham now transferred,
covering 63% of our office-based colleagues.
We also focused on sharing information with our
colleagues, launching our Company-wide climate
action group, which has 249 members across the
Company, and a further 300+ who actively engage with
the content published – webinars, guides and research.
As part of these employee-focused initiatives, in the UK
we launched our Electric Car Salary Sacrifice Scheme,
with 90 colleagues purchasing an electric vehicle
through the scheme.
The majority of our Scope 3 (full) emissions are from
our supply chain, and later this year we will appoint a
colleague to work with our suppliers to help them
reduce their carbon impact.
In 2021 we offset our total emissions to become carbon
neutral, at a cost of £45,000. We will continue this
practice, again utilising a portfolio of high-quality,
certified offsets that blend local and international
projects as well as carbon removal projects. We believe
this best reflects our global business and gives us the
best opportunity to invest in programmes that offer
positive social, as well as environmental, impacts.
We have used the GHG Protocol Corporate Accounting
and Reporting standard (revised edition) and emission
factors from the UK Government’s GHG Conversion
Factors for Company Reporting 2019 to calculate the
below disclosures. The standard requires a statement
of relevant intensity ratios, which are an expression of
the quantity of emissions in relation to a quantifiable
factor of the business activity. Kainos has identified
two such intensity ratios, set out below. These figures
were calculated from data available for our main
operations and extrapolated to take account of our
smaller locations.
Kainos Annual Report 2022
26
GHG emissions data for period 1 April 2021 to
31 March 2022
Global tonnes of CO
2
e
2022 2021
UK Non-UK UK Non-UK
Combustion of fuels and
operation of facility (Scope 1) 86 26 94 18
Emissions from purchase of
electricity, heat, steam and
cooling purchased for own
use (Scope 2)
15 69 92 87
Business travel (Scope 3) 275 107 6 2
Total emissions by location
376 202 192 107
Total emissions for year
578 299
Total emissions from activities for which the
Company is responsible (Scope 1 and 2)
2022 2021
kWh (thousand) 1,095 1,286
The following table expresses our annual emissions
in relation to quantifiable factors associated with
our activities.
Intensity ratios
2022 2021
tCO
2
e/£ million revenue 1.91
1.27
tCO
2
e/average number
of employees 0.28 0.19
Hybrid working
In delivering projects to our customers, we have always
prided ourselves on being able to work flexibly; whether
responding to a customer deadline, a location
preference or a change in priorities. Our approach
internally has been the same, with a focus on supporting
our colleagues in working in the most effective way
possible, whether that is working from home, from one of
our offices, from client site or while travelling.
This approach was one of the reasons that we were
able to respond so quickly at the start of the pandemic,
in a matter of days successfully moving our entire
workforce to work from home. Our working practices
established during the early stages of the pandemic
have continued where our colleagues alternate
between office-based and home-based work locations.
We describe this working pattern as ‘hybrid working’.
To us, hybrid working is about combining remote and
office-based working, giving our people greater
flexibility to work in the location that best suits them,
taking into consideration the needs of their role, their
work, their team members and the customer.
In addition to supporting our people to work effectively
in a more flexible manner, hybrid working also provides
a unique opportunity to reduce our environmental
impact across Scopes 1, 2 and 3, especially in the areas
of business travel and employee commuting, which are
significant contributors to our environmental impact.
Secure equipment recycling
As we operate a cloud-based infrastructure, most of
our equipment recycling is focused on our laptops.
During the year we recycled over 540 pieces of
equipment, partnering with Vyta Secure Limited, who
use military grade techniques to remove all data from
the system. Typically, 85% of our equipment is reused
as a working system, with the remainder broken down
for WEEE recycling, of which 99% is recycled.
We are in the fourth year of our arrangement with our
disposal partners and over that time we continued to
generate funds for charitable causes from disposing of
our old equipment. These funds have been donated to
our charity partners, principally Doctors without
Borders (Médecins sans Frontières) as well as being
used for our charity grants which support our
colleagues when fund-raising for their preferred,
individual charities.
2022
85%
of equipment
reused as a
working
system
15%
broken down
for WEEE
recycling, of
which 99% is
recycled
Social: our people and our communities
Our success depends upon the ability, skills and
motivation of our people. We therefore focus on
engaging with our people, providing them with
opportunities to develop their careers and making it
easy for them to stay at Kainos to build their career.
Everyone in Kainos shares in the responsibility of
creating a great place to work, however it is our Chief
People Officer, appointed in 2017, who sets the strategy
for all our people-related activity.
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
Kainos Annual Report 2022
27
Alongside supporting them while they are working, part
of our responsibility is to support them outside of work.
This ranges from healthcare benefits to community
volunteering.
To make sure that we perform consistently, every year
and in every location, we use our Workday platform to
record all our employee information – everything from
salary and benefits to performance and career
planning, colleague feedback and diversity
characteristics.
Engagement
Our ambition is to be a great place to work. Our people
tell us when we get it right and tell us about the areas
where we can improve. We use the annual Sunday
Times ‘Best Companies to Work For’ survey as a
confidential way for our colleagues to share their
feedback across eight different categories: Leadership,
My Company, My Manager, My Team, Wellbeing, Giving
Something Back, Fair Deal and Personal Growth.
Having first appeared in the Top 100 in 2012, we are
delighted to still be included in 2022, once again
retaining the two-star ‘outstanding company’
accreditation.
Engagement can also be measured through Glassdoor,
the online career community with over 54 million users.
Glassdoor allows current and former employees to
provide feedback on companies. In March 2022, Kainos
had an approval rating of 86% and 87% of respondents
would recommend working at Kainos to a friend; these
are well above the average ratings across 2.1 million
companies of 74% and 66% respectively. In early 2022,
we were designated as No. 38 in the ’50 Best Places to
Work in the UK’ annual awards from Glassdoor.
We work hard to retain the talented people already in
Kainos. We are also very focused on recruiting new
talented colleagues. We continue to attract strong
interest in key recruitment markets, with tens of
thousands of candidates applying each year to join
Kainos. During the year, our headcount grew by 668
to 2,692 people (2021: 2,024). This includes 153 new
colleagues who joined us via the four acquisitions we
completed in the year.
As part of our recruitment activity, we operate a referral
scheme. We believe that referrals, where a new employee
has joined Kainos because of a recommendation from
an existing employee, is a good indicator of existing
employee engagement. During the year, 200 people
joined via a referral.
We are focused on creating a workplace that people
want to join and then stay to develop their careers. With
the global shortage in digital skills, we are pleased that
86% of our colleagues made the choice to stay and
develop their career at Kainos (2021: 92%).
We take great enjoyment in marking the significant
work anniversaries of our colleagues. During the year
100 people celebrated their five-year anniversary, and
a further 58 marking their 10-, 15-, 20-, 25- or 30-year
anniversary of joining Kainos.
We believe that it is important to celebrate the
achievements of our colleagues and our recognition
scheme allows any person in Kainos to nominate an
inspirational colleague. We centre this scheme around
our values – creativity, honesty, cooperation,
determination and being respectful. During the year,
over 2,250 awards were made to recognise the
contribution of colleagues.
We also believe that our colleagues have many ideas
about how we can improve as an organisation. Over the
past five years, our staff ideas portal has received 436
suggestions. Of these, 126 have been implemented, 116
are being evaluated or undergoing implementation and
194 were not taken forward.
Measures:
Sunday Times ‘Best Companies’ position:
2022 86th
2021 86th
Glassdoor approval rating:
2022 86%
2021 86%
Staff retention:
2022 86%
2021 92%
Headcount: An increase of 668 (2021: 309 people).
2022 2,692
2021 2,024
Employee referrals:
200
new people employed
Recognition awards:
2,274
awards received
STRATEGIC REPORT
Kainos Annual Report 2022
28
Wellbeing
Employee wellbeing is a key priority for us. We strive to
create the conditions for our people to deal with the
normal stresses of life, to feel fulfilled and productive at
work and to be able to contribute to their communities.
In our wellbeing approach, we focus on empowering
and supporting our people across five areas: emotional,
physical, social, career and financial wellbeing.
We have a dedicated wellbeing intranet site which
contains self-care information to help our people
manage their own wellbeing and that of their friends,
colleagues and team members. This site has over
64,000 visits every year.
a) Emotional
We are focused on the mental and psychological
wellbeing of our colleagues, to ensure that they are
realising their full potential and coping with their
dynamic lives.
Since March 2020 we have operated our online Mindset
wellbeing platform supporting self-awareness and
reflection. There are 25 modules, such as growth
mindset, emotional intelligence, and resilience. Over
1,400 people are actively using the system, posting a
satisfaction rating of 95%.
We launched our wellbeing app in March 2021, which
covers physical and emotional wellbeing, including
fitness, nutrition, mediation techniques and wellbeing
insights. To date, over 475 people actively use the app.
In addition to these self-directed activities, we have
trained 31 volunteers from across all our office
locations as ‘wellbeing champions’. These dedicated
volunteers are equipped to have supportive
conversations with our people and, if required, direct
them to further support or professional help.
Professional support is available globally through our
Employee Assistance Programmes, offering 24/7
confidential access to expert advice (telephone, virtual
and face-to-face) across a range of areas, including
wellbeing, financial and legal advice.
Measures:
Using the mindset platform:
2022 1,350+ people
2021 950+ people
Using the wellbeing app:
2022 475+ people
2021 375+ people
Wellbeing champions:
2022 31 people
2021 32 people
Accessing the employee assistance programme:
2022 190 people
2021 75 people
b) Physical
Our focus during the pandemic has been on reducing
the risks of Covid-19 for our colleagues. On 5 March
2020 we invoked our Covid-19 response plan, which
prioritised the physical safety of our people. As part of
that response, we asked them to work from home or
another safe location, reopening our offices in
September 2020 for those who preferred to work from
an office environment. We relaxed this guidance in
March 2022, encouraging our colleagues to use our
office locations for collaboration and social events.
More typically, we concentrate in helping our
colleagues manage their physical health and energy
levels. This includes the self-directed mindset and
wellbeing platforms described earlier, but also a range
of activities that include yoga sessions, mindfulness
sessions, activity-based charity events and support for
cycling schemes.
While these measures focus on preventing health
issues, we also recognise that our colleagues can
require support when health-related issues arise. On a
global basis, Kainos continues to offer private medical
and permanent health insurance.
During the year, sickness absence increased to 6.5 days
(2021: 5.1 days), which is slightly above the UK average.
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
Kainos Annual Report 2022
29
Measures:
Absence levels:
2022 6.5 days per person
2021 5.1 days per person
Accessing private medical insurance:
2022 326 claims
2021 960 claims
Accessing permanent health insurance:
2022 three people
2021 four people
c) Social events
We enjoy being a social company, providing the
opportunity to have meaningful relationships and
creating an environment where our people feel
engaged, supported and included. We have volunteer
led social committees at all our locations and each
committee organises inclusive events that appeal to the
local teams. These can be unique to individual offices
(escape rooms!), but there are also themes across our
locations: a staff party and family-friendly events in
December, summer BBQ and payday lunch or drinks.
In addition to these location-focused events, we also
encourage quarterly social meet-ups at a team level.
Kainos pays for all expenses linked to these events.
Covid-19 severely disrupted these events and we
switched to virtual events, gifts or hampers during
the pandemic. Since the start of 2022, we have been
encouraging our colleagues to meet and socialise and
we expect these events to increase in frequency during
2022 as people feel more comfortable resuming ‘in
person’ events.
Measures:
Staff entertainment expenditure:
2022 £1.2 million
2021 £0.7 million
d) Career
As a growing company, we are continually able to offer
people opportunities to develop their career and to
undertake meaningful, professional work.
At a planning level, our global capabilities are
responsible for developing the skills, qualifications and
confidence of our colleagues. There are over 21 global
capabilities, including cyber security, experience
design, engineering and reporting and analytics. We
have approximately 785 people managers of varying
levels of seniority, who are responsible for supporting
our people’s career development day-to-day.
We use an annual performance appraisal, conducted
between each person and their people manager, as a
dedicated, detailed review of the year and as a planning
exercise for the year(s) ahead. This conversation is
complemented with monthly 1-2-1s, that ensure career
plans are being progressed, although a person can
reduce the frequency of the 1-2-1 discussion to match
their career requirements.
People managers are supported in their key role by
practical tools such as our online coaching portal
comprising 24 self-study modules, with over 530 people
managers accessing the portal. People managers also
undertake our three-day Effective Manager
programme, which covers core management skills,
personal leadership skills, everyday coaching and
giving and receiving feedback. Over 570 of our people
managers have completed this training.
Alongside the career planning and support, we invest
heavily in training and certifications for our people.
We have a diverse curriculum of internal courses
(which we call ‘Kainos MAP’) and comprehensive
self-study materials to support external technical
and professional qualifications and certifications.
As a response to Covid-19, we have transitioned our
learning curriculum and approach to a virtual delivery
model. This has increased the global participation on
our training programmes but has reduced the
opportunity for our colleagues to build their personal
networks as they would if they were attending in-
person courses. We expect to maintain a high level of
virtual training in the future, but also a greater level of
in-person courses and conference attendance.
Measures:
Number of promotions:
2022 413 people
2021 265 people
Annual appraisals completed:
2022 99.1%
2021 98.9%
Training expenditure:
2022 £1.4 million
2021 £0.6 million
STRATEGIC REPORT
Kainos Annual Report 2022
30
e) Financial
We recognise the significant role that we play in the
financial wellbeing of our people. We have therefore
created a compelling reward framework for our
colleagues, designed to support their needs as they
move through their career at Kainos.
This encompasses salary, bonus (where applicable)
and pension. It also includes a comprehensive benefits
package, some of which has been detailed in previous
sections.
One of the reasons that we chose to become a public
company was the ability to make it easy for everyone in
Kainos to become a shareholder and to share in the
value that they have created.
Every year, we gift shares to all permanent employees
in the UK, Ireland and Poland, operating cash-
equivalent schemes in all our other locations. In
addition, we operate a save-as-you-earn shared-based
scheme. In 2022 we allocated 375,288 shares under all
our share schemes, bringing the total allocated to
9,929,522 since we became a public company.
Our colleagues regularly share stories of how they have
used the proceeds from their share sales to support
them in various life events – ranging from a first car to
a deposit on a first home.
Measures
Shares allocated
in 2022:
375,288
shares or £5 million
at 31 March 2022 closing price
14
Shares allocated
since 2015:
9,929,522
shares or £131 million
at 31 March 2022 closing price
14
Diversity and inclusion
We have colleagues from 57 different nationalities and,
whilst diversity is not only defined by nationality, we
appreciate the value of having a diverse, international
workforce.
We are focused on creating an inclusive culture that
champions diversity of thinking and ensures everyone
has an equal opportunity to develop, be rewarded
and be recognised for their contribution to Kainos.
Our publicly available Diversity and Inclusion (D&I)
policy commits to a culture that is responsive to the
needs of all groups and a zero-tolerance attitude to
bullying, harassment, exclusion or victimisation.
Diversity and inclusion is an integral part of our
company strategy because we believe that by having
more culturally diverse leadership and teams, we are
more likely to have increased staff wellbeing and have
higher rates of staff engagement and retention.
With a more diverse work environment, we are better
able to deliver technology and services that meet the
diverse needs of users and citizens and through diversity
of thought quickly bring new innovations to market.
With a more diverse and inclusive culture, we believe
we can perform better as an employer and for our
customers while driving higher growth and profitability
and better meet or exceed global equality standards
and laws.
How we are organised
We have a Global D&I Council comprising colleagues
from various levels across our entire business.
Sponsored by our Chief People Officer, this group
drives delivery of our D&I programme. This is supported
by our Employee Network Groups; Xpression (LGBTQ+),
Inspire (gender diversity), Voice (ethnic diversity) and
Neurodiversity.
These groups work as support networks, educators and
voices for these communities and each group is
sponsored by a member of the Executive Team to ensure
representation at all senior decision-making forums.
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
14 KNOS closing share price on 31 March 1,323 pence.
Kainos Annual Report 2022
31
Our data
Historically we have collected a small subset of the data
required to truly gain insight into the diversity of our
organisation. Early in 2021 we launched a specialised
module, Workday VIBE Index
TM
(Value, Inclusion,
Belonging and Equity), and asked our colleagues to
voluntarily disclose details on ethnicity, disability,
marital status, religion, citizenship status, nationality,
sexual orientation, sex at birth and gender identity.
Over 2,140 of our colleagues have updated their
diversity information.
Progress
During the year, our D&I plan has focused on activities
and campaigns on raising awareness, connecting our
people to talk, learn and unite around our differences
– over 1,400 people participated in these events.
We continue to pledge our support to the Office of the
United Nations High Commissioner for Human Rights
(OHCHR), UN Standards of Conduct for Business
Tackling Discrimination against LGBTI People, the
Race at Work Charter and the Armed Forces
Covenant. We have retained our membership of
Inclusive Employers, the leading membership
organisation who are experts in workplace inclusion.
Our progress has also included achieving Disability
Level 2 employer status.
Improving our own understanding and behaviours
has continued to be a focus. Our unconscious bias
eLearning module, covering behaviours, bias,
inclusivity and policy, has been completed by over
2,000 colleagues, with 251 hiring managers completing
our newly launched interviewer skills training which
focuses on unconscious bias within the hiring process.
We continue to supplement this learning with webinars,
hosted panel sessions and information packs.
Measures
Employees opting to disclose their diversity data:
2022 90%
2021 52%
Gender balance
Gender diversity remains a challenge within the wider
industry, where 19% of roles in technology are
undertaken by women
15
and nationally, women hold 5%
of executive management roles
16
.
In considering Kainos employees, there are 787 women
(2021: 518), 1,520 men (2021: 1,156) and 42 colleagues
that are non-binary or transgender or have chosen not
to disclose that information (2021: 51). Viewed as
proportions, 33% of our workforce are women (2021:
30%), 65% are men (2021: 67%), 2% are non-binary,
transgender or prefer not to disclose this information
(2021: 3%).
STRATEGIC REPORT
15 BCS diversity report 2021: Women in IT.
16 PwC research report: Women in Tech.
Global D&I Council
Xpression
(LGBTQ+)
321
members
Inspire
(women)
446
members
Voice
(ethnic diversity)
275
members
Neurodiversity
115
members
Our global D&I structure
Kainos Annual Report 2022
32
There are 171 women at manager level or above (2021:
95) and two women hold executive management roles
(2021: two). As proportions, women holding manager
level and above, roles represent 27% (2021: 21%) with
women holding 12% of executive management roles
(2021: 20%).
On the Kainos Board, two of the four (50%) Non-
Executive Directors are women (2021: 40%). Including
the Executive Directors, 33% of our Board are women
(2021: 25%). All Board members identify ‘White/
European’ as their ethnic group.
We recognise that the under-representation of women
in Kainos and in the wider sector, means that our
journey towards gender parity will take several years.
Our gender parity plan identifies three key themes and
associated actions plans, outlined in the following
sections.
a) Develop the talents and careers of women already
in Kainos
Our initial focus is on our senior women colleagues.
Working with industry leadership experts, our six-month
programme, Women in Leadership, is designed to
support the continued development of the participants.
There are 15 women on the first iteration of this
programme. In addition to the personal development
goals of those in the programme, it is also our aim to
create role models, ambassadors and advocates that
are inspirational for women in, or considering a career
in, the digital sector.
We have also partnered with Everywoman, a leader in
the advancement of women in business, to provide
specialist learning and development programmes for
women across Kainos.
b) Become the destination employer for talented women
We believe that the most effective way to encourage
people to join Kainos is to showcase our existing
talented women. With a degree of encouragement, five
of our colleagues agreed to be nominated for a series
of industry-related awards. All five were shortlisted, with
two of our colleagues winning their award categories
– ‘Excellence in IT’ and ‘Advocate of the Year’.
c) Encourage more women to consider and adopt
digital careers
The Outreach section in this report provides more
detail of our activities including the gifting of digital
bursaries to undergraduate women studying at
university, and women-only events for young women
considering a digital career. We were delighted to
engage 333 young women in our virtual work
placement programmes, where over 1,100 students
participated.
To support the continued development of our women
colleagues, this year Kainos commissioned a
professional leadership development specialist to
design and deliver a highly engaging, bespoke Woman
in Leadership Programme ‘Empowering Leadership’;
15 talented women are currently attending the six-
month programme.
Measures:
Gender identity:
2021 30% 67%
2022 33% 65%
■
Women ■ Men ■ Non-binary, transgender or prefer not
to disclose this information
Women at manager level and above:
2022 27%
2021 21%
Women at executive level:
2022 12%
2021 20%
Communities
a) Outreach
Part of our role as a leading digital company is to
promote awareness of digital technologies amongst
school leavers and young people. This responsibility
extends to helping these young people to build the skills
that can help them forge a fulfilling career in technology.
Over the past seven years, our outreach programmes
have directly benefited over 7,400 young people in
the UK, Ireland and Poland. These programmes
have catered for students from a range of socio-
economic backgrounds and 30% of the attendees
were young women.
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
2%
3%
Kainos Annual Report 2022
33
In the past year we switched our activity to a virtual
events format which has increased accessibility of our
programmes. With over 1,100 virtual work placements
completed, we offered students aged 14-19 an
enjoyable and engaging insight into the career
opportunities in digital technology. Our virtual work
placements were inclusive to all, with over 40 students
with special educational needs engaged. We introduced
women-only events, including women-only work
experience programmes, building peer networks among
over 333 young women aiming to pursue a career in
digital technology. We launched our Digital Insight
events in Cyber Security and Intelligent Automation,
with over 100 young people participating.
We also switched our popular CodeCamp to being a
virtual event, launching it as a global programme,
engaging with over 230 students in 17 different
countries. In a similar manner, our education-based
conference also switched to a virtual app design
competition, with over 20 young people showcasing
their app design skills.
We launched our Digital Bursaries, aimed at widening
the participation of young people who are traditionally
under-represented at university. Our initial university
partners are Queen’s University Belfast (QUB) and
Birmingham City University (BCU). At QUB, these
are bursaries for all degrees, at BCU our bursaries
will support women attending digital courses.
Our commitment over the next three years is to
support 60 young people attending university.
We partnered with the Now Group (a Social Enterprise
and Autism Charity) and their Digital Skills Academy,
providing paid work placements for two participants
who are seeking to gain entry level employment.
We also partnered with Leonard Cheshire (a disability
charity) to provide a paid work placement for a
graduate from their Graduate Employ scheme.
b) Graduate employment and our Earn as You Learn®
apprentice scheme
Since Kainos was founded in 1986, we have recognised
our responsibility to provide roles for people starting
their career in industry, particularly with a focus on
technology.
In the year, we recruited 142 graduates and 17
placements (a placement is typically a 12-month
engagement and is fully remunerated). These roles
were based across our Belfast, Derry, Birmingham,
Gdańsk, London, Hamburg and Indianapolis locations.
STRATEGIC REPORT
We continue to operate our popular Earn as You Learn®
apprenticeship scheme, which has proven particularly
successful since its inception in 2013. Designed to
encourage young people into the digital industry,
Earn as You Learn® has allowed us to identify talented
young people outside our traditional graduate
recruitment activity. Since the launch, 74 young people
have joined us through this programme.
c) Charities
Our people propose and decide on our global charity,
which we support for a minimum of two years.
We allocate 50% of our funds to our global charity
(currently Doctors without Borders or Médecins
sans Frontières), with the other 50% supporting
local charities.
We have volunteer-led charity committees at all our
locations, who organise fund-raising activities and
decide which local charities receive support. Kainos
provides financial support for all these activities.
As with all in-person events during the pandemic, we
experienced a reduction in fund-raising activities.
However charitable donations increased to £45,000
(2021: £22,000).
Everybody in Kainos can avail themselves of two,
paid-for days every year to get involved in social and
charitable activities. In the past this has covered
activities like volunteering on emergency transport or
nature reserve maintenance; more recently this has
been linked with supporting Ukrainian refugees,
especially in Gdańsk.
Measures:
Virtual placements on offer:
2022 1,147
2021 1,000
Graduates and students employed:
2022 159
2021 63
Charity donations:
2022 £45,000
2021 £22,000
Digital inclusion
bursaries:
60
young people over three years
Earn as You Learn®
apprenticeships:
74
places in nine years
Kainos Annual Report 2022
34
Governance: Our stakeholders
Over the past 35 years, we have constantly
demonstrated our commitment to honesty and
integrity in our business undertakings; and adhering to
best practice in terms of corporate governance.
We view this as spanning our commitments to all our
stakeholder groups, our policies underpinning our
business ethics and ensuring that all our employee
and customer data is held confidentially.
Section 172(1) statement
Section 172 of the Companies Act 2006 requires a
director of a company to act in the way he or she
considers, in good faith, would support the long-term
success of the Company and its various stakeholders.
In doing this, our Directors need to consider a variety
of factors, including: the long-term impact of any
decision; the interests of our employees; our
relationships with our suppliers and customers; the
impact that we have in our communities and on the
environment; maintaining our reputation for high
standards of business conduct; and the need to act
fairly for our shareholders.
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
Our Directors have exercised care in their decision-
making, cognisant of their section 172 obligations, and
taking into consideration the needs and interests of the
various stakeholder groups as part of all Board
decision-making.
Stakeholder engagement
Under section 172, we consider our stakeholder groups
to be our staff, our customers, our shareholders and our
communities.
We recognise that the importance of a topic may vary
between stakeholder groups and that there may,
occasionally, be a conflict in the interests of different
groups. Recognising that not every decision can
support each group equally, the Board is committed to
effective engagement with our stakeholders to
understand their interests and priorities.
Kainos Annual Report 2022
35
STRATEGIC REPORT
In addition to the detailed reports provided to the Board as part of our monthly internal reporting, the Directors
engage directly with stakeholder groups as appropriate, with examples of this interaction set out below and in
the Strategic Report.
a) Our employees
The skills, motivation and engagement of the people working in Kainos are key to our success. As the previous
sections indicate, we place immense value on ensuring that our colleagues are engaged, rewarded and that we
are focused on their wellbeing.
We engage to understand how they view Kainos as an employer and where we can improve. We place immense
value on ensuring that our colleagues are engaged, rewarded and that we are focused on their wellbeing. This in
turns helps us to attract and retain the talent we need to fulfil our growth plans.
Their interests
• Their reward and benefits.
• Their career progression.
• The training and development opportunities we create.
• Our culture and teamwork.
• Their health and wellbeing.
• Our ethical stance as a company.
How we engage
• We use the annual Sunday Times ‘Best Companies to Work For’ survey as a confidential way for
our colleagues to share their feedback.
• The Culture and Development Group (chaired jointly by the CEO and Chief People Officer) is the
Company’s formal workforce advisory panel and reports regularly to the Board on employee
matters.
• The Directors have regular opportunities to engage with the wider company through office
visits, attending our all-staff annual conference and presentations from staff as part of our
monthly Board meetings.
• Our CEO holds monthly ‘Kainos in Brief’ sessions with staff groups, to share news and progress
against objectives and strategic ambitions, and to receive direct input from staff.
• We operate an internal social network platform (Microsoft Yammer) which creates the opportunity
for every person to publish, share and comment about all aspects of working in Kainos.
Outcomes
• Our continued placement in the Top 100 of the Sunday Times Best Companies to Work For.
• The output from the survey was shared with the Board and staff and a continuous improvement
plan created to address feedback. Progress against the plan was reported each month to the
Executive Team, quarterly to the entire workforce and twice yearly to the Board.
• During the past year, colleagues have contributed 9,310 posts to Yammer, including a vibrant
response to the introduction of a UK Electric Vehicle scheme.
Further information regarding our workforce engagement is set out in the Directors’ Report and is referenced in
the Social: our people and our communities section of this report.
Kainos Annual Report 2022
36
b) Our customers
We engage with our customers so that we can understand their evolving needs and their attitudes towards
our service, so we can continue to support them effectively and deliver high levels of customer satisfaction.
This enables us to generate repeat business with customers and to win work with new customers.
Their interests
• Quality and cost of service.
• Our ability to meet agreed deadlines.
• Our ability to innovate.
• Our ethical stance as a company.
How we engage
• We work with over 700 customers and our project teams will typically interact with them daily.
Feedback or escalations will be shared within the project team and, where appropriate, with the
Executive Team and the Board.
• We use online surveys to obtain feedback about our performance and customer satisfaction
across all our customers. Surveys happen on a rolling basis, with customers asked for feedback
twice a year. The output is shared monthly with the Board and is reported in our investor
presentations every six months.
• The Executive Directors, primarily the CEO, will meet with customers during the year, typically
our largest customers.
• At a Board level, project success stories and retrospectives are included as part of the regular
Board agenda, with the teams directly involved in the project presenting to the Board.
Outcomes
• We received 394 customer engagement surveys, with 98% rating us ‘Good’, ‘Very good’ or
‘Excellent’ overall. Responses are used to inform our continuous improvement programme,
which aims to meet or exceed customer expectations on every project.
• During the year, a total of nine team success stories, two external speakers and two
retrospectives were provided to the Board.
c) Our investors and shareholders
We value the support of our shareholders and recognise their interest in our strategy and our progress on key
strategic programmes.
Their interests
• Our strategic direction and successful implementation of the strategy.
• Our operational and financial performance.
• Our dividends and total shareholder return.
• Our ethical stance as a company, including our approach to ESG matters.
• Our remuneration practices.
• Any developments in our markets.
How we engage
• Our CEO and CFO meet analysts and institutional shareholders throughout the year, with
detailed updates following our interim and full year results.
• Our CEO and CFO provide regular feedback from these meetings to the Board. Formal
feedback is also obtained by our PR and financial advisors and reported to the Board.
• Our Chair engages with shareholders on various topics raised, addressing enquiries, setting out
our position and offering to discuss further, where required, in person or virtually.
• We communicate with private investors through the RNS Service, the Annual Report and the
Annual General Meeting.
• We make financial and other information available on our website.
Outcomes
• We increased our understanding of shareholder views on dividend policy, environmental
considerations, and tax transparency.
• We published our tax policy on our website.
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
Kainos Annual Report 2022
37
d) Our communities
We believe that as a responsible business, we need to contribute to the communities within which we operate.
Their interests
• Our engagement with community-based programmes.
• Our carbon footprint and our commitment to reducing our environmental impact.
• Our employment options for their communities.
• Our tax strategy and tax transparency.
• Our ethical stance as a company.
How we engage
• Our outreach programmes engage with our local communities to ensure that our programmes
support the needs of our stakeholders.
• Our volunteer-led charity committees support and amplify the fund-raising efforts of our
colleagues and oversee the selection of our global and local charities.
Outcomes
• We extended our outreach programmes to operate globally, with participants from 17 countries.
• We increased our graduate and school-leaver recruitment programmes.
• We increased our level of charitable donations.
• We published our tax policy on our website.
• We achieved carbon neutral in 2021 and remain on schedule to achieve net zero by 2025.
Further information regarding our community engagement is set out in the Directors’ Report and is referenced in
the Social: our people and our communities section of this report.
e) Case study: our engagement in action
In July 2021, England moved to Step 4 of the Covid-19 exit plan, which relaxed most social distancing restrictions
and included the ability to return to office-based work. In parallel, there was general encouragement from
government ministers and commentary in the press and from high-profile business personalities for us to return
to offices.
While it was clear that the global health situation was improving, our assessment about a return to the office
differed from this guidance. Our assessment, informed by our work supporting the NHS in its Covid-19 response
programmes, was that there was a high likelihood of a resurgence later in 2021, what was termed at the time as
‘the winter surge’.
With this assessment in mind, we considered the various needs of our stakeholders and retained our guidance
that our colleagues should continue to work from home, where it was possible and safe for them to do so.
Our employees. Since the start of the pandemic our colleagues experienced low infection rates from Covid-19,
and we believed that our work-from-home guidance, coupled with our colleagues’ caution and diligence,
contributed to these low rates. We also recognised that the pandemic had brought additional care
responsibilities for many people, which would need to remain in place until the risks of infection had further
reduced. In considering our decision in July 2021, we consulted with our leadership community across Kainos
(c.300 of our most senior colleagues based in several countries), and then engaged with everyone in the
Company. For those people who wished to work in an office-based environment, we issued guidance for safe
working at our offices, which had remained open since September 2020.
Our customers. We had been successfully supporting our customers remotely since March 2020, drawing very
favourable feedback for the quality of work that we had delivered. This feedback, coupled with the opinions of our
customer-facing staff, helped shape our customer engagement in July 2021, where we explained our preference
for working remotely. The customer feedback was overwhelmingly positive, and in the small number of cases
where onsite working was required, we were able to facilitate arrangements that were supportive of the needs of
our customers and our colleagues.
STRATEGIC REPORT
Kainos Annual Report 2022
38
OUR ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) COMMITMENTS CONTINUED
Our shareholders. A remote working model, and its
associated lack of travel, was an important
consideration for our shareholders. The reduced
expense and reduced environmental impact are
notable factors for an investor in assessing whether to
become or remain a shareholder in Kainos. We shared
our remote working guidelines formally in our Trading
Updates and Interim Results communications, although
our continued policy was also very visible on our
website and in our external communication.
Our communities. In opting for our cautious approach,
we contributed to reducing the load on healthcare
systems in over 20 countries; at the same time, we
supported those colleagues who had additional care
responsibilities for vulnerable people. We moved our
outreach programmes to a virtual format, engaging
with over 1,100 young people. We extended our
recruitment from school and college, building a virtual
programme to support our new recruits as they started
their digital careers. Finally, asking our people to limit
travel, we continued to minimise the impact that
business travel had on the environment.
Code of ethics: our ethical principles and commitments
We are committed to conducting our business ethically
– this is a commitment which resonates with all our
stakeholder groups – and our code of ethics directly
responds to the concerns and interests of the public
and our customers.
Our six ethical principles are: wellbeing, equality, the
environment, transparency, integrity and taking the
initiative to make a positive difference. These principles
could not be more important to our people, our
customers and the communities we serve.
Our code of ethics outlines our commitments to our
ethical principles in clear and active terms. This is
deliberate. Everyone in the Company is working
proactively to deliver against our ethical commitments
wherever they are relevant.
Our ethical stance isn’t new, but our code of ethics
is the newly formalised way in which we have
consolidated and codified our long-standing ethical
principles and commitments so that these are clear
and visible to our stakeholders now and in the future.
As detailed above, ethics is core to our approach to
business and we are already delivering considerable
social value and ethical outcomes through the work
that we do and the way that we work.
We have worked collaboratively across the Company
to ensure our code of ethics reflects the needs of the
whole Company.
We have agreed our six ethical principles together and
outlined how to apply these in our everyday business
dealings through our 36 ethical commitments.
In the next few weeks, we will be launching our
guidance to ensure our activity is maximising
opportunities to align to the code of ethics and we will
start to report against our ethical ambitions on an
annual basis to celebrate our progress.
We know the number of lives that we touch as an
organisation is vast. In the past year, 60 million people
have used a system or service that we have delivered.
That is why our code of ethics is so important, and why
we will strive to make sure everything we do is aligned
to it, so that we can create the best outcomes for our
people, our customers and our communities.
Business ethics: Human rights, anti-bribery, anti-
corruption and whistleblowing
We operate a zero-tolerance approach to corruption
and bribery in all our business dealings and encourage
staff to report suspected wrongdoing as soon as
possible. We also recognise that all businesses face the
risk of things going wrong from time to time, or of
unknowingly harbouring illegal or unethical conduct.
Our culture is one of openness and accountability,
which we believe is essential to reduce the possibility of
these situations occurring, but also to swiftly address
them should they occur.
These principles are reflected in our global anti-
corruption and anti-bribery policy and our
whistleblowing policy and there is mandatory training
for all staff on these issues.
We do not tolerate slavery or human trafficking and we
take a risk-based approach to our supply chains.
We strongly support the enactment and enforcement
60m
PEOPLE WHO HAVE USED A SYSTEM OR
SERVICE THAT WE HAVE DELIVERED IN
THE PAST YEAR
Kainos Annual Report 2022
39
STRATEGIC REPORT
“WE RECOGNISE THE SENSITIVITY
OF THE INFORMATION WHICH WE
PROCESS DAILY AND HAVE
PRIORITISED SECURE DATA HANDLING
PROCESSES, PRODUCT DESIGN,
HOSTING AND OPERATIONAL
MANAGEMENT.”
of human trafficking laws that recognise and protect
victims, while seeking to bring traffickers to justice.
Our whistleblowing policy encourages staff to report
any wrongdoing, and this extends to human rights
violations, such as modern slavery.
These policies are reviewed on a regular schedule to
ensure they reflect the most recent legislation and that
they adopt best practice in this area. The review and
update schedule of these policies is:
• Global anti-corruption and anti-bribery policy.
Updated every two years, current version is April
2022, with the previous version dated April 2020.
• Whistleblowing policy. Updated every five years,
current version is March 2021, with the previous
version dated April 2016.
• Modern slavery statement. Updated every year,
current version is March 2022, with versions updated
every year since 2016.
In this reporting period, there were zero incidents of
breaches of our anti-corruption and anti-bribery
policies (2021: zero); and there were zero breaches of
our modern slavery statement (2021: zero). There were
zero incidents referred through our whistleblowing
process (2021: zero).
Quality standards, data privacy and security
Our commitment to delivering a high-quality service to
our customers has been established over 35 years in
business. To achieve this consistent quality, we have
invested in our quality management system.
This system is based upon the following quality
certifications:
• ISO9001 (Quality Management System), held
since 1993.
• ISO20000 (Information Technology Service
Management System), held since 2009.
• ISO27001 (Information Security Management
System), held since 2011.
We ensure adherence to these standards through our
own internal training programme, supplemented by our
internal audit review.
As part of the certification process, we are subject to a
six-monthly external assessment to ensure that our
controls are robust, that we are applying them
consistently and we are updating them regularly to
reflect the most recent best practice.
In addition, information security risks are assessed and
reviewed regularly in IT steering meetings with the
Group’s senior management.
Kainos also participates in third-party assessments for
public and private sector customers to evidence that
our associated security controls are effective and
address any related risks.
During FY22 there were no incidents of data security
or privacy breaches that required reporting to the
Information Commissioner (2021: zero).
We recognise the sensitivity of the information which
we process daily and have prioritised secure data
handling processes, product design, hosting and
operational management.
Our people complete security awareness and data
handling training annually.
We have selected SOC2 Certification for our Smart
products. This covers security, availability, processing
integrity, confidentiality and privacy. These practices
are subject to external assessment annually, by global
consulting firm EY.
Kainos Annual Report 2022
40
FY22 was another year of excellent financial
performance as is detailed further in the
Operational Review.
In summary, we achieved revenue of £302.6 million
(2021: £234.7 million), representing an increase of 29%.
Digital Services revenue grew 24% to £199.8 million
(2021: £161.6 million), reflecting increased demand for
digital transformation across all sectors. Our Workday
Practice grew in all its regional markets and as a result
revenue grew by 41% (30% organic) to £102.8 million
(2021: £73.1 million). This was driven by 45% growth
(29% organic) in Workday Services to £70.9 million
(2021: £49.0 million) and 32% growth in Smart products
to £31.9 million (2021: £24.2 million).
Overall gross margin was 46.3% (2021: 50.4%). Digital
Services margins decreased to 38.7% (2021: 44.6%)
mainly due to the normalisation of utilisation levels,
increased salary and contractor costs and the
decrease of Covid-19 related cost savings previously
highlighted as non-recurring in nature. Workday
Practice margins decreased to 61.1% (2021: 63.3%),
also driven mainly by reduced utilisation and
increased salary and contractor costs.
FINANCIAL REVIEW
Revenue 2022
£302.6m
2021
£234.7m
Operating expenses
Operating expenses for the year increased by 37%
to £93.6 million (2021: £68.2 million). The growth in
operating expenses is higher than the revenue growth
due to the reduction of non-recurring cost savings in
training, recruitment, facilities and travel during the
pandemic lockdown, increased investment in our Smart
products in both sales and product development, and
increased acquisition-related expenses.
Investment in product development increased to
£6.2 million (2021: £4.2 million) with all product
development costs expensed. Research and
Development Expenditure Credit (RDEC) grants
recognised during the year totalled £3.2 million (2021:
£3.6 million).
Alternative performance measures
The business is managed and measured on a day-to-
day basis using underlying results. The Directors believe
that the ‘adjusted profit before tax’, ‘adjusted EBITDA’
and the ‘adjusted diluted and basic earnings per share’
measures presented are more representative of the
underlying performance of the Group and enable
comparability between periods.
To arrive at adjusted results, adjustments are made to
exclude the effect of share-based payment expense,
acquisition-related expenses including amortisation of
acquired intangible assets and compensation for
post-combination services.
The adjusted profit measures are not defined
performance measures in UK-adopted IFRS standards.
The Group’s definition may not be comparable with
similarly titled performance measures and disclosures
in other entities. Adjusted profit measures can be
reconciled to the reported numbers as follows:
Adjusted profit measures
2022
(£000s)
2021
(£000s)
Profit before tax 45,993 50,341
Share-based payment expense and
related costs
3,727 4,513
Amortisation of acquired
intangible assets
1,890 383
Compensation for post-combination
services
5,520 1,836
Acquisition-related expenses
1,641 –
Adjusted profit before tax 58,771 57,073
Kainos Annual Report 2022
41
STRATEGIC REPORT
Adjusted pre-tax profit 2022
£58.8m
2021
£57.1m
2022
(£000s)
2021
(£000s)
Profit after tax 35,768 39,601
Share-based payment expense and
related costs
2,907 3,656
Amortisation of acquired
intangible assets
1,890 383
Compensation for post-combination
services
5,520 1,760
Acquisition-related expenses
1,641 –
Adjusted profit after tax 47,726 45,400
Adjusted EBITDA
2022
(£000s)
2021
(£000s)
Adjusted profit before tax 58,771 57,073
Depreciation of property, plant and
equipment
1,538 921
Depreciation of right-of-use assets 1,654 1,786
Finance expense 74 78
Finance income
(52) (84)
Adjusted EBITDA 61,985 59,774
Adjusted pre-tax profit increased by 3% to £58.8 million
(2021: £57.1 million). Profit before tax decreased by 9%
to £46.0 million (2021: £50.3 million) driven by
acquisition-related expenses.
Corporation tax charge
The effective tax rate for the year was 22% (2021: 21%),
which is higher than the UK tax rate of 19% due to
acquisition expenses which are not deductible for tax
and our geographic mix of profits.
Financial position
We continue to have a strong financial position, with
£76.6 million of cash and treasury deposits (2021: £80.9
million), no debt and net assets of £107.7 million
(2021: £87.6 million). The combined underlying trade
receivables and accrued income totalled £74.7 million
(2021: £52.1 million), which increased due to the
revenue growth in FY22 and due to the fact FY21 had
exceptionally high cash conversion.
Property, plant and equipment increased to £14.9
million at year end (2021: £10.3 million). Spending
during the year related mainly to premises
refurbishment costs and office equipment purchases.
The acquisitions of Cloudator, Une Consulting and
Blackline completed during the year, increased the
carrying value of goodwill to £18.8 million at 31 March
2022 (2021: £3.1 million) and intangibles to £6.0 million
(2021: £3.3 million). Further information relating to
these acquisitions is detailed in note 26.
Cash flow and cash conversion
Cash conversion, calculated by taking cash generated
by operating activities as a percentage of EBITDA,
continued to be strong at 83% (2021: 112%).
Dividend
We continue to adopt a progressive dividend policy,
maximising shareholder return alongside retaining
sufficient funds to invest in long-term growth.
We have consistently been profitable and have
generated a strong cash balance. The proposed
final dividend, if approved by shareholders, is
15.1p and would be payable on 28 October 2022 to
all shareholders on the Register of Members on
7 October 2022, and with an ex-dividend date of
6 October 2022. This will make the total dividend
for the year 22.2p (2021: 28.2p) which will represent
a distribution of 58% of the adjusted profit after
taxation for the year (2021: 76%). The total dividend
for FY21 of 28.2p includes a special dividend paid in
September 2020 of 6.7p per share. Excluding this
special dividend the total interim and final dividend
for FY21 of 21.5p represents a distribution of 58% of
the adjusted profit after taxation for this year.
Kainos Annual Report 202242 Kainos Annual Report 2022Kainos Annual Report 2022
WE AIM TO INCREASE PROFITABILITY WHILE MAINTAINING A
HEALTHY FINANCIAL POSITION AND INVESTING IN THE PEOPLE
AND OPPORTUNITIES WHICH UNDERPIN OUR GROWTH.
WE TRACK SEVERAL KPIS TO IDENTIFY TRENDS IN OUR OPERATING
PERFORMANCE AND TO ASSESS PROGRESS OF OUR KEY
OBJECTIVES, SUCH AS STAFF WELLBEING AND ENGAGEMENT.
FINANCIAL KPI TARGETS ARE USED AS A BASIS FOR
REMUNERATION AWARDS AND ARE IDENTIFIED IN THE
DIRECTORS’ REMUNERATION REPORT.
Bookings
2022
£349.8m
2021
£258.8m
Revenue
2022
£302.6m
2021
£234.7m
Financial KPIs
KEY PERFORMANCE INDICATORS (KPIs)
Adjusted pre-tax profit
2022
£58.8m
2021
£57.1m
42
Kainos Annual Report 2022 43Kainos Annual Report 2022Kainos Annual Report 2022
Overall customer satisfaction rating
17
2022
98%
2021
98%
Staff retention
2022
86%
2021
92%
Number of staff
2022
2,692
2021
2,024
Non-financial KPIs
17 Data collated from regular feedback surveys conducted with subset of Kainos customers over the course of the year.
Number of customers
2022
731
2021
546
STRATEGIC REPORT
43
Kainos Annual Report 2022
44
There are a number of current risks and uncertainties
which could have a material impact on our operations,
financial results, reputation or the value and liquidity of
our securities and could cause our actual results to
differ materially from historical and forecast results.
Risk management process
The Board uses our Risk Register as its principal tool for
monitoring and reporting risk.
The Risk Register describes each risk, the potential
impact of each risk, the likelihood of that risk occurring
and the mitigating controls. The preparation of the
register is co-ordinated at senior management level,
and input is obtained from all areas of the business in
the preparation process. An appropriate senior person
is assigned as the owner of each risk to ensure the
correct level of focus is applied to managing the risk
and its potential impact. The Audit Committee formally
reviews the Risk Register twice a year when we issue
our interim and full year results.
When significant changes to risks occur, they are
reported to the Board at the Board meeting, and the
Board receives an update from the Audit Committee
after each formal review of the Risk Register. The Board
considers our risk assessment processes to be robust
and comprehensive.
While there has been some movement over the year
against individual risks, there is no significant change
from previous years to our underlying risk profile.
RISK FACTORS AND UNCERTAINTIES
The areas of particular focus for us during the year
included:
Russia invasion of Ukraine: The war in Ukraine has
been identified as an emerging potential risk.
Cyber security: We continue to focus on cyber security,
including the potential heightened threat because of
the Russia-Ukraine war. The risk in this area has
increased over the course of the last year. We have
further strengthened our controls in this area and will
continue to do so in the year and years ahead.
Climate-related risk: We are committed to reducing our
carbon impact and achieving carbon net zero by 2025.
In assessing the direct climate risk to our business, for
instance from extreme weather events, we assess this
as being a low-to-moderate risk. A greater risk is one
of reputational damage. Further detail on this can be
found in the section ‘Our Environmental, Social and
Governance (ESG) Commitments’.
Coronavirus pandemic. We have moved to a
monitoring position on the Coronavirus pandemic.
It should also be noted that this risk has resulted in an
opportunity for Kainos through the acceleration of
digital transformation trends – further detailed in the
description of our Digital Services business earlier in
this report.
Detailed risk assessment
Informed by our Group Risk Register, the following
tables describe the known principal and emerging
risks – the risks are not listed in order of seriousness
or potential impact. The table is not intended to be
exhaustive and there may also be risks that we do
not currently consider to be serious or which we do
not currently know, as well as risks that are outside
our control.
Where reasonably possible, we have taken steps to
manage or mitigate the risks, or potential risks using
a combination of technical, operational and legal
controls, but we cannot entirely safeguard against all
of them. Where feasible, we also operate reasonable
levels of insurance, including cyber liability cover, to
mitigate the financial exposure arising from known or
potential risks.
Kainos Annual Report 2022
45
STRATEGIC REPORT
a) Major global disruption events
Link to strategy
Change in
risk level
Coronavirus pandemic
Description
In addition to economic disruption and uncertainty, the pandemic has affected all areas of
business for both Kainos and our customers, including changes to perceptions and practices of
remote working and the increased reliance on digital technology.
Potential impact
The pandemic has not had an adverse impact on Kainos in terms of the ability of our people
to continue to work and the delivery of solutions to our customers. However, there is continued
uncertainty as regards the longer-term economic impact across our markets.
More generally, the pandemic has presented opportunity to us, as it has accelerated existing
digital transformation trends and therefore increased spending. It has also established a
remote working model, which has cost, efficiency and environmental benefits.
Mitigation
We have moved to a monitoring position in terms of the impact of the pandemic. This includes
potential economic implications in our market and customer bases.
Should the Coronavirus threat re-emerge, or another similar pandemic arise we will be able to
use our experience from the last two years to guide us through that event.
b) Climate-related risks
Link to strategy
Change in
risk level
Sustainability
Description
With the increasing focus on sustainability and climate, there is reputational risk for us if we
decide not to act, or act too slowly.
Potential impact
A slow response to our climate responsibilities could give rise to fines for non-compliance,
increasing costs for carbon offsetting and the potential of reputational damage. In the case of
reputational damage, this may encourage colleagues to leave Kainos or deter applicants from
joining Kainos; it may also deter customers from appointing us to projects and investors owning
our shares.
Mitigation
We achieved carbon neutrality in 2021 and remain on track to be carbon net zero by 2025.
Further details are outlined in this report in the section Our Environmental, Social and Governance
(ESG) Commitments. We believe that achieving this ambitious target mitigates this risk.
Strategy components
People Customers Markets
Increasing Decreasing No change Emerging
Change in risk level
Kainos Annual Report 2022
46
RISK FACTORS AND UNCERTAINTIES CONTINUED
c) Operational risks
Link to strategy
Change in
risk level
Cyber security threat risk
Description
Cyber threats are constantly adapting and increasing in number, frequency and sophistication.
The cyber threat landscape needs to be continually monitored to ensure the effective defence of
confidentiality, integrity, and availability of internal systems and data, and those we provide for
our customers.
The threat of cyber incidents has increased due to the growth of remote working during the
pandemic and with our global expansion.
Geopolitical events such as the war in Ukraine may increase the potential for cyber attacks
against our systems, or those we develop for customers.
We rely on the confidentiality, integrity and availability of our IT systems, both internally and as
part of our service offerings to customers.
Potential impact
In providing services to our customers, and in our internal systems, we manage and process
sensitive data.
By failing to protect that data from cyber attacks, through intentional or unintentional
actions, we face legal, financial, and reputational risk which could reduce short-term profits,
expose us to regulatory fines and impact our market credibility. Such an incident could also
lead us to incur significant remediation costs.
A major cyber security event causing loss of customer data or service could expose us to fines
(for example under GDPR), contractual liability, reduce short-term profit and cash flow, cause
reputational damage, and damage customer relationships and credibility in the market.
Mitigation
We monitor the cyber threat landscape to allow a risk-based approach to strengthen our
defences against the likelihood of a successful cyber security attack. Our security controls are
reviewed and assessed for effectiveness and are measured against industry best practice.
Regular updates are shared through our cyber security governance structures with
representation from our Chief Information Officer (CIO), cyber security and information security
teams and from our legal and business teams. The output of these reviews allows us to improve
and adapt our internal controls, processes and working practices at both a Company
infrastructure and a customer project level.
Mitigations include technical, operational, and contractual measures to address risk coupled
with regular staff training on information security and data privacy and management. Our CIO
has reviewed operations and practices specifically to address the risk from this perspective.
As we expand into new regions, markets and sectors, local or market specific cyber security
frameworks and data privacy regulations are identified and mapped to facilitate compliance or
relevant certification.
We have cyber liability insurance in place to mitigate the impact of any cyber event, although it
may not cover the total costs of the incident.
We have cyber liability insurance in place to mitigate the impact of any cyber event, although it
may not cover the total costs of the incident.
Strategy components
People Customers Markets
Increasing Decreasing No change Emerging
Change in risk level
Kainos Annual Report 2022
47
STRATEGIC REPORT
c) Operational risks continued
Link to strategy
Change in
risk level
Non-compliance with data protection laws
Description
We need to comply with legal, regulatory and contractual information security and data privacy
requirements. It is essential that we adhere to regional regulations regarding data privacy and
data protection.
GDPR for Europe mandates a suite of data privacy controls aimed at mitigating the risk of
unauthorised disclosure of personal information. Other jurisdictions have similar measures that
must be adhered to and as we expand into new regions, it is imperative that we understand and
are in adherence with applicable controls.
Potential impact
Non-compliance could expose us to liability and fines (for example under GDPR), reduce profit
and cash flow in the short-term, cause reputational damage and damage customer
relationships and credibility in the market.
Mitigation
We review the impact that new and existing information security and data privacy regulations
and legislation will affect us and our customers. The output of these reviews influences our
internal controls and processes and the design of products, solutions and working practices.
We make staff aware of the potential impact of changing regulations and provide targeted
training within business divisions. Detail on activities to ensure the provision of GDPR controls
includes, but is not limited to:
• Staff education regarding data privacy.
• Data Privacy Impact Assessment (qualification screening at minimum) for all projects.
• Data mapping (Record of Processing).
• Customer consent through legitimate interest terms & conditions.
• Retention controls.
• Personal rights in place, such as right to be forgotten, right to amend, right to view/disclosure.
As we enter new regions, ensure:
• The relevant privacy laws are reviewed.
• Effective initial controls are put in place as needed at the project level.
• As additional projects commence, standardise the controls for that region and manage
centrally through the Data Protection Officer function.
Employee action including financial fraud or theft
Description
We may be subject to fraud, theft or other disruptive actions by employees including unauthorised
access or misuse of our bank accounts or other resources leading to the loss of funds.
Potential impact
Employee action could affect our operations, exposing us to liability and fines, and negatively
impact profit and cash flow in the short-term, cause reputational damage and damage
customer relationships and credibility in the market.
Mitigation
All staff are required to complete regular training programmes.
Regarding access to funds, we have system, review and approval controls in place restricting
access to accounts and these controls are regularly monitored.
We have systems and processes in place to protect against data loss. Incidents are managed in
accordance with our incident management processes.
Kainos Annual Report 2022
48
RISK FACTORS AND UNCERTAINTIES CONTINUED
c) Operational risks continued
Link to strategy
Change in
risk level
Data loss
Description
We need to guard against the loss of sensitive customer or employee data.
Potential impact
Loss of customer or our data whether through a cyber security incident, employee action or
otherwise could expose us to liability and fines (for example under GDPR), and/or contractual
liability, and reduce profit and cash flow in the short-term, cause reputational damage and
damage customer relationships and credibility in the market.
Mitigation
We have systems and processes to protect against data loss, including data loss prevention
technology.
Measures are in place that are designed to ensure logical segregation to protect applicable data.
Solution or software product errors or lack of service availability
Description
Software bugs or lack of availability of hosted or supported services could affect our
customer service.
Potential impact
This could expose us to liability and negatively impact profit and cash flow in the short-term,
cause reputational damage and harm our customer relationships and credibility in the market.
Mitigation
We design our systems, customer solutions and infrastructure to provide both resilience and
service availability.
Our software development lifecycle includes following coding practices, quality assurance and
testing and is audited as part of our ISO9001 accreditation.
Critical incident and problem management processes are in place and are audited as part of
our ISO9001 accreditation.
Professional indemnity insurance is in place.
Service deployment delays or non-compliance with requirements
Description
Inability to build and deploy services that fulfil the contractual customer requirements within the
agreed contractual timeframe.
Potential impact
Project delay or failure could expose us to liability, reduce profit and cash flow in the short-term,
cause reputational damage and damage customer relationships and credibility in the market.
Mitigation
We have a track record of delivering successful projects and we apply the staff and expertise to
meet contractual requirements in a timely manner.
Strategy components
People Customers Markets
Increasing Decreasing No change Emerging
Change in risk level
Kainos Annual Report 2022
49
STRATEGIC REPORT
c) Operational risks continued
Link to strategy
Change in
risk level
Loss of key employees
Description
There is the risk of losing key employees who carry out critical activities across the business.
Potential impact
The loss of key employees, along with their knowledge, expertise and customer relationships
could negatively impact our business efficiency. This could reduce revenue, profit and cash
flow in the short-term, and damage customer relationships and credibility in the market.
The current global shortage of digital skills means the likelihood and impact of this risk has
increased.
Mitigation
Staff engagement is a key focus for us. Initiatives and activities mitigating this risk include:
• Ensuring we have compelling financial rewards and benefits for staff.
• Having clear career progression opportunities, supported by regular 1-2-1s, personal
development plans and career coaching.
• Having key staff succession planning in place for key roles.
• Focusing on effective internal communications.
• Using feedback from staff through surveys to help improve our performance as an employer.
Inability to recruit employees
Description
We may be unable to recruit employees with suitable qualifications at all required levels in core
locations, or in other locations where our employer brand is less well known.
Potential impact
This could impact our ability to provide contracted solutions and services exposing us to liability,
negatively impacting profit and cash flow in the short-term and causing damage to our
reputation, customer relationships and staff morale.
The current global shortage of digital skills means the likelihood and impact of this this risk has
increased.
Mitigation
We have worked to become an employer of choice in some of our key locations, notably Belfast,
Birmingham and Gdańsk, and have implemented a team, processes and infrastructure dedicated
to recruiting the most appropriate candidates in a streamlined hiring process.
We have invested in our recruitment team, reviewed our reward ranges and taken steps to define
and promote our employer brand in key growth locations.
Kainos Annual Report 2022
50
d) Strategic risk
Link to strategy
Change in
risk level
Intellectual property infringement and/or litigation
Description
Our intellectual property (IP) is centred around the solutions we develop or deploy for customers.
We have to manage the risk of infringing a third party’s intellectual property rights when building
these solutions.
Potential impact
If we infringe a third party’s intellectual property rights it could expose us to liability,
negatively impact profit and cash flow in the short-term and cause reputational damage.
If a third party infringes our intellectual property rights, it can expose us to competitive or
security risk.
Mitigation
We enter into non-disclosure agreements with employees, independent contractors and third
parties in the ordinary course of our business to provide a degree of protection. Staff are made
aware of client confidentiality requirements.
Where practical, focused patent searches are undertaken to identify areas in which new
products or services under development may conflict with third-party IP.
We monitor the use of third-party software in our product offerings. The choice of third-party
components is subject to technical review and assessment at design stage.
Our employment and consultancy contracts have clauses to protect intellectual property.
Partner relationships
Description
We need to maintain our partner relationships, or we risk losing access to essential intellectual
property, or a deterioration in strategic partner relationships and a decline in partner
influenced sales.
Potential impact
Failure of partner relationships could negatively impact revenue, profit and cash flow in the
short-term and cause reputational damage and impact market confidence and customer
relationships.
Mitigation
We have contracts with our main partners including Workday, Inc., Microsoft and AWS to detail
the relationship. Our partner arrangements may include access to proprietary materials such as
training, know-how or branding which we require in order to deliver or enhance our services.
Kainos operates a Strategic Alliances Team to establish and manage relationships with all key
partners.
Our partner managers have regular contact with key partners.
Investment decisions
Description
Our investment decisions may not be satisfactory.
Potential impact
Failure to manage investment decisions could negatively impact profit and cash flow in the
short-term and cause reputational damage.
Mitigation
We use our regular strategic review process (3-4 meetings per year) to review all investment
decisions that are linked to normal business operations – for instance, increasing the sales
team, entering a new market segment.
For investments that are outside of this process, or require significantly more investment levels,
we have a dedicated new business investment process, which is detailed in the section, New
business ideas, innovation and research.
Strategy components
People Customers Markets
Increasing Decreasing No change Emerging
Change in risk level
RISK FACTORS AND UNCERTAINTIES CONTINUED
Kainos Annual Report 2022
51
STRATEGIC REPORT
e) Macro-economic risks
Link to strategy
Change in
risk level
Events occurring that are outside of our control
Description
We may be affected by:
• The instability of the financial system, market disruptions or suspensions.
• A material downturn in the financial markets or an economic recession.
• The insolvency, closure, consolidation or rationalisation of parts of our customer base.
Potential impact
If these events occur, they could harm our revenue, profit, growth and cash flow over a sustained
period, result in higher costs and disruption to our business, damage our reputation or cause
financial loss if customers do not renew their contracts.
Mitigation
We strive to build a balanced business, where our revenues are generated from many different
sources; they are:
• from different service lines: Digital Services (66%) and Workday Practice (34%);
• derived from separate sectors: commercial (41%), public sector (37%) and healthcare (22%);
• spread over different regions: UK & Ireland (71%), North America (19%), Central Europe (9%)
and the rest of the world (1%); and
• from different business models: services (83%), SaaS and related (15%), third party (2%).
In addition to this resilience in our revenue streams, we also have a considerable contracted
backlog (typically 85% of prior year revenues) that provides short-term protection.
Russia invasion of Ukraine
Description
The Russian invasion of Ukraine has caused political and economic disruption across the world.
Potential impact
Kainos has no direct business relationships or operations in Russia or Ukraine.
We consider the risk of direct operational difficulties to be low, based on our current
knowledge and the status of the conflict at the time of writing. We understand this has the
potential to change rapidly, particularly should the location of the conflict expand into
territories where Kainos has people or customers.
Further, it seems possible that these events are likely to have significant geopolitical and
macro-economic impacts in regions where we operate including the UK, the EU, and North
America. The extent of these is currently unknown.
Mitigation
We are monitoring the potential risks to our business arising from the conflict in Ukraine
including assessing sanction regulations. The situation has the potential to change rapidly, and
the implications are currently unpredictable.
Our cyber security team is actively monitoring, communicating and adjusting practices and
processes to address that aspect of this risk.
Kainos Annual Report 2022
52
f) Financial risks
Link to strategy
Change in
risk level
EU Exit
Description
We may face financial, or trading risks associated with the UK leaving the European Union.
Potential impact
Market uncertainty associated with the impact of EU Exit has the potential to limit or harm our
trading activities. There is also a potential increase to overheads and an impact on staff mobility.
Mitigation
We continue to monitor the impact of EU Exit and we do not envisage substantial short-term risk
to operations, given that:
• our supply chain requirements are not reliant on the EU;
• we have not identified any significant issues with staff mobility, although the pandemic did
significantly reduce our travel levels; and
• we are not overly reliant on UK-EU trade, with less than 10% of our revenues being sourced from
EU countries.
However, given the uncertainty surrounding the impact of EU Exit in the medium to long-term, we
are maintaining a watching brief to monitor changes and facilitate the early identification and
implementation of any required mitigations.
Exchange rate fluctuations
Description
There is a risk of material detrimental movement in foreign exchange rates.
Potential impact
This could harm our revenue, profit, growth and cash flow over a sustained period.
Mitigation
We have a documented treasury policy, to mitigate currency risk, which is reviewed and
approved annually.
g) Legal and compliance risks
Link to strategy
Change in
risk level
Non-compliance with laws and regulations
Description
We have to comply with laws and regulations applicable to us and design our products and
services to meet laws and regulations applicable to its customers.
Potential impact
Non-compliance could expose us to liability and/or fines, negatively impact profit and cash flow in
the short-term and cause reputational damage.
Mitigation
Our finance and legal teams review draft and current regulatory and legislative requirements,
including, for example, the Network and Information Systems Regulations and GDPR and provide
an impact assessment for the products and services that we deliver to customers.
Kainos’ internal processes and systems are monitored with a view to ensuring compliance with
applicable laws and regulations.
We have processes in place designed to ensure awareness of regulatory requirements and that
the relevant information is appropriately disseminated. There are well established training and
awareness activities.
In relation to bribery and corruption, we have established policies in place, with associated
training. More details on these policies can be found in the Business Ethics section of this report.
Strategy components
People Customers Markets
Increasing Decreasing No change Emerging
Change in risk level
RISK FACTORS AND UNCERTAINTIES CONTINUED
Kainos Annual Report 2022
53
STRATEGIC REPORT
Non-financial information statement
The Group has complied with the requirements of s414CB of the Companies Act 2006 by including certain non-financial
information within the Strategic Report. The information provided above is to help our stakeholders understand our
position on key non-financial matters, specifically employees, social matters, respect of human rights, environmental
matters, and anti-corruption and anti-bribery matters.
The Strategic Report was approved by the Board and signed on its behalf by:
Dr Brendan Mooney
Chief Executive Officer
20 May 2022
Kainos Annual Report 2022
54
DIRECTORS’ REPORT AND CORPORATE GOVERNANCE STATEMENT
The Directors present their report and the audited financial statements for Kainos Group plc (company number
09579188) for the year ended 31 March 2022. These will be laid before the shareholders at the Annual General
Meeting (AGM) to be held on 28 September 2022. The Strategic Report is incorporated by reference into this
Directors’ Report.
All sections of the Annual Report contain certain forward-looking statements which by their nature involve risk and
uncertainty. The forward-looking statements are based on the knowledge and information available at the date of
preparation and on what are believed to be reasonable judgements. A wide range of factors may cause the
actual results to differ materially from those contained within, or implied by, these forward-looking statements.
The forward-looking statements should not be construed as a profit forecast.
This section of the Annual Report outlines how the Board maintains high standards of corporate governance as
well as providing a summary of how each of the Board’s committees (the Remuneration Committee, the
Nominations Committee and the Audit Committee) function.
Statement of application of and compliance with the UK Corporate Governance Code 2018
The Board believes in strong governance and recognises the importance of complying with the various aspects
of the UK governance framework. This section explains the main aspects of Kainos Group plc’s (the ‘Company’)
corporate governance structure and gives a greater understanding of how the Company has applied the
principles of the 2018 UK Corporate Governance Code (‘the Code’) available at www.frc.org.uk.
For the year ended 31 March 2022, the Board considers that it has complied fully with all provisions of the Code,
except for Code Provision 36.
Code Provision 36: share award vesting and holding periods
Under the Code, there is a recommended five-year holding period for shares awarded to Executive Directors.
Historically, our schemes have had a three-year share vesting and holding period, which was set in consideration
of the long tenure of the Executive Directors and their demonstrated commitment to Kainos.
The Board has reviewed this and our new Remuneration Policy which is subject to shareholder approval at the
2022 AGM will have a three-year vesting period for Executive Directors and an additional two-year holding period
prior to exercise.
Board leadership and Company purpose
The Board recognises that its role is to deliver the long-term success of Kainos and its various stakeholders.
Our purpose, value and strategy are set out in the Strategic Report.
Stakeholder engagement
The Board recognises that long-term success is dependent on how Kainos interacts with its stakeholders.
Full details of our stakeholder engagement are set out in our Section 172 Statement contained in the section
‘Governance: our stakeholders’ within the Strategic Report.
The Board continues to welcome interaction with all stakeholders and is always available to all employees,
customers, shareholders and communities, as an alternative to meetings with the Executive Directors.
Board and workforce engagement
The Board believes in the importance of dialogue between the Board and the broader workforce and has created
a number of ways for this to happen, in addition to those that happen regularly between the Executive Directors
and the wider organisation.
More details on employee engagement can be found in the section, ‘Governance: our stakeholders’ in the
Strategic Report.
Kainos Annual Report 2022
55
Direct engagement
Established in the Board schedule are regular presentations from colleagues who have been leading key projects,
involved in winning a significant new contract or responsible for an important area of our business. During the
year, there were 11 presentations to the Board in this category.
Also, within the schedule, the Board will meet with senior leaders in Kainos, typically in a social setting, for instance
over dinner. Our response to the pandemic paused these events, but they will resume during 2022.
Review of internal and external surveys
In addition to the detailed interaction with a small number of people, the Board also reviews any company-wide
survey results. During the year this included detailed results from the independently provided ‘Best Companies to
Work For’ survey results, and the detailed results from the internal survey about employee views on hybrid working.
Our culture and development group
Within Kainos, the Culture and Development Group, consisting of representatives from different business areas
and Kainos locations, are responsible for overseeing all matters relating to the workforce in Kainos. During the year
the group discussed changes to policies and people processes, the introduction of hybrid working, wellbeing aids
and seminars, increased communication and the creation of a strategy to achieve gender parity.
In 2020, the Board expanded the remit of the Culture and Development Group to act as a formal workforce
advisory panel, to further enrich the engagement between staff and the Board. A staff member from the group
regularly presents to the Nominations Committee, and during the year presented on the various survey results
and provided an update on several improvement initiatives underway.
Our global diversity and inclusion group
This group, composed of colleagues from across Kainos, provide the Company guidance on all matters relating to
diversity and inclusion. This group is also supported by our four employee network groups, representing LGBTQ+,
women, ethnic diversity and neurodiverse colleagues.
Our global diversity group reports quarterly to the leadership teams and every six months to the Nominations
Committee of the Board. In the year, the presentations covered the improvement in our data recording, a key
enabler of improved diversity, and our plan to achieve gender parity.
Further information regarding our policy, objectives and progress made during the year is contained within the
‘Social: our people and our communities’ section of the Strategic Report.
Board composition, balance and diversity
Crucial to strong governance is a stable Board that contains the right balance of skills and experience; therefore,
Board appointments are taken very seriously. The Board’s policy is to appoint and retain Non-Executive Directors
who bring relevant expertise to Kainos.
Our Board comprises an independent Chairman, three Independent Non-Executive Directors (NEDs) and two
Executive Directors. The biographies of all Directors are contained in the following section.
On the Kainos Board, two of the four (50%) Non-Executive Directors are women (2021: 40%). Including the
Executive Directors, 33% of our Board are women (2021: 25%). All Board members identify ‘White/European’ as
their ethnic group. While noting the improvement in gender composition over the course of the year, further
improvement is anticipated during the next rotation of Non-Executive Directors.
Board independence
The Board considers its overall size and composition to be appropriate, considering the combined experience and
skills of the Directors. In making this assessment, the Board considered the independence criteria set out in
Provision 10 of the Code.
Prior to joining the Kainos Board, due diligence was carried out on each of the Non-Executive Director’s
independence on appointment and when the incumbent Non-Executive Directors were invited to continue to serve
for an additional term. The Board can confirm that Andy Malpass, Katie Davis, Rosaleen Blair and Tom Burnet are
independent in character and judgement.
CORPORATE GOVERNANCE
Kainos Annual Report 2022
56
Directors’ interests in shares and share incentives in Kainos are detailed in the Directors’ Remuneration Report.
Board changes during the year
Executive Director, Paul Gannon and Non-Executive Director, Chris Cowan, both completed their term as Directors
on 23 September 2021.
Rosaleen Blair was appointed as a member of the Audit Committee on 23 September 2021.
There were no new appointments during the year.
Board appointment process
Board appointments are overseen by the Nominations Committee. Prior to appointment, prospective Non-
Executive Directors are required to confirm that they can allocate sufficient time to carry out their duties and
responsibilities effectively.
When joining the Board, Non-Executive Directors undergo a thorough, formal and tailored induction process.
This is followed by regular reviews by the Chairman of training and development requirements. As appropriate,
and tailored to their needs, Directors will receive ongoing updates to improve their skills and knowledge.
Each Non-Executive Director is appointed for an initial 12-month term continuing for an envisaged three-year
period, and subject to a three-month notice period. In addition, each Non-Executive Director is subject to annual
re-election by shareholders at the AGM. At the end of the three-year period, the Board may invite a Non-Executive
Director to continue for a further period, provided that the Board is satisfied with the Non-Executive Director’s
performance, independence and ongoing time commitment.
The Non-Executive Directors’ letters of appointment confirm the amount of time that each Non-Executive Director
is expected to commit to each year, which is a minimum of 20 days. The service agreements and letters of
appointment for all Directors can be requested from the Company Secretary and will be available to shareholders
to view at the 2022 Annual General Meeting.
Board succession
The succession planning process for Board members is actively considered by the Nominations Committee, as the
skills and experience required by Kainos changes, and in recognition of further diversity within the Board. The
Nominations Committee also recognises the need to plan for rotation of Non-Executive Directors to ensure that
the Board retains the experience of those who are familiar with Kainos whilst maintaining the necessary
independence and adding new skills and experience to the Board.
All the executive team roles and roles that are deemed critical within the Company have a formal defined
succession plan. To ensure business continuity, these plans contain an immediate plan, in the event of an
emergency, as well as longer-term potential succession options for the role. Those identified as potential
successors have individual development plans in place to address any identified developmental gaps and to
ensure readiness for role. Progress against the development plans is reported on at each Nominations
Committee meeting.
Director election and re-election
At the 2022 AGM, all current Directors will retire and stand for re-election.
Other statutory disclosures
In accordance with Section 414C (11) of the Companies Act 2006, to the extent they are not addressed in the
Directors’ Report, the disclosures relating to the following matters are included in the Strategic Report:
environmental matters (including greenhouse gas emissions and the impact of the Group’s business on the
environment); the Group’s employees (including equal opportunities, gender diversity and employee engagement);
and, social, community and human rights issues (including corporate social responsibility).
DIRECTORS’ REPORT AND CORPORATE GOVERNANCE STATEMENT
CONTINUED
Kainos Annual Report 2022
57
The financial results and position are shown in the consolidated financial statements. A fuller explanation of the
results, including the recommended dividend and financial position, is provided in the Operational and Financial
Review sections of the Strategic Report and the notes to the financial statements.
No political donations were made during the year ended 31 March 2022 (£nil for year ended 31 March 2021).
There are no off-balance sheet arrangements. Details of the trusts relating to Kainos’ share incentive plans are set
out in note 22 to the consolidated financial statements. The shares held by the trust rank pari passu with all the
other shares in issue and have no special rights.
For the purposes of LR9.8.4C R, the information required to be disclosed by LR9.8.4 R can be found in the following
locations:
Section Topic Location
1 Interest capitalised Not applicable
2 Publication of unaudited financial information Not applicable
4 Details of long-term incentive schemes Directors’ Remuneration Report
5 Waiver of emoluments by a Director Not applicable
6 Waiver of future emoluments by a Director Not applicable
7 Non pre-emptive issues of equity for cash Not applicable
8 Section (7) in relation to major subsidiary undertakings Not applicable
9 Parent participation in a placing by a listed subsidiary Not applicable
10 Contracts of significance Directors’ Report
11 Provision of services by a controlling shareholder Not applicable
12 Shareholder waivers of dividends Not applicable
13 Shareholder waivers of future dividends Not applicable
14 Agreements with controlling shareholders Not applicable
Share capital and articles of association
Details of the called-up and fully paid share capital are set out in note 21 to the consolidated financial statements.
The rights and obligations attaching to the shares and the powers of the Directors are set out in the Articles of
Association, copies of which can be obtained from Companies House. There are no restrictions on the voting rights
attached to the shares and no person holds securities carrying special rights regarding control.
Authority to purchase own shares
Kainos holds a general authority to purchase up to 12,322,093 ordinary shares in the market. This represented
approximately 10% of Kainos’ issued share capital as at 18 August 2021, as voted on and approved by shareholders
at the 2021 AGM. No purchase of shares has been made pursuant to this authority. There is no present intention to
use such authority, but the Board considers it desirable that the possibility of making such purchases under
appropriate circumstances remains available. A similar authority will be requested at the forthcoming AGM, again
limited to a maximum of 10% of the issued share capital. The Board intends only to exercise this authority if it
believes that it will lead to an increase in earnings per share for the remaining shareholders.
The appointment and replacement of Directors is governed by the Articles of Association and the Nominations
Committee’s Terms of Reference. The Articles of Association may be amended by a special resolution.
Disclosure of information to auditor
The Directors who held office at the date of approval of the Directors’ Report confirm that, so far as they are each
aware, there is no relevant audit information of which the auditor is unaware, and each Director has taken the
steps that he or she ought to have taken as a director to ascertain any relevant audit information and to establish
that the auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies
Act 2006.
CORPORATE GOVERNANCE
Kainos Annual Report 2022
58
Auditor re-appointment
During the year, Deloitte (NI) Limited resigned as auditors and KPMG were appointed auditors on 23 September
2021. In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG as
auditor of the Company is to be proposed at the forthcoming Annual General Meeting.
Significant agreements – change of control
Members of the Group are subject to certain customer contracts which require them to notify the relevant
counterparty of a change of control of the Group which, in some instances, may allow the relevant counterparty
to terminate their contracts with the Group. The Directors are not aware and do not anticipate any reason or
circumstances where any such customers would wish to trigger their termination rights under such change of
control provisions. The only significant agreements with change of control provisions are the share incentive plans.
Under the CSOP, SAYE and Polish share plans, on a change of control, options and awards that are not lapsed
would generally vest in full. The PSP awards would also vest subject to the satisfaction of any performance
conditions at the time, but these would be time pro-rated. Other than as set out in this statement, Kainos is not
party to any other significant agreements that take effect, alter, or terminate upon a change of control following a
takeover or upon a takeover bid.
Principal shareholders
The following have disclosed that they (including persons closely connected) have an interest in 3% or more of the
issued ordinary share capital. At 30 April 2022, the last holding notified to the Company is shown below.
Investor
Ordinary
0.5p shares
% of
issued share
capital
Eileen and Dr Brendan Mooney 14,205,987 11.4%
QUBIS Ltd 12,561,217 10.1%
Standard Life Aberdeen plc 11,440,826 9.2%
Liontrust Asset Management plc 7,270,730 5.9%
Paul Gannon 7,164,044 5.8%
Richard McCann 4,630,352 3.7%
Baillie Gifford & Co (Edinburgh) 4,446,116 3.6%
Dr Brian Gannon 4,285,675 3.5%
Capital Research Global Investors (Los Angeles) 3,703,704 3.0%
Going concern and long-term viability
Our business activities and position in its market are described in the ‘Operational Review’, ‘Our Markets’ and ‘Risk
factors and uncertainties’ sections of the Strategic Report. The financial position, cash flows and liquidity position
are described in the ‘Financial Review’ and the notes to the consolidated financial statements. In addition, the
notes to the consolidated financial statements include our objectives, policies and processes for managing our
capital, our financial risk management objectives and our exposures to credit and liquidity risk.
Having reviewed the future plans and projections for our business and our current financial position, the Board
believes that we are well placed to manage our business risks successfully. We have adequate financial resources,
no borrowings, a good level of recurring revenue, and a broad spread of customers. As a consequence of these
factors and having reviewed the forecasts for the coming year, the Board has a reasonable expectation that we
have adequate resources to continue in operational existence for the foreseeable future, a period of not less than
12 months from the date of this report. For this reason, we continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
DIRECTORS’ REPORT AND CORPORATE GOVERNANCE STATEMENT
CONTINUED
Kainos Annual Report 2022
59
In addition to the going concern consideration, the Directors have assessed our viability over a longer period than
12 months. The assessment was conducted over a three-year period, ending March 2025. A period of three years is
considered an adequate period to assess the rate of change in each of the key divisions.
In performing the assessment, our long-term strategy and focus, the growing demand for our products and
services, the increasing level of recurring revenue and low customer attrition, the track record of strong cash
generation and a healthy cash balance with no debt from financial institutions were all taken into consideration.
Consideration has also been given to the risks of regional and political changes in our main markets and the
estimated continued impact of Covid-19 on both the Digital Services and Workday Practice business areas.
The Board believes that our global structure means that we are less susceptible to the effects of regional changes,
as the vast majority of our costs are incurred in Sterling with most revenue also being earned in Sterling and
revenues earned in foreign currency including Euro and US Dollar have most of their costs in foreign currency.
We remain optimistic that we are well positioned to help public and private sector organisations in their digital
transformation initiatives. We have a proportionally low fixed cost base which enables swift responses to adverse
economic conditions when required, further supported by our strong cash position, low capital commitments and
no borrowings.
The review included sensitivity analysis on the future performance and solvency over three years and for the
principal and emerging risks facing the business in severe but reasonable scenarios. Based on the results of this
assessment, the Directors have a reasonable expectation that should these risks, either all or in part manifest
themselves, the resulting adverse outcomes can be managed and mitigated such that, we will be able to continue
in operation and meet our liabilities as they fall due over the three-year period of their assessment. In doing so, we
recognise that such future assessments are subject to a level of uncertainty that increases with time and,
therefore, future outcomes cannot be guaranteed or predicted with certainty.
Based on their assessments of prospects and viability above, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the
three-year period ending March 2025.
Directors’ responsibilities statement in respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year.
Under that law they are required to prepare the Group financial statements in accordance with UK-adopted
international accounting standards and applicable law and have elected to prepare the Company financial
statements in accordance with UK accounting standards and applicable law, including FRS101 Reduced
Disclosure Framework.
Under company law the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and Company and of the Group’s profit or loss for
that period.
In preparing the Group and Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant, reliable and prudent;
• for the Group financial statements, state whether they have been prepared in accordance with UK-adopted
international accounting standards;
• for the Company financial statements, state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the Company financial statements;
• assess the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or
to cease operations or have no realistic alternative but to do so.
CORPORATE GOVERNANCE
Kainos Annual Report 2022
60
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that its financial statements comply with the Companies Act 2006.
They are responsible for such internal controls as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that
law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements will form part of
the annual financial report prepared using the single electronic reporting format under the TD ESEF Regulation.
The auditor’s report on these financial statements provides no assurance over the ESEF format.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
• the Strategic Report includes a fair review of the development and performance of the business and the
position of the issuer, and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy.
This Directors’ Report was approved by the Board of Directors on 20 May 2022 and is signed on its behalf by:
Tom Burnet
Chairman
20 May 2022
DIRECTORS’ REPORT AND CORPORATE GOVERNANCE STATEMENT
CONTINUED
Kainos Annual Report 2022
61
Directors’ biographies
Tom Burnet (aged 54) Chairman
Tom graduated with an MBA from the University of Edinburgh. In addition to his responsibilities at Kainos, Tom is,
Non-Executive Chairman of The Baillie Gifford US Growth Trust plc and Non-Executive Chairman at Aker Systems.
He is also a Non-Executive Director for the BMO Private Equity Trust. He started his career as the UK’s youngest
Army Officer serving in the Black Watch (R.H.R.) and is a member of the Queen’s Bodyguard in Scotland.
Tom was appointed Company Chair on 26 September 2019. Tom acts as an Independent Non-Executive
Chairman and Chair of the Nominations Committee. He is also a member of the Remuneration Committee.
Dr Brendan Mooney (aged 55) Chief Executive Officer (CEO)
Brendan joined Kainos in 1989 as a trainee software engineer before moving into several technical and
commercial roles in Dublin, London and the US. He was appointed CEO of Kainos in 2001. In addition to his role at
Kainos, Brendan has served as a Non-Executive Director on several private technology companies, at the
Probation Service for Northern Ireland and was a serving Lay Magistrate. Brendan has received both an Honorary
Doctor of Science (DSc) and an Honorary Doctor of Economics (DSc Econ) in recognition of the contribution that
Kainos has made to the economy. Brendan was appointed to the Board on the Company’s admission to the
market, on 10 July 2015. Brendan acts as an Executive Director and is the CEO.
Richard McCann (aged 57) Chief Financial Officer (CFO)
Richard is a Fellow of the Institute of Chartered Accountants in Ireland and trained with Coopers & Lybrand, before
moving into industry with Galen Holdings plc. Richard joined Galen as financial controller of a start-up subsidiary
in the US and subsequently became Senior Vice President in charge of Corporate Finance with responsibility for
the organisation’s acquisitions and investor relations. He served as the Managing Director of two subsidiaries in
the Almac Group, including a US subsidiary that provides software development services for pharmaceutical
companies. Richard joined Kainos in 2011, with over 20 years’ experience in accounting. Richard was appointed to
the Board on the Company’s admission to the market on 10 July 2015. Richard acts as an Executive Director and
is the Chief Financial Officer and Chief Operating Officer.
Andy Malpass (aged 60) Independent Non-Executive Director
Andy graduated with a BA (Hons) in Accounting and Finance from Lancaster University and is a Fellow of the
Chartered Institute of Management Accountants. He has over 30 years’ experience in the software industry
covering both private and public companies. Most recently, Andy served as Group Finance Director of Fidessa
Group plc (formerly Royalblue Group plc) which he joined in 1995, and where he has also been Company Secretary.
In June 2018, Andy was appointed as a Non-Executive Director and chair of the Audit Committee of accesso
Technology Group plc. Andy was appointed to the Board on the Company’s admission to the market on 10 July
2015. Andy acts as an Independent Non-Executive Director and is Chair of the Audit Committee.
Katie Davis (aged 57) Independent Non-Executive Director
Katie holds a BS in Electrical Engineering from the University of Illinois at Champaign/Urbana. Katie is an
experienced leader with a strong track record for delivery in both the public and private sectors. She joined
Accenture’s Chicago office in 1987, moving to London in 1988 and becoming a partner in Accenture’s Customer
Relationship Management practice in 2000.
In 2005, Katie joined the Cabinet Office with responsibility for increasing the capacity and capability of UK central
government and the wider public sector, to deliver large-scale IT-enabled business change. Katie subsequently
held several senior positions in the Cabinet Office, Home Office, Department of Health and NHS. In 2012, Katie was
named one of the 25 most influential women in IT by Computer Weekly.
Katie was appointed to the Board on 28 November 2019. Katie acts as an Independent Non-Executive Director
and is a member of the Audit Committee, the Nominations Committee and the Remuneration Committee. Katie
assumed the role of chair of the Remuneration Committee, with effect from 1 September 2020.
CORPORATE GOVERNANCE
Kainos Annual Report 2022
62
Rosaleen Blair (aged 56) Independent Non-Executive Director
Rosaleen is the Founder and Chair of Alexander Mann Solutions (AMS), a pioneer in the global workforce solutions
industry. She served as CEO of AMS for 23 years, leading the business from a start-up to a global business working
in partnership with clients such as Deloitte, HSBC, Novo Nordisk, Rolls Royce and Santander. AMS has 8,000
employees operating in 90 countries.
A serial entrepreneur and adviser to numerous companies, Rosaleen is also the Chair of Everywoman, an
organisation dedicated to the advancement of women in business. Rosaleen is involved in several not-for-profit
initiatives, notably serving as Chair of the London Irish Centre and as an Enterprise Fellow of the Prince’s Trust. She
is the returning Chair of EY’s World Entrepreneur of the Year Awards in 2022.
Rosaleen is recognised as an industry leader and entrepreneur, winning numerous awards including Veuve
Clicquot Businesswoman of the Year (2007) and EY London Entrepreneur of the Year (2006). She was awarded a
CBE for services to business and recruitment in the New Year’s Honours in 2017.
Rosaleen was appointed to the Board on 01 January 2021. Rosaleen acts as an Independent Non-Executive
Director and is a member of the Nominations Committee, the Remuneration Committee and with effect from
23 September 2021, the Audit Committee.
Board and Committee membership
On 31 March 2021 the Board comprised a Non-Executive Chairman, three Executive Directors and five NEDs
whose Board and Committee responsibilities are set out in the table below:
Board Audit Remuneration Nominations
Tom Burnet Chair Chair – Member Chair
Dr Brendan Mooney CEO Member – – –
Richard McCann CFO Member – – –
Andy Malpass Senior Independent
Director &
Independent NED
Member Chair – –
Katie Davis Independent NED Member Member Chair Member
Rosaleen Blair Independent NED Member Member Member Member
The Board meets formally on a regular basis to discharge its key areas of responsibility: to monitor operating issues,
risk and trading performance, to review forecasts, strategy and policy, to consider key projects, major investments,
critical operating issues and to oversee appropriate shareholder reporting. If required, additional impromptu Board
meetings occur to consider specific issues. During the year, our Board met on 12 scheduled occasions.
The Board is responsible for corporate governance and delegates operational control to the Executive Directors.
The Chairman met with the Non-Executive Directors, without the Executive Directors present, to discuss the
performance of the Executive Directors.
The Board also approves all circulars, listing particulars, resolutions and correspondence to the shareholders
including the Full Year Results Announcement, Annual Report and our Interim Results Announcement.
The principal committees of the Board are the Audit Committee, the Nominations Committee and the
Remuneration Committee. The composition of the committees and their terms of reference outlining the main areas
of the committees and the division of responsibilities can be found in the Investor Relations area of our website.
DIRECTORS’ REPORT AND CORPORATE GOVERNANCE STATEMENT
CONTINUED
Kainos Annual Report 2022
63
Board and Committee meeting attendance
The attendance of individual Directors at Board meetings and Committee meetings is summarised:
Board
meetings
attended
Audit
Committee
meetings attended
Remuneration
Committee
meetings attended
Nominations
Committee
meetings attended
Tom Burnet 12/12 – 6/6 4/4
Dr Brendan Mooney 12/12 – – –
Richard McCann 12/12 – – –
Andy Malpass 12/12 3/3 – –
Katie Davis 12/12 3/3 6/6 4/4
Rosaleen Blair 11/12 2/3 6/6 4/4
Rosaleen Blair was appointed to the Audit Committee on 23 September 2021 and has attended all scheduled
Audit Committee meetings since her appointment.
There is a written formal ‘Schedule of Matters Reserved for the Board’, that covers key areas of Kainos’ affairs.
The schedule includes approval of the Annual Report and any other financial statements, the adoption of budgets
or business plans, decisions on acquisitions and disposals, material financial commitments and the release of
inside information. Certain matters require Board approval and other matters may be approved by senior
management, but notification to the Board is required.
A procedure exists to allow the Directors to seek independent legal advice in respect of their duties at Kainos’
expense where the circumstances are appropriate. All Directors have access to the Company Secretary for her
advice and services.
At the date of this Directors’ Report, indemnities are in force under which Kainos has agreed to indemnify the
Directors and the Company Secretary to the extent permitted by law and by Kainos Group plc’s Articles of
Association in respect of losses arising in their capacity as Director or officer of any member of the Kainos Group.
In addition, Kainos has purchased and maintained throughout the year Directors’ and Officers’ liability insurance
in respect of itself and its Directors and officers.
Board evaluation
During the year there was an internal evaluation of the performance of the Board, with all Directors and the
Company Secretary completing an in-depth questionnaire covering the following areas:
• Board effectiveness. • Focus of meetings.
• Board composition. • Strategic oversight.
• Stakeholder oversight. • Risk management and internal control.
• Board dynamics. • Succession planning and people management.
• Board support. • Priorities for change.
• Board Committee reporting.
The survey scores were predominantly in the “excellent” or “good” category.
The results of the survey were discussed at the January 2022 Nominations Committee meeting and presented to
the Board, where the Directors were given the opportunity to discuss the results and identify priorities for 2022
which included improved Board diversity.
On review of the findings of the survey, the Board remains confident that it is operating effectively, is currently the
right size, with appropriate skills represented. No specific actions were identified. The Board proactively reviews its
composition and will recruit to address any perceived gaps in experience and skills represented. Similarly, the
performance of each of the Directors continues to be effective and they continue to demonstrate commitment to
their roles, sharing their considerable commercial experience with Kainos.
CORPORATE GOVERNANCE
Kainos Annual Report 2022
64
An evaluation of the Chairman by the Non-Executive Directors was also carried out and it was concluded that he
was performing his role effectively. The Senior Independent Director (SID), Andy Malpass, confirms that, as
supported by the results of the evaluation survey, the performance of the Chairman continues to be effective.
The next formal evaluation of the Board’s performance is scheduled to be conducted in 2022 and will be internally
facilitated. The next externally facilitated evaluation will be conducted in December 2023.
Division of responsibilities
There is a formal written policy on the division of responsibilities between the Chairman and the CEO and the SID
such that their roles are complementary to each other.
Tom Burnet as Chairman is principally responsible for leading the Board, promoting constructive debate amongst
the Board and facilitating communication with shareholders as well as overseeing strategy.
Dr Brendan Mooney as CEO is responsible for all aspects of Kainos’ operations; he leads and develops the strategic
plans for the business and identifies risk factors.
Andy Malpass as SID provides a sounding board for the Chairman and acts as an intermediary for the other
Directors and shareholders.
Conflicts of interest
The Companies Act 2006 imposes a statutory duty on Directors to avoid conflicts of interest. The Articles of
Association allow the Directors to consider and, if they deem fit, to authorise conflicts of interest. The Articles of
Association set out the process for authorisation of such conflicts and any such conflicts will be recorded in the
Board minutes and maintained on a register which will be reviewed on an annual basis by the Nominations
Committee and by the Board.
No conflicts have arisen in the year ended 31 March 2022.
Gráinne Burns
Company Secretary
20 May 2022
DIRECTORS’ REPORT AND CORPORATE GOVERNANCE STATEMENT
CONTINUED
Kainos Annual Report 2022
65
Statement from the Chair of the Remuneration Committee
As chair of the Remuneration Committee, I am pleased to introduce our Directors’ Remuneration Report for the
year ended 31 March 2022.
Remuneration Committee
The Remuneration Committee is comprised entirely of independent Non-Executive Directors whose biographies
are set out within the Directors’ Report and Corporate Governance Statement.
In addition to myself as chair, the Remuneration Committee is composed of Tom Burnett, a member of the
Committee since July 2015, and Rosaleen Blair, who has been a member since January 2021.
There were six meetings during the year, with all Remuneration Committee members attending all meetings.
Key activities undertaken
• The Remuneration Committee performed a detailed review of our current policy and recommended changes to
ensure that our policy continues to provide the strongest possible support for our business strategy and culture.
• We continued to oversee implementation of our current policy and discussed improvements to our approach to
ensure consistent pay across the organisation and related topics such as gender attrition.
• We continued to oversee remuneration practice across Kainos, including focused discussions on global benefits
and mobility, lessons learned from recent acquisitions and work to review salary ranges.
Strategic context
We continue to retain and attract high-quality talent, with our workforce totalling 2,692 across 22 countries in
Europe and the Americas. Our people are critical to our business.
As the demand for the services that we provide increases, so too has the demand for skilled people – in our Digital
Services and Workday divisions and in our central teams. This global digital skills shortage was a feature of 2021
and will persist for at least another 18 months. Alongside this, we recognise that, post-pandemic, people are
exploring new careers, new employment models and new employers.
Kainos is also affected by these trends and as a result we have seen staff retention reduce from 90% pre-
pandemic to 86% in the past year.
As a Committee we recognise that we cannot afford to be complacent; we need to continue to retain and motivate
our current colleagues and attract further talented individuals as we continue to grow. Financial reward, in tandem
with strong engagement activities, is key to our success.
Executive outcomes and reward
The Strategic Report outlines another strong performance by Kainos during the year.
Executive Director annual bonuses are based on revenue, adjusted pre-tax profit and bookings targets. Given the
weightings in our scheme, our strong performance for the year translates to 110% pay-out against these targets,
with the key measures outlined below.
2022
£
2021
£
Revenue £302.6m £234.7m
Adjusted pre-tax profit £58.8m £57.1m
Bookings £349.8m £258.8m
Total dividend per share 22.2p 28.2p
In June 2021, the Group made performance share awards to the CEO and CFO of 5,974 and 6,628 share options
respectively.
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Kainos Annual Report 2022
66
In July 2018, long-term incentive awards were granted to the CEO, CFO and SVP Business Development.
These awards vested in full during the year with the CEO receiving 17,621 share options, the CFO receiving 19,552
share options and the SVP Business Development receiving 15,690 share options.
Further detail of these awards is provided in the Annual Report on Remuneration.
The Remuneration Committee believes that these rewards remain appropriate in the context of the Company’s
outstanding performance and continued growth in challenging circumstances.
Review of Remuneration Policy for Executive Directors
Our current policy was approved by shareholders at the 2019 Annual General Meeting (AGM), and we will, in line
with the three-year cycle in regulations, be submitting a new policy for shareholder approval at our next AGM in
September 2022.
In preparation for our new policy, the Remuneration Committee undertook a detailed review of our current
remuneration framework, recommending the following changes, to adopt best practice as described in the UK
Corporate Governance Code 2018. The proposed changes are:
• the shareholding period will be revised from the current thee-year Long-Term Incentive Plan (LTIP) vesting
period, to a three-year vesting and two-year holding period;
• a minimum shareholding requirement of 200% of annual salary, over a four-year period, will be introduced for
Executive Directors;
• a post-employment shareholding requirement will be introduced for Executive Directors requiring them to
retain shares equal to 200% of annual salary (or their actual shareholding on departure if that is lower) for a
minimum of two years post-employment;
• the maximum annual bonus that can be earned has been capped at 150% of salary;
• one third of each Executive Director’s accrued annual bonus will be deferred for a period of three years; and
• Executive Director pension contributions have been aligned to the rest of the workforce at 5%.
As part of the review, the Committee gave significant focus to the performance conditions in our LTIP and
discussed how the Environmental, Social and Governance (ESG) component of the LTIP could be strengthened
to best support our business strategy and culture. We have agreed the principle of including a ‘Responsible
Company’ performance condition which will contain a ‘basket’ of measures which reflect our priorities: diversity,
workforce engagement, climate action and customer satisfaction.
We are excited to implement this new approach as we believe it will better align executive reward with key areas
which are critical for continued business growth and success.
Alignment with UK Corporate Governance Code
Our refreshed Remuneration Policy is aligned with the UK Corporate Governance Code 2018.
Clarity
• This report sets out the arrangements for Executive Directors in a clear and transparent way.
• The workings of the Committee and the Remuneration Policy have been discussed with our culture and
development group, who operate as the formal workforce advisory panel.
• Shareholders can ask questions and comment upon remuneration at our AGM.
Simplicity
• The remuneration framework is made up of three key elements: fixed pay (including base salary, pension and
benefits), annual bonus scheme and long-term incentive plan.
• The framework is simple to understand for participants, shareholders and the wider workforce. Incentive
elements are aligned to strategic priorities for the business.
DIRECTORS’ REMUNERATION REPORT CONTINUED
Kainos Annual Report 2022
67
Risk
• Variable remuneration targets are set at levels which reward high performance, but which do not encourage
inappropriate business risk.
• Part of any bonus earned is deferred and a holding period applied to any long-term award to ensure variable
remuneration is linked to sustainable performance.
• Malus and clawback provisions apply to variable incentives.
Predictability
• Our policy sets out the maximum payments available for the annual bonus and LTIP.
• Target and threshold performance levels are set for the annual bonus, and minimum, mid and maximum
performance levels are set for LTIP performance conditions.
Proportionality
• A significant proportion of Executive Director reward is linked to performance through the incentive framework,
and there is a clear line of sight between performance and the delivery of long-term shareholder value.
• Performance measures and the underlying targets are reviewed regularly by the Remuneration Committee to
ensure that they are directly aligned to our strategic priorities.
Alignment to culture
• The new ‘Responsible Company’ LTIP performance condition reflects areas of importance to the business:
diversity, workforce engagement, climate action and customer satisfaction.
• The Committee regularly reviews Executive Director reward to ensure alignment with shareholder and
workforce experience.
• Share incentives are used extensively throughout Kainos to align the employee experience with shareholders.
All employees are given the opportunity to benefit through the Save as You Earn (SAYE) and Share Incentive
Plan (SIP) (or the equivalent in locations where these share schemes are not available).
Looking forward
We believe that the changes we have seen in the post-pandemic recruitment market are likely to be persistent,
perhaps even increasing, over the next 18 months. As a result, employee engagement remains a top priority for us,
with plans in place across the business to proactively tackle the challenges we face.
Priorities for the Remuneration Committee over the next year include:
• ensuring a smooth implementation of our refreshed policy;
• maintaining an ongoing review of company-wide salaries – within the context of our overall Employee Value
Proposition – to ensure that we are able to attract, motivate and retain talent in all parts of the globe where we
operate;
• continuing to engage with our workforce on the priorities which matter to them, including reward; and
• continuing to take action to close the gender pay gap and establishing our position with regard to any ethnicity
pay gap.
We believe that our refreshed Remuneration Policy will help us to deliver on these priorities and will strongly
support the measured growth that we are hoping to achieve as a business in the year ahead.
CORPORATE GOVERNANCE
Kainos Annual Report 2022
68
Directors’ Remuneration Policy
The policy set out below is a new Directors’ Remuneration Policy which will be subject to shareholder approval at
the 2022 AGM held on 28 September 2022 and will be effective for a further three years from this date.
In setting this policy, the Committee has taken into account the need for Executive Director remuneration
arrangements to reflect the six factors set out in Code Provision 40, namely clarity, simplicity, risk, predictability,
proportionality and alignment to culture.
Our Remuneration Policy seeks to ensure that Kainos can motivate its Executive Directors. The Remuneration
Committee believes that the Executive Directors should be rewarded fairly and competitively according to their
performance and that this should be at a comparable level to directors in similar companies.
The Committee’s remuneration philosophy for executive reward is that:
• the objective is to set Executive Director packages at an attractive level to retain and motivate leaders with a
significant portion based on performance;
• salaries will continue to be kept at below median levels compared to peer companies;
• short-term performance will be incentivised via an annual bonus which is based on revenue (30%), adjusted
pre-tax profit (40%) and bookings targets (30%); and
• long-term performance will continue to be incentivised via a share plan under which Executive Directors are
awarded performance shares subject to achieving stretch targets over a three-year period. The associated
measures are earnings per share (45%), share price performance (25%) and being a responsible company
(30%) reflecting our priorities in the areas of diversity, workforce engagement, climate action and customer
satisfaction.
The focus on financial performance, shareholder return and being a responsible company encourages consistent
performance over multiple years and aligns remuneration with the Kainos strategy, shareholder and stakeholder
interests. It aims to deliver value and good growth over the long-term while striking an appropriate balance
between caution and risk.
The Remuneration Committee is directly responsible for setting the remuneration of Executive Directors, giving
guidance on the remuneration of other members of the senior management team and supervising the workings of
all the share incentive plans that Kainos operates.
DIRECTORS’ REMUNERATION REPORT CONTINUED
Kainos Annual Report 2022
69
CORPORATE GOVERNANCE
The individual elements of the remuneration packages offered to Executive Directors are set out in the
following tables.
Executive Director reward components
Base Salary
Purpose
To attract and retain Executive Directors.
Operation
Reviewed annually and fixed for 12 months, commencing 1 June each year. The Remuneration
Committee considers:
• an individual’s experience, knowledge and performance in the role.
• business and individual performance.
• achievement of objectives.
• comparative salaries and periodic reviews.
• the Company’s financial position.
• the salary increases being provided to Kainos employees.
Potential
remuneration
Percentage increases will normally be in line with other employees in the same location.
Higher increases may be awarded in certain circumstances if there are commercial reasons for
doing so, such as to reflect market movements, changes in job responsibilities and to address
retention issues.
Performance
metrics
None.
Benefits
Purpose
To attract and retain Executive Directors.
Operation
The Executive Directors are entitled to private medical insurance, life insurance and permanent
health insurance.
Potential
remuneration
No maximum is set but the Remuneration Committee will monitor the overall cost of the benefits
package. Any changes will normally be in line with other employees in the same location.
Performance
metrics
None.
Pension
Purpose
To attract and retain Executive Directors.
Operation
The Executive Directors are entitled to participate in the Kainos pension scheme or receive a payment
in lieu of pension.
Potential
remuneration
No maximum is set but the Committee will monitor the overall cost of the benefits package. Any
changes will be in line with other employees in the same location.
Performance
metrics
None
Kainos Annual Report 2022
70
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Bonus
Purpose
To reward and incentivise performance within a financial year with adequate reward for good
performance and excellent reward for exceptional performance, to focus Executive Directors on key
objectives and support positive team behaviour.
Operation
Performance is measured on an annual basis for each financial year. Criteria are established and
weighted at the beginning of each year based on Company financial targets. Threshold and target
levels of performance are determined for each measure. At the end of the year, the Committee
determines the extent to which targets were achieved. On target levels of payment are set for each
Executive Director at the start of each year. Up to 150% of these levels may be paid where targets are
exceeded, based on the extent to which the target is exceeded.
Annual bonus is normally paid in cash following the completion of the audit of that year’s financial
statements. One third of payments will be deferred for three years and then paid in cash or in shares.
Clawback may be applied at the discretion of the Remuneration Committee in the event of material
misstatement of the financial results or other exceptional circumstances, such as gross misconduct.
The Remuneration Committee has discretion to apply ‘corporate override’ in the event core targets are
not achieved or in the event of a material negative event.
Potential
remuneration
The maximum annual bonus opportunity under the policy as a percentage of the Executive’s salary
is 150%.
Performance
metrics
Annual bonus is discretionary. Criteria are chosen, weighted and targets set each year by the
Committee in accordance with business priorities.
An element of the bonus may also be based on personal performance.
Long-Term Incentive Plan (LTIP)
Purpose
To motivate Executive Directors, incentivise performance over the long-term and to facilitate share
ownership.
Operation
Performance share awards are made under the Group’s 2015 Performance Share Plan (PSP).
Awards, made in the form of nil or nominal cost options, will normally have a three-year vesting period
and for Executive Directors there is an additional two-year holding period prior to exercise, following
the date of award and will vest and be exercisable subject to continued employment and the meeting
of appropriately challenging performance conditions specified at the outset. The Remuneration
Committee determines the extent to which performance conditions have been met. Awards may be
increased for dividends paid during the vesting period.
The Remuneration Committee determines the performance conditions, weighting and target
performance levels at the point of award.
Clawback may be applied at the discretion of the Committee in the event of material misstatement of
the financial results or other exceptional circumstances, such as gross misconduct.
Potential
remuneration
The normal maximum level of annual award is 200% of salary. In exceptional circumstances, awards
may be made up to a maximum of 300% of salary.
In the event of a new appointment the Remuneration Committee would expect to make a higher
award, closer to the normal maximum.
Performance
metrics
The Remuneration Committee will assess what measures and targets best support the long-term focus
of the Group and so measures and targets may be different from year to year.
Executive Director reward components continued
Kainos Annual Report 2022
71
CORPORATE GOVERNANCE
Non-Executive Director payments
Pension
Purpose
To attract and retain Non-Executive Directors with appropriate experience and skills.
Operation
The Chairman and Non-Executive Directors are paid fees, as detailed in this table. The fee levels
consider the time commitment and responsibilities of the role and fees paid in other companies of
comparable size and complexity.
The Chairman’s fee is approved by the Board on recommendation of the Remuneration Committee.
Fees for the Non-Executive Directors are approved by the Board on the recommendation of the
Chairman and Executive Directors.
Additional fees are payable for additional responsibilities.
Potential
remuneration
The Chairman’s fee is currently £100,000 per annum. The base fee for Non-Executive Directors is
currently £50,000 per annum.
Additional fees per annum are awarded:
• Senior Independent Director – £10,000
• Chair of Audit Committee – £8,000
• Chair of Remuneration Committee – £8,000
Performance
metrics
None.
Company-wide share plans
The following additional share schemes are offered to eligible employees and Executive Directors are eligible to
participate as shown.
Share Incentive Plan (SIP) UK
Purpose
To motivate, facilitate share ownership and align employees with shareholders.
Operation
The Share Incentive Plan (SIP) is a tax-advantaged all employee plan, supervised by the
Remuneration Committee. Significant tax advantages apply if shares acquired under the plan are
held for five years (UK).
UK Employees, including Executive Directors, may be awarded free shares up to a maximum value of
£3,600 each year.
They may purchase partnership shares out of pre-tax salary up to £1,800 per tax year and may be
awarded up to two free matching shares for each partnership share acquired (although no partnership
purchase or matching has been implemented to date).
The Board shall determine if and when further SIP awards will be made and the terms of those awards.
Potential
remuneration
At the time of IPO and each consecutive year since, free shares with a value up to £3,600 were awarded
to UK employees, including Executive Directors, depending on their length of service.
Performance
metrics
None.
Kainos Annual Report 2022
72
DIRECTORS’ REMUNERATION REPORT CONTINUED
Save As You Earn Option Plan (SAYE)
Purpose
To motivate, facilitate share ownership and align employees with shareholders.
Operation
An ‘all employee’ share option plan approved by HMRC, supervised by the Remuneration Committee.
UK employees, including Executive Directors, may enter into a savings contract under which they agree
to save a specified monthly amount for three or five years. At the end of the contract period,
participating employees may use the amount saved to exercise options with an exercise price of up to
a 20% discount to the market price at the outset.
The Board shall determine if and when further SAYE awards will be made and the terms of SAYE
participation.
Potential
remuneration
Under the plan, the maximum monthly savings amount is £500. Executive Directors are eligible to
participate in these schemes.
Performance
metrics
None.
Poland and Ireland Share Schemes
Purpose
To motivate, facilitate share ownership and align employees with shareholders.
Operation
The Group has implemented share schemes for employees in Poland and the Republic of Ireland to
make share awards to these employees on similar terms and of a similar value to those made under the
UK SAYE and SIP schemes.
Potential
remuneration
Employees based in these countries may be awarded participation in these plans at similar levels of
that offered to UK employees under the SAYE and SIP schemes. If Executive Directors were based in
these countries, they would be able to participate in these schemes.
Performance
metrics
None.
Share Options (CSOP)
Purpose
To motivate, facilitate share ownership and align employees with shareholders.
Operation
Market value options may be granted to employees at the discretion of the Remuneration Committee
under the 2015 Performance Share Plan. UK employees may receive tax advantaged awards under the
CSOP Sub-Plan. Options have a market value exercise price and have a normal minimum vesting
period of three years.
Potential
remuneration
It is not intended to grant CSOP options to Executive Directors.
Performance
metrics
Performance conditions may be applied but it is intended that CSOP options will not normally have
performance conditions attached.
Company-wide share plans continued
Kainos Annual Report 2022
73
CORPORATE GOVERNANCE
Service contracts – Executive Directors
The key terms of the Executive Director contracts are summarised in the table below:
Provisions
Term and notice Indefinite with 12 months’ notice from either party.
Payment Salary and discretionary annual bonus.
Benefits and other
entitlements
Company pension contribution or payment in lieu of pension, private medical insurance and
permanent health insurance.
Termination May be terminated on 12 months’ written notice served by either party. Kainos has a
contractual right to pay the Executive Directors in lieu of all of their notice and to place them
on garden leave during all or part of their notice period. In the event of gross misconduct,
their employment will be terminated with immediate effect without the requirement for
notice or associated payment in lieu.
Letters of appointment – Non-Executive Directors
The Non-Executive Directors have letters of appointment which may be terminated in certain circumstances,
including the giving of three months’ written notice by either party or failure to be re-elected by shareholders.
Payments for loss of office
In the event of termination, all Directors will receive payments for loss of office in accordance with the termination
provisions of their applicable service contract or letter of appointment.
The default position is that on loss of office, an Executive Director forfeits any right to any bonus payment which
would otherwise have accrued in respect of that year. If an Executive Director is deemed a ‘good leaver’, they will be
entitled to receive a bonus pro-rated to the proportion of the year that they worked.
The treatment for share-based incentives previously granted to an Executive Director will be determined based
on the relevant plan rules. The default treatment will be for outstanding unvested awards to lapse on cessation of
employment. In relation to awards granted under the PSP, SIP or SAYE plans, in certain specified circumstances
‘good leaver’ status may be applied, and the awards may vest in full.
In respect of performance shares, awards of ‘good leavers’ will normally vest subject to the achievement of any
performance conditions, on the normal vesting date reduced on a pro-rata basis to reflect the portion of the vesting
period elapsed at the point of departure. Under the rules of the plan, the Remuneration Committee may determine
that awards vest at the point of departure to the extent that performance conditions have been met at that point
(as determined by the Remuneration Committee acting reasonably) and on a reduced basis pro-rated for time
unless the Remuneration Committee determines to allow vesting to a greater extent.
There were no payments to past Directors for loss of office during the year ended 31 March 2022.
Remuneration Policy for new Directors
The appointment of Non-Executive Directors shall be on terms substantially similar to those of the existing
Non-Executive Directors and in accordance with the Remuneration Policy applicable at the time.
In the event that a new Executive Director is appointed, or a new service contract is entered into, the service
contract would be subject to a notice period of not greater than 12 months with the Director entitled to receive
salary, bonus and benefits as well as participate in the current share plans. The remuneration package for the new
Director would be set in accordance with the terms of the approved Kainos Remuneration Policy in force at the time
of appointment, while at the same time reflecting the experience and skill of the individual.
The new Director’s total remuneration would be consistent with comparative packages as advised by the
Remuneration Committee’s remuneration advisers. In the year of joining, the annual bonus and associated
performance measures will be pro-rated.
In addition, when recruiting new Executive Directors externally, the Remuneration Committee may need to offer
additional cash and/or share-based elements on a one-time basis when it considers these to be in the best interests
of Kainos and its shareholders. Such payments would be limited to the remuneration lost when leaving the former
employer to take up a position with Kainos and would broadly reflect the delivery mechanism (e.g., cash, shares,
options), time horizons and whether performance requirements are attached to that remuneration. Shareholders
will be informed of such payments at the time of appointment.
Kainos Annual Report 2022
74
In the case of an internal appointment, any variable pay element awarded in respect of the prior role would be
allowed to pay out according to its terms, adjusted as relevant to take into account the appointment. In addition,
other ongoing remuneration obligations existing prior to appointment would continue as appropriate, provided that
they are put to shareholders for approval at the earliest opportunity.
For external and internal appointments, the Remuneration Committee may agree that Kainos will meet reasonable
relocation expenses in line with market practice.
Employees
Kainos expects the total remuneration for employees to be at a level appropriate to attract, motivate and retain
talented individuals.
Some employees may receive a bonus, which in many cases will be a percentage of salary with an element
determined by personal performance and an element determined by the overall Company financial performance.
For more senior employees, a higher proportion of remuneration is payable as a bonus.
The benefits available are dependent on market practice in each country. The pension scheme available to an
employee varies according to location with contributions at a competitive level for each country.
It is the policy of the Group to offer participation in share incentive plans to all employees. More senior employees
may receive discretionary share option awards.
The Remuneration Committee takes into consideration the pay and benefits of employees when reviewing the
remuneration of the Executive Directors. In addition, the Committee consults with employees through our
Culture and Development Group. Representatives from these groups will attend Remuneration Committee
meetings as guests periodically to ensure that the Remuneration Policy is aligned with the Kainos culture and
employee experience.
Shareholders and statement of voting at AGM
At the 2021 AGM the Annual Report on Remuneration for the year ended 31 March 2021 was approved as follows:
Number of
votes cast
for
Percentage of
votes cast
for
Number of
votes
against
Percentage of
votes cast
against
Total
votes
cast
Number of
votes
witheld
87,839,386 96.7% 3,033,393 3.3% 90,872,779 0
We are keen to ensure that our shareholders are supportive of the Group’s remuneration philosophy and policy.
As chair, I welcome shareholder feedback either as part of the AGM process, or at any time through the year. To
date, we have not received any significant dissenting shareholder votes on Remuneration Policy and outcomes.
Flexibility, discretion and judgement
The Remuneration Committee has attempted to ensure that this policy has sufficient flexibility to deal with unusual
situations and scenarios which may arise. As outlined in the policy tables, the Remuneration Committee retains
flexibility to determine the objectives, weightings and target levels of performance for the annual bonus at the start
of each year. The Remuneration Committee may also alter the performance criteria during the year, reflecting the
overall circumstances and the Company performance to ensure targets remain both challenging and appropriate.
Similarly, the Remuneration Committee retains flexibility to determine the conditions, weightings and target levels of
performance for share awards at the point awards are made. In addition, where performance conditions have been
set, if events subsequently occur which cause the Remuneration Committee to consider that any performance
condition no longer represents a fair measure of performance, the Remuneration Committee may amend the
performance condition to be more appropriate. The alternative performance condition will be equally challenging.
No such discretion was applied during the year ended 31 March 2022.
External appointments
Executive Directors may accept appointments as Non-Executive Directors in other companies provided that the
appointments do not conflict with their duties or time commitments to Kainos. Any external appointment is subject
to receiving prior written approval from the Board. The Executive Director is entitled to receive the fees themselves
from such appointments.
No appointments were made during the year ended 31 March 2022.
DIRECTORS’ REMUNERATION REPORT CONTINUED
Kainos Annual Report 2022
75
CORPORATE GOVERNANCE
Responsibilities
The Remuneration Committee operates within its terms of reference, which are reviewed and updated annually
and are available from our website.
The Remuneration Committee is directly responsible for managing all aspects of the remuneration of Executive
Directors, for giving guidance on the remuneration of other members of the senior management team and
supervising the workings of all our share incentive plans.
Membership, meetings and evaluation
The members of the Remuneration Committee are Katie Davis (Chair), Tom Burnet and Rosaleen Blair. All are
considered independent Non-Executive Directors. None of the members of the Remuneration Committee has any
personal financial interest (other than as shareholders, to the extent disclosed in this report), conflicts of interest
arising from cross-directorships, or day-to-day involvement in running the business.
The Executive Directors may attend committee meetings by invitation. The Company Secretary acts as secretary
to the Committee.
The Remuneration Committee met six times during the year, with all members of the Committee in attendance.
Further detail is contained within the section ‘Director’s Remuneration Report’.
During the year, the Remuneration Committee did not take any advice from remuneration consultants.
Board evaluation
As outlined in the ‘Board Evaluation’ section of ‘The Directors’ Report and Corporate Governance Statement’, there
was an internal evaluation of the performance of the board and all Committees. With regard to the Remuneration
Committee, the evaluation focused on:
• Structure and management of meetings.
• Committee support.
• The work of the Committee.
• Priorities for change.
The conclusion was that the Remuneration Committee was rated highly overall and was found to have good
measures in place to support the Company’s strategy.
Remuneration details
The following tables set out the remuneration for each Director for the years ended 31 March 2022 and
31 March 2021.
Single total figure of remuneration for Executive Directors (audited)
Name Year Salary Benefits
1
Bonus Pension
2
Other
3
Incentive
vested Total
Total
fixed
Total
variable
All amounts in (£000s)
Dr Brendan Mooney 2022 225 2 198 20 4 196 645 247 398
2021 128 5 216 11 4 227 591 144 447
Richard McCann 2022 257 2 198 13 4 233 707 272 435
2021 139 7 216 12 4 252 630 158 472
Paul Gannon
4
2022 83 3 70 12 – 185 353 98 255
2021 120 19 155 18 3 199 514 157 357
1. Benefits are the taxable value of benefits received by Executive Directors in the year including travel allowance and private health insurance.
The Executive Directors did not receive travel allowance from June 2021 to March 2022.
2. Pension amounts for Dr Brendan Mooney and Richard McCann are payments in lieu of pension.
3. Other relates to the award of SIP shares or ROI restricted shares for Paul Gannon.
4. The above table includes remuneration details for Paul Gannon up to the date of resignation as Executive Director on 23 September 2021.
ANNUAL REPORT ON REMUNERATION
Kainos Annual Report 2022
76
Annual bonus (audited)
The following table details the eligible bonus payment for the Executive Directors.
Weighting
Target
performance
(£million)
Threshold
performance
(£million)
Outcome
(£million)
Eligible Bonus pay-out
Objective (£000s) (£000s) (£000s)
Brendan
Mooney
Richard
McCann
Paul
Gannon
1
Revenue 30% 285 243 303 61 61 21
Adjusted pre-tax profit 40% 57 46 59 75 75 27
Bookings 30% 305 259 350 62 62 22
Totals 198 198 70
1. The above table reflects the bonus payable to Paul Gannon up to the date of resignation as Executive Director on 23 September 2021.
The bonuses payable to Dr Brendan Mooney, Richard McCann and Paul Gannon are 88%, 77% and 84% of salary
respectively. Under the Remuneration Policy the maximum annual bonus opportunity as a percentage of the
Executive’s salary is 150% for the CEO, 150% for the CFO and 225% for the SVP Business Development.
LTIP (audited)
The Committee granted performance-related share awards to the Executive Directors under the PSP on 29 June
2021 as outlined in the table below. The awards are share options with a nominal exercise price of £0.005 per option.
Name
Date
of grant
No. of ordinary
shares under
option Face value
1
Exercise
price per
ordinary share
First
exercise
date
Lapsing
date
Dr Brendan Mooney June 2021 5,974 £87,597 Nominal June 2024 June 2031
Richard McCann June 2021 6,628 £97,186 Nominal June 2024 June 2031
Paul Gannon June 2021 5,319 £77,992 Nominal June 2024 June 2031
1. Face value is calculated using the average middle market closing price for the three days prior to grant date.
Single total figure of remuneration for Non-Executive Directors (audited)
Name Year Fees
All amounts in (£000s)
Andy Malpass 2022 68
2021 62
Chris Cowan
1
2022 25
2021 46
Tom Burnet 2022 100
2021 99
Katie Davis 2022 58
2021 46
Rosaleen Blair 2022 50
2021 13
1. The above table includes remuneration details for Chris Cowan up to the date of resignation as Non-Executive Director on 23 September 2021.
ANNUAL REPORT ON REMUNERATION CONTINUED
Kainos Annual Report 2022
77
CORPORATE GOVERNANCE
The 2021 PSP awards are subject to the following performance conditions:
Performance
condition Weighting
Minimum
performance
Mid
performance
Maximum
performance
TSR performance
(FTSE techMARK Index)
50% 30% vesting
at median
performance
Linear vesting between
minimum and maximum
performance
100% vesting
if in upper
quartile
EPS percentage growth 30% 30% vesting for
growth of 5%
Linear vesting between
minimum and maximum
performance
100% vesting if
growth is 13%
or higher
‘Best Companies’
survey performance
18
20% 100% vesting if score at
end of the three-year period
is at least equal to the score
at the start of period
N/A N/A
SIP and SAYE schemes (audited)
The Executive Directors are entitled to participate in the SIP and SAYE schemes, on the same terms as all other
employees with the same length of service.
The SIP shares awarded during the year to Executive Directors are shown below:
Name
2021
SIP shares
Face
value
1
Vesting
period
Dr Brendan Mooney 180 £3,255 3 years from the date of grant
Richard McCann 180 £3,255 3 years from the date of grant
1. Face value is calculated using the average middle market closing price for the five days prior to grant date.
2018 PSP (audited)
On 4 July 2018, awards were granted under the Kainos PSP to Dr Brendan Mooney, Richard McCann and Paul
Gannon. The TSR performance measurement period ended on 3 July 2021 with the following outcome:
Award Measure Weighting Vesting scale
Performance
achieved
% of award
vesting
2018 TSR 50% No vesting if TSR growth below 9% p.a.,
30% of awards vest if TSR growth equals
9% p.a. and 100% vests if TSR growth
exceeds 16% p.a. Straight-line pro-rata
basis from 30% to 100% if TSR growth
exceeds 9% but is less than 16% p.a.
54% 100%
Name
No. of
shares % vested
Number of
shares
vested
Number of
shares
lapsed
Share price
at end of
performance
period
Value
at end of
performance
period
Dr Brendan Mooney 8,811 100% 8,811 – £15.12 £133,222
Richard McCann 9,776 100% 9,776 – £15.12 £147,813
Paul Gannon 7,845 100% 7,845 – £15.12 £118,616
18 Based on the Best Companies Index (BCI) score in the survey undertaken by Best Companies.
Kainos Annual Report 2022
78
2019 PSP (audited)
On 8 July 2019, awards were granted under the Kainos PSP to Dr Brendan Mooney, Richard McCann and Paul
Gannon. The TSR performance measurement period does not end until 8 July 2022. However, the performance
measurement period for the EPS performance condition ended on 31 March 2022, with the following outcome:
Award Measure Weighting Vesting scale
Performance
achieved
% of award
vesting
2019 EPS 30% No vesting if EPS growth below 5% p.a.,
30% of awards vest if EPS growth equals
5% p.a. and 100% vests if EPS growth
exceeds 13% p.a. Straight-line pro-rata
basis from 30% to 100% if EPS growth
exceeds 5% but is less than 13% p.a.
35% 100%
Name
No. of
shares % vested
Number of
shares
vested
Number of
shares
lapsed
Share price
at end of
performance
period
Value
at end of
performance
period
Dr Brendan Mooney 3,942 100% 3,942 – £13.23 £52,153
Richard McCann 4,374 100% 4,374 – £13.23 £57,868
Paul Gannon 3,510 100% 3,510 – £13.23 £46,437
Directors’ shareholdings (audited)
The interests of the Directors in office at 31 March 2022 including connected persons in Kainos ordinary shares at
31 March 2022 was:
Name
Current
shareholding
SIP shares
(available
to withdraw)
SIP/RSS shares
(not available
to withdraw)
Vested but
unexercised
options
Unvested
options
Dr Brendan Mooney 14,205,987 4,081 878 91,156 30,663
Richard McCann 4,630,352 2,930 878 101,094 33,959
Andy Malpass 38,590 N/A N/A N/A N/A
Tom Burnet 28,253 N/A N/A N/A N/A
Rosaleen Blair N/A N/A N/A N/A N/A
Katie Davis N/A N/A N/A N/A N/A
During the year:
• Tom Burnet acquired an additional 13,865 shares in the Company.
• Kerry McCann, a person closely associated (PCA) with Richard McCann, sold 82,300 shares in the Company.
• Richard McCann exercised his 2018 SAYE, acquiring 1,078 shares in the Company.
• Dr Brendan Mooney’s PCA, Ciaran Mooney, acquired 46 shares in the Company.
No other changes took place in the interests of the Directors between 31 March 2022 and 30 April 2022.
ANNUAL REPORT ON REMUNERATION CONTINUED
Kainos Annual Report 2022
79
CORPORATE GOVERNANCE
Share ownership guideline for Executive Directors
The Remuneration Committee has implemented guidelines in respect of the value of shareholding which Executive
Directors should hold. A minimum shareholding requirement of 200% of annual salary, over a four-year period, will
be introduced; in addition, a post-employment shareholding requirement will be introduced requiring them to
retain shares equal to 200% of annual salary (or their actual shareholding on departure if that is lower) for a
minimum of two years post-employment.
There is no shareholding guideline for the Non-Executive Directors.
Performance graphs and comparator tables
The regulations require the presentation of a number of graphs and tables setting out a comparison of Group
performance and CEO remuneration for the same period of time.
The Board believes that the FTSE techMARK All-Share Index, provides the best benchmark for comparison. It is
also the index used by the Group for the performance criterion for the 2019, 2020 and 2021 PSPs.
Our TSR performance against the FTSE techMARK All-Share Index TSR performance from the date of IPO in
July 2015 to the end of 31 March 2022 is shown below. The Kainos share price and the FTSE techMARK All-Share
Index are both set to 100 at the start of the period.
Kainos TSR performance against FTSE techMARK All-Share Index
Total shareholder return (rebased to 100)
Jul 15
Oct 15
Jan 16
Apr 16
Jul 16
Oct 16
Jan 17
Apr 17
Jul 17
Oct 17
Jan 18
Apr 18
Jul 18
Oct 18
Jan 19
Apr 19
Jul 19
Oct 19
Jan 20
Apr 20
Jul 20
Apr 21
Jul 21
Oct 20
Jan 21
Jan 22
Oct 21
Kainos Group PLC TSR FTSE techMARK All-Share TSR
1,600.0
1,400.0
1,200.0
1,000.0
800.0
600.0
400.0
300.0
200.0
0.0
Rebased share price performance since IPO
CEO remuneration (seven-year analysis)
The table below sets out the total remuneration delivered to the CEO over the last seven years valued using the
methodology applied to the single total figure of remuneration.
CEO single figure of
total remuneration
(£000s)
Annual bonus
pay-out against
maximum
(%)
Long-term incentive
vesting rates
against maximum
opportunity
(%)
2022 645 59 100
2021 591 65 100
2020 683 51 100
2019 1,036 65 96
2018 423 53 n/a
2017 399 46 n/a
2016 428 57 100
Kainos Annual Report 2022
80
Percentage change in remuneration
The tables below shows the percentage change in remuneration for each Director and all UK employees for both
the current period and the prior period. Kainos considers the comparator group of all UK employees to be
representative of Kainos as a whole and a global comparator group would not result in a material variance.
a) Executive Directors
Percentage increase in remuneration in 2022 compared with remuneration in 2021
1
2022
Dr Brendan Mooney Richard McCann Paul Gannon
2
Employees
Salary and fees
3
75.8% 84.9% (30.8%) 10.0%
All taxable benefits
4
(60.0%) (71.4%) (84.2%) 0.0%
Annual bonuses (8.3%) (8.3%) (54.8%) (12.2%)
Total 9.1% 12.2% (31.3%) 0.6%
1. Executive Director’s salary calculated using the single total figure of remuneration.
2. Paul Gannon resigned from his role as Board Director on 23 September 2021.
3. In FY21 the Executive Directors elected to take no salary between April and August 2020.
4. Executive Directors did not receive travel allowance between June 2021 and March 2022.
Percentage increase in remuneration in 2021 compared with remuneration in 2020
2021
Dr Brendan Mooney Richard McCann Paul Gannon Employees
Salary and fees
1
(41.8%) (33.8%) (41.7%) 5%
All taxable benefits
2
(28.6%) 0% 0% 0%
Annual bonuses 27.8% 27.8% 27.7% 95.1%
Total (13.5%) (9.1%) (19.8%) 27.9%
1. Executive Directors elected to take no salary between April and August 2020.
2. Dr Brendan Mooney did not receive any travel allowance between April and August 2020.
b) Non-Executive Directors
Percentage increase in remuneration in 2022 compared with remuneration in 2021
1
2022
Andy Malpass Chris Cowan Tom Burnet
1
Katie Davis
2
Rosaleen Blair
3
Employees
Salary and fees 9.7% (45.7%) 1.0% 26.1% 284.6% 10.0%
All taxable benefits – – – – – 0.0%
Annual bonuses – – – – – (12.2%)
Total 9.7% (45.7%) 1.0% 26.1% 284.6% (0.6%)
1. Calculated using the single total figure of remuneration table. The increase represents a return to full salary as the Non-Executive Directors elected to
take a reduced salary between April and August 2020.
2. Chris Cowan resigned from the Board on 23 September 2021.
3. Rosaleen Blair joined the Board on 1 January 2021.
Percentage increase in remuneration in 2021 compared with remuneration in 2020
2021 Andy Malpass Chris Cowan Tom Burnet
1
Katie Davis
2
Rosaleen Blair Employees
Salary and fees 0% 2.2% 30.3% 170.6% – 5%
All taxable benefits – – – – – 0%
Annual bonuses – – – – – 95.1%
Total 0% 2.2% 30.3% 170.6% – 27.9%
1. Tom Burnet replaced John Lillywhite as Independent Non-Executive Chairman.
2. Katie Davis joined the Board on 28 November 2019.
ANNUAL REPORT ON REMUNERATION CONTINUED
Kainos Annual Report 2022
81
CORPORATE GOVERNANCE
Pay ratios (audited)
The following table sets out the ratio of the CEO’s latest single total figure of remuneration versus UK full-time
equivalent (FTE) employees’ remuneration.
Year Method
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
2022 A 18.2 : 1 11.6 : 1 8.0 : 1
2021 A 18.0 : 1 12.0 : 1 8.0 : 1
Kainos has adopted option A as the preferred method for calculating the pay ratio for the year ended 31 March
2022. Option A is considered the most efficient and robust approach in respect of gathering data for the year.
The salaries and wages of UK staff were used to calculate an equivalent single figure remuneration.
The wages and salaries figures for the median, 25th and 75th percentile employees used in the pay ratio
calculation are as follows:
Y25 Y50 Y75
Wages and salaries £35,000 £55,000 £80,000
The pay ratio has remained consistent with last year as a result of the net impact of CEO’s salary being reinstated
but bonus payment at a lower level.
Relative importance of spend on pay
Kainos’ employees are vital to the growth and success of the business. As a digital technology business with a
growth strategy focused on organic development, our primary costs are related to our employees. The profit,
corporation tax and dividend figures have been included to provide greater context to staff remuneration.
2022
(£000s)
2021
(£000s)
Change
(£000s)
Change
(%)
Staff remuneration 168,395 125,962 42,433 34%
Profit before tax 45,993 50,341 (4,348) (9%)
Corporation tax (10,225) (10,740) 515 (5%)
Effective tax rate 22% 21% – 1%
Dividends (27,419) (16,026) (11,393) 71%
Employee engagement
As we have developed the People Approach within our future strategy, we have made it a priority to engage with
our employees to help them to understand our current reward strategy for Executive Directors, Executive
Managers and other employees and to provide input to our future reward strategy.
It is a priority for the Remuneration Committee to ensure that our Remuneration Policy for Executive Directors and
Executive Managers is aligned with the employee experience. As with the main Kainos Board, the Remuneration
Committee will continue to engage with the wider workforce through the Kainos Culture and Development Group
and divisional leadership teams.
AGM
The 2022 AGM will be the Group’s seventh since its IPO. The Directors’ Annual Report on Remuneration will be put
to an advisory shareholder vote.
Kainos Annual Report 2022
82
Directors’ remuneration for the year commencing 1 April 2022
Salary The Remuneration Committee will continue to monitor the remuneration of Executive Directors
of other companies in the IT sector and other listed companies with similar market capitalisation
to ensure that the Executive Directors remain sufficiently rewarded to promote long-term
success. The Remuneration Committee will also consider the salary increases across the wider
workforce.
Benefits There will be no change to the benefits of the Executive Directors in the year commencing
1 April 2022.
Pension There will be a change to CEO pension contributions with effect from 1 April 2022 to align with
the workforce.
Annual bonus Annual bonus for the year commencing 1 April 2022 will be operated within the policy
disclosed in this report. Executive Directors will defer one third of the annual bonus payable in
June 2023 for three years.
The targets for the annual bonus for FY23 are not being disclosed in this report as that
information is deemed commercially sensitive and may be interpreted to be a forecast. That
information will be disclosed in the 2023 Annual Report.
Long-term
incentives
The Remuneration Committee intends to make further performance share awards in mid-
2022. These will be made in line with the Remuneration Policy. The Remuneration Committee
will determine the levels, performance conditions, weighting and growth targets to be applied
at the time of award and disclose them in the 2023 Annual Report.
Non-Executive
Director
remuneration
For the year commencing 1 April 2022 it is proposed that fees remain in line with the structures
in effect from 1 October 2019.
Illustration of application of Remuneration Policy
The charts below provide estimates of the potential future reward opportunities for each Executive Director, and
the potential split between the different elements of remuneration under three different scenarios: ‘minimum’, ‘in
line with expectation’ and ‘maximum’.
ANNUAL REPORT ON REMUNERATION CONTINUED
Chief Executive Officer (£000s) Chief Financial Officer (£000s)
Fixed Annual variable bonus Long-term incentive
900
800
700
600
500
400
300
200
100
0
Minimum In line with expectation Maximum
900
800
700
600
500
400
300
200
100
0
Minimum In line with expectation Maximum
100% 44% 34%
32%
24%
47%
19%
100% 45%
34%
30%
25%
48%
18%
Kainos Annual Report 2022
83
CORPORATE GOVERNANCE
In developing the scenarios, the following assumptions have been made:
Minimum The fixed amount consists of base salary, benefits and pension.
Base salary is the latest known salary.
Benefits are measured using figure in single figure table as set out above.
Pensions are measured using single figure table as set out above.
In line with
expectation
Based on what a Director would receive if performance was in line with plan:
• Annual variable bonus pay-out at 100% for on-target performance.
• 100% vesting of long-term incentive awards.
Maximum Maximum pay-out of annual variable bonus is 150% of salary for both CEO and CFO.
100% vesting of long-term incentive awards.
Long-term incentives consist of share awards only, which are measured at face value, i.e., no assumption for
increase in share price or dividends.
On behalf of the Board
Katie Davis
Chair of the Remuneration Committee
20 May 2022
Kainos Annual Report 2022
84
As Chairman of the Audit Committee, I am pleased to present the Audit Committee Report for the year ended
31 March 2022.
The Audit Committee continues to fulfil a vital role in the Company’s governance framework, providing valuable
independent challenge and oversight of the accounting, financial reporting and internal control processes, risk
management, and the relationship with the external auditor.
During the year we conducted a competitive audit tender process and recommended the selection of KPMG as
external auditor for the year ended 31 March 2022.
As a Committee, our responsibilities include providing advice (where requested by the Board) on whether the
Annual Report and Accounts, taken as a whole are fair, balanced, and understandable and provide the information
necessary for shareholders to assess the Company’s position and performance, business model and strategy.
The Audit Committee has focused on the integrity, completeness and clarity of financial reporting, the areas where
judgements and estimates are required in the financial statements and the quality and effectiveness of audit
processes to complement the other risk management activities.
Andy Malpass
Chair of the Audit Committee
20 May 2022
Composition and evaluation
The Audit Committee is chaired by Andy Malpass who has been in this role since June 2015. Andy’s previous
experience includes serving as Finance Director of Fidessa Group plc until October 2015, and from June 2018,
serving as a Non-Executive Director and chair of the Audit Committee of accesso Technology Group plc. For the
purposes of Code Provision 24, the Board considers that Andy has the recent and relevant financial experience
required to act as chair of the Audit Committee.
During the year the other Audit Committee members comprised Katie Davis, Chris Cowan, who retired from the
Board and as a member of the Audit Committee on 23 September 2021, and Rosaleen Blair who joined the Audit
Committee on 23 September 2021.
All Audit Committee members are Independent Non-Executive Directors. The range and depth of their financial
and commercial experience enables them to deal effectively with the matters they are required to address and to
challenge management when necessary. Further details of the relevant experience of all members of the Audit
Committee along with details of attendance at Audit Committee meetings are included in the ‘Directors’ Report’.
The Company Secretary is secretary to the Audit Committee.
The performance of the Audit Committee this year was internally evaluated. The evaluation process sought views
from all Directors and the Company Secretary, through the completion and review of a comprehensive evaluation
questionnaire across a wide range of areas, including:
• The Audit Committee’s composition and management;
• The quality of the information that the Audit Committee receives;
• Areas where additional support, training or induction were required;
• The Audit Committee’s monitoring of the integrity of the Company’s financial reporting;
• The effectiveness of the Audit Committee’s review of the internal controls and risk management systems; and
• The Committee’s performance and potential areas of improvement.
The evaluation concluded that the Committee was performing effectively.
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Only the members of the Audit Committee have the right to attend Audit Committee meetings; however, the
Executive Directors, relevant members of the finance team and senior representatives of the external auditor and
other senior management attend meetings by invitation of the Audit Committee. If the presence of any attendee is
inappropriate or might compromise discussion, then the Audit Committee will either not invite the attendee
concerned or request that the attendee recuse themselves from that part of the meeting.
Responsibilities
The Audit Committee operates within its terms of reference, which are regularly reviewed and updated and are
available on our website.
The Audit Committee’s main responsibilities include:
• Monitoring the integrity of the financial statements, including the annual and interim reports, announcements
of full year results and any other formal announcements relating to its financial performance;
• Advising the Board that the Annual Report is fair, balanced and understandable and provides the information
necessary for shareholders to assess Kainos’ position and performance, business model and strategy;
• Challenging the appropriateness of accounting policies and practices along with consistent treatment year to
year;
• Monitoring and reviewing the adequacy and effectiveness of our internal financial controls and internal control
and risk management systems; and
• Making recommendations to the Board on the appointment and remuneration of the external auditor, review
and monitor the external auditor’s performance, expertise, independence, and objectivity along with the
effectiveness of the audit process and its scope.
Audit Committee meetings and key activities during 2021/22
The Committee has a broad agenda of business which focuses on our assurance, risk, and audit processes.
The following principal activities have been carried out by the Audit Committee during the financial year:
May 2021
• Review of the auditor’s report to the Audit Committee for the year ended 31 March 2021.
• Review of significant judgements and issues in relation to the financial statements.
• Review of going concern and viability statements.
• Review and recommendation to the Board to approve the Final Results Announcement and the 2021 Annual
Report, concluding it was fair, balanced, and understandable.
• Review of the effectiveness of external auditors.
• Information security update.
• Group Risk Register update.
June 2021
• Audit tender presentations and recommendation of external auditor for the year ended 31 March 2022.
November 2021
• Review of the Interim Report, including the going concern statement and key disclosures, and recommendation
of its approval to the Board.
• Review of KPMG engagement letter and approval of audit fees.
• Review of management representation letter.
• Review of the Group Risk Register.
• Information security review.
• Group insurance strategy.
February 2022
• KPMG audit plan and strategy for the year ended 31 March 2022.
• Review of internal audit function and requirements.
• Review of tax function and global tax risks.
• Legal and compliance update.
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86
External audit
The Audit Committee advises the Board on the appointment, reappointment, or removal of the Group’s
external auditor.
Deloitte (NI) Limited (‘Deloitte’) was the Company auditor from the year ended 31 March 2012 to the year ended
31 March 2021 inclusive. In accordance with UK legislation, all public interest entities must tender their audit every
10 years. Accordingly, a competitive audit tender process was completed during the year and at the 2021 AGM,
KPMG was appointed auditor for the year ended 31 March 2022. The Audit Committee has worked closely with
KPMG since their appointment to ensure a smooth transition.
The Company confirms that it was compliant with the provisions of The Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee
responsibilities) Order 2014 during the financial year ended 31 March 2022.
Appointment, independence and objectivity
KPMG has not provided any non-audit services since their appointment as external auditor. We have engaged
other independent accounting advisors to perform tax consulting work and other assignments to ensure the
independence and objectivity of the auditor is not compromised. The Audit Committee received written
confirmation from the external auditor that it considered itself to be independent.
The current audit partner is John Poole who has been in the role since the appointment of KPMG. Audit partners
for listed companies are ordinarily rotated every five years.
Fees paid to KPMG for the audit of the consolidated financial statements are set out in note 6 of the consolidated
financial statements.
Effectiveness of the external auditor
The Audit Committee reviews the effectiveness and quality of the external auditor on an ongoing basis to ensure
a high-quality external audit process. To assess the effectiveness of the external auditor, the Audit Committee
reviewed:
• The audit plan including identified significant risks.
• The relevant skills and experience of the audit partner and team.
• Engagement with the Finance team in planning the audit and its execution.
• Formal reports presented to the Audit Committee prior to meetings.
Significant issues related to the financial statements
During the year ended 31 March 2022 the Audit Committee reviewed the results of the external audit for the
previous financial year including reviewing the 2021 Annual Report and Full Year Results Announcement, the
external auditor’s half year review and the half year results as well as the external audit plan for 2022. In May 2022,
the Audit Committee received the 2022 Annual Report including the financial statements contained within it, the
Full Year Results Announcement for the year ended 31 March 2022 and reports from the external auditor on their
audit of the financial statements and Annual Report.
The Audit Committee’s prime areas of focus were:
• The integrity, completeness and consistency of financial reporting, including the adequacy, clarity and
appropriateness of disclosures and compliance with financial reporting requirements;
• Assisting the Board in an assessment of whether the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s position,
performance, business model and strategy;
• The material areas in which significant judgements and key sources of estimation uncertainty are included in
the financial statements;
• The scope and programme of external audit, along with the quality and effectiveness of external audit
processes;
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• The materiality level used by the external auditor, concluding that its basis should be consistent with the
previous year;
• Whether the going concern basis of accounting should continue to apply in the preparation of the annual
financial statements and whether the period applied to the viability statement was appropriate;
• Reviewing the processes and systems to identify and mitigate the financial and non-financial risks and to
consider the appropriateness of the controls to reduce the risk of fraud and exposure to bribery and corruption;
and
• The appropriateness of the ‘whistleblowing’ procedures in place whereby staff may confidentially raise
concerns about possible improprieties.
The preparation of financial statements requires management to make assumptions, judgements and estimates
and the material ones are detailed in note 4 of the consolidated financial statements. The key areas of judgements,
estimates and assumptions that have been reviewed and considered by the Committee were:
• Revenue recognition in relation to significant contracts and implementations and the level of contract or fixed
price provisioning for rectification and irrecoverable accrued income. Kainos has a clear revenue recognition
policy, described in note 3, and performs regular contract reviews with relevant staff. The Audit Committee has
also obtained comfort over the completeness and valuation of any contract or fixed price provisions. The Audit
Committee is satisfied that the internal processes and controls are appropriate and revenue recognition is in
line with IFRS15;
• Development costs and the approach to their capitalisation. The Audit Committee received updates from
management and was satisfied that the methodology and process were appropriate. The Audit Committee
concurred with management that development costs should not be capitalised; and
• The tax complexity and risk related to the multinational operations of the Group and the areas of uncertainty
that arise. The Audit Committee considered the appropriateness of deferred tax assets and tax provisions held,
an analysis of the RDEC rules and their impact on the reported results in relation to the updates and reports it
had received, the transfer pricing rates applied between the jurisdictions in which the Group operates and their
impact on the reported results and concluded that the treatment adopted was fair and reasonable in all cases.
There were no material changes to significant accounting policies during the year ended 31 March 2022.
Risk management and internal control
The Board is ultimately responsible for the overall system of internal controls and risk management for Kainos and
for reviewing their effectiveness. The system of internal controls is designed to manage, rather than eliminate, the
risks to which Kainos is exposed. This includes the risk of failure to achieve business objectives and can provide
only reasonable and not absolute assurance against material misstatement or loss. The concept of reasonable
assurance recognises that the cost of control procedures should not exceed the expected benefits. Information on
the principal and emerging risks are set out in the Strategic Report.
The Board confirms that Kainos has established systems, procedures and controls designed to establish an
ongoing process for identifying, evaluating, and managing the principal and emerging risks faced by Kainos and
that they have been in place for the period under review and up to the date of approval of the Annual Report.
The effectiveness of those systems, procedures and controls are regularly reviewed by the Board.
As required by the Code, the Audit Committee has reviewed the internal controls and risk management systems,
including those relating to financial reporting, information technology, business continuity, management of
employees, operational and compliance matters and the Audit Committee has confirmed to the Board that it is
satisfied that Kainos has established internal controls and risk management systems that are effective and
compliant with the current governance provisions.
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The key elements of Kainos’ ongoing processes for the provision of effective internal control and risk management
systems include:
• Regular Board meetings to consider matters reserved for the Directors’ attention;
• Regular management meetings held to monitor divisional performance. Management is responsible for the
identification and evaluation of significant risks applicable to their area of business, together with the design
and operation of suitable internal controls;
• Maintenance of a Group Risk Register to identify the risks facing the business. The key risks are summarised for
review by the Audit Committee and are operationally owned and managed by the Company;
• Documentation of key policies and procedures; and
• Preparation of a comprehensive annual budgetary process for review and approval by the Board and updated
forecasts regularly prepared throughout the year. The operating results are reported monthly to the Board and
compared to the latest forecast with explanations for all significant variances.
Internal audit
Kainos does not operate a separate, dedicated internal audit function. The Group undertakes activities associated
with internal audit through subject specialists across the business divisions and central services teams for the
collective benefit of Kainos. Together, these people discharge the duties that an internal audit function would
typically own.
The purpose of our internal audit activities is to assist the Board and senior management in protecting the assets,
reputation and sustainability of Kainos. The key aims are to:
• Ensure all significant risks are identified and appropriately reported.
• Assess risk controls and mitigations.
• Act as a challenge function to improve governance, risk management and internal controls.
To support these activities and outcomes, Kainos has documented (i) the principles of operation of the activities,
(ii) the areas with systems of internal controls in place to identify and mitigate the risks and issues impacting the
business, and (iii) the specified owner for each area. This is reviewed annually for effectiveness by the Committee.
Areas covered by internal audit activities include:
• Information security governance and controls.
• Corporate governance and legal compliance.
• Financial compliance.
• Commercial review.
• Project delivery assurance.
• Financial planning and analysis.
• Risk reporting.
Some examples of the types of activity are detailed below.
ISO Audit Programme
Kainos operates an audit programme which forms part of its ISO9001 (Quality Management System), ISO20000
(Information Technology Service Management System) and ISO27001 (Information Security Management System)
certifications. As part of the certification process Kainos undergoes a bi-annual assessment to ensure that all
controls are robust and any Kainos assets are appropriately protected.
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Information security risk management
Kainos participates in additional third-party assessments for public and private sector customers to ensure that
associated security controls are effective and address any related risks.
The Kainos Information Security Steering Group includes technology and cyber security experts from within our
business divisions and central services that:
• Regularly review information security controls and processes.
• Maintain a detailed risk register for this specific area.
• Oversee our ISO Audit Process.
Kainos continues to identify cyber security and information security as a major risk area for our business – more
information is available in the ‘Risks factors and uncertainties’ section of the Strategic Report. Accordingly, this
group reports on a regular basis directly to the executive team and the Audit Committee on the risks, controls and
processes in this area.
Our internal audit principles
The principles underlying our internal audit activities are:
• Unrestricted scope of subject matter – all aspects of Kainos’ business are open to review.
• Internal audit activities are owned by senior level subject matter experts in each field.
• Focus and activities are based on the weighted risk profile of Kainos Group.
• Risk assessment is informed by stakeholder management.
• Reporting on group-level issues and all risks to the Audit Committee two times per year.
• Report on various focus areas at regular scheduled intervals to the Audit Committee.
• Ad hoc reporting and review of emerging or significant risks as required to the Group Chief Financial Officer,
relevant business stakeholders and the Audit Committee.
• Review of the principle and operation of internal audit activities at a minimum once a year to ensure these
remain appropriate.
Committee review of internal audit
In February 2022, the Committee completed a review of the Kainos internal control framework and procedures and
considered the merits of establishing a separate internal audit function.
The collective view of the Committee was that while there was an obvious ‘independence’ benefit from having a
separate audit function, this was not currently required given the Audit Committee’s confidence that the internal
controls were being well managed and the overlap inefficiencies that a separate audit function would introduce to
a company of Kainos’ size. The Audit Committee also considers that the absence of an internal audit function does
not directly affect the work of the external auditors.
The requirement for a separate internal audit function will be kept under review by the Audit Committee.
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90
Membership, meetings, and evaluation
The Nominations Committee, which is chaired by Tom Burnet, also includes Katie Davis and Rosaleen Blair as
members and is therefore compliant with the requirements of the Code.
The performance of the Nominations Committee was internally evaluated. The evaluation process sought
views from all Directors and the Company Secretary through the completion of a comprehensive questionnaire.
Further details are covered in the ‘Directors’ Report and Corporate Governance’ section of this report.
Survey scores were predominantly in the ‘excellent’ or ‘good’ category.
The results of the evaluation exercise were discussed at the January 2022 Nominations Committee meeting and
presented to the Board, where the Directors were given the opportunity to discuss the results together with
potential improvements that could be made. On review of the results of the evaluation exercise, the Board remains
confident that it is operating effectively and is the right size, with appropriate skills represented.
Responsibilities
The Nominations Committee operates within its terms of reference, which are regularly reviewed and updated and
are available on our website.
The Nominations Committee’s main responsibilities are to advise and make recommendations to the Board on the
following matters:
• The size, structure, and composition of the Board;
• Succession planning of Board members; and
• The appointment of new Directors and the re-appointment of existing Directors.
Matters considered during the year
During the year ended 31 March 2022, the Nominations Committee:
• Considered and reviewed the Board’s composition, focusing on the planned rotation of Non-Executive Directors
to ensure that the independence criteria will continue to be met, that there is continuity at a Board level and
there is improved Board diversity;
• Facilitated the internal Board evaluation exercise; and
• Led succession planning activities at Board and executive level, with a focus on diversity and good practice,
talent retention, training, and development.
Diversity – Board and senior management
In relation to appointments and diversity, the Board believes that better diversity creates a more inclusive
corporate culture and better equips companies to navigate the challenges facing businesses and support long-
term strategic needs. Diversity is viewed by the Board through a broad lens, to include gender, ethnicity, nationality,
skills, social mobility and experience.
The Board acknowledges that achieving diversity in certain sectors, including the technology sector, presents
challenges when considering the profile of the available talent pool in those sectors.
The Board is actively exploring further ways to bolster diversity concentrating on ethnicity, gender and
diversity of experience, with a focus on bringing additional skills to the Board to further support the
Company’s strategic objectives.
For all future Board appointments (and in all succession planning activities undertaken by the Board and the
Company), the Board will proactively ensure that recruitment and selection practices are transparent, fair
and result in appointments based on merit and objective criteria, promoting diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths. In addition, search processes will use a wide range of
channels, including advertising, to encourage applications from diverse candidates with relevant skills,
experience and knowledge.
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CORPORATE GOVERNANCE
Succession planning
The Board recognises the importance of succession planning and the role it plays in maintaining a continuous
level of quality in management and reducing the level of instability that may arise following unforeseen events,
such as the departure of a key individual.
The Nominations Committee formally discusses and reviews succession planning at each meeting; this is a key
area of focus.
As part of succession planning exercises, the Nominations Committee reviews the Kainos executive team and
leadership structures, and the output of this exercise is an input to the training and development plans for senior
executives.
Tom Burnet
Chairman
20 May 2022
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KAINOS GROUP PLC
Independent auditor’s
report
to the members of Kainos Group plc
Report on the audit of the financial statements
1.
Opinion
We have audited the financial statements of Kainos
Group plc (“the Company”) and its consolidated
undertakings (collectively “the Group”) for the year
ended 31 March 2022, which comprise the consolidated
income statement, consolidated statement of
comprehensive income, consolidated statement of
financial position, consolidated statement of changes in
equity, consolidated statement of cash flows, Company
statement of financial position, Company statement of
changes in equity, and the related notes, including the
accounting policies in note 3 to the Group financial
statements and note 2 to the Company financial
statements. The financial reporting framework that has
been applied in their preparation is UK Law, UK adopted
international accounting standards and, as regards the
Company financial statements, UK Law and FRS 101
Reduced Disclosure Framework.
In our opinion:
— the financial statements give a true and fair view of
the state of the Group’s and of the Company’s
affairs as at 31 March 2022 and of the Group’s
profit for the year then ended;
— the Group financial statements have been properly
prepared in accordance with UK adopted
international accounting standards;
— the Company financial statements have been
properly prepared in accordance with FRS 101
Reduced Disclosure Framework issued by the UK’s
Financial Reporting Council; and
— the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the audit committee.
We were first appointed as auditor by the shareholders on
23 September 2021. The period of total uninterrupted
engagement is for the one financial year ended 31 March
2022. We have fulfilled our ethical responsibilities under,
and we remain independent of the Group in accordance
with, UK ethical requirements including the Financial
Reporting Council (FRC)'s Ethical Standard as applied to
listed public interest entities. No non-audit services
prohibited by that standard were provided.
Overview
Materiality:
group financial
statements as a
whole
£2.7m
5% of Group adjusted
profit before tax
Coverage 97% of Group adjusted
profit before tax
Key audit matters
Revenue recognition relating to
misstatement of accrued and deferred
income
Recognition of research and
development credits
Investments in subsidiaries
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FINANCIAL STATEMENTSFINANCIAL STATEMENTS
2.
Conclusions relating to going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group and the Company’s financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at
least a year from the date of approval of the financial statements
(“the going concern period”).
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the Group and
Company’s ability to continue to adopt the going concern basis
of accounting included:
— Obtaining an understanding of the inherent risks to the
Group's and Company's business model and analysed how
those risks might affect the Group and Company's financial
resources or ability to continue operations over the going
concern period.
—
Obtaining an understanding of the directors’ use of the going
concern basis of preparation. This included inspecting their
going concern assessment and associated underlying
forecasts and assumptions, and performing inquiries of
management and those charged with governance.
—
Assessing the appropriateness of key assumptions made in
the Group’s business plan, by comparing them to historical
performance and challenging the achievability of budgeted
growth.
—
Testing the clerical accuracy of the going concern model
including the data used in stress testing.
—
We also compared past budgets to actual results to assess the
directors' track record of budgeting accurately.
—
We considered whether the going concern disclosure in note
3 to the Group financial statements gives an appropriate and
sufficient description of the directors' assessment of going
concern.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group or the Company’s ability to continue as a going concern
for a period of at least twelve months from the date when the
financial statements are authorised for issue.
In relation to the Group and the Company’s reporting on how
they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of
this report.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time
they were made, the absence of reference to a material
uncertainty in this auditor's report is not a guarantee that the
Group or the Company will continue in operation.
3.
Detecting irregularities including fraud
We identified the areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements and risks of material misstatement due to fraud,
using our understanding of the entity's industry, regulatory
environment and other external factors and inquiry with the
directors. In addition, our risk assessment procedures included:
— Inquiring with the directors and other management as to the
Group’s policies and procedures regarding compliance with
laws and regulations, identifying, evaluating and accounting
for litigation and claims, as well as whether they have
knowledge of non-compliance or instances of litigation or
claims.
—
Inquiring of directors as to the Group’s high-level policies
and procedures to prevent and detect fraud, as well as
whether they have knowledge of any actual, suspected or
alleged fraud.
—
Inquiring of directors regarding their assessment of the risk
that the financial statements may be materially misstated due
to irregularities, including fraud.
—
Inspecting the Group’s regulatory and legal correspondence.
—
Reading Board, audit committee, remuneration committee
and nomination committee meeting minutes.
—
Performing planning analytical procedures to identify any
usual or unexpected relationships.
We discussed identified laws and regulations, fraud risk factors
and the need to remain alert among the audit team.
Firstly, the Group is subject to laws and regulations that directly
affect the financial statements including companies and financial
reporting legislation, taxation legislation and distributable profits
legislation. We assessed the extent of compliance with these laws
and regulations as part of our procedures on the related financial
statement items, including assessing the financial statement
disclosures and agreeing them to supporting documentation
when necessary.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance could
have a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation. We identified the following areas as those most likely
to have such an effect: health and safety, anti-bribery,
employment law, environmental law and certain aspects of
company legislation recognising the nature of the Group’s
activities.
Auditing standards limit the required audit procedures to identify
non-compliance with these non-direct laws and regulations to
inquiry of the directors and other management and inspection of
regulatory and legal correspondence, if any. These limited
procedures did not identify actual or suspected non-compliance.
We assessed events or conditions that could indicate an incentive
or pressure to commit fraud or provide an opportunity to commit
fraud. As required by auditing standards, we performed
procedures to address the risk of management override of
controls and the risk of fraudulent revenue recognition. We
identified a fraud risk in relation to the Group revenue
recognition relating to misstatement of accrued income and
deferred income.
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94
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KAINOS GROUP PLC CONTINUED
3.
Detecting irregularities including fraud (continued)
In response to the fraud risks, we also performed procedures including:
— Identifying journal entries to test for all full scope components based on risk criteria and comparing the identified entries to supporting
documentation.
— Evaluating the business purpose of significant unusual transactions.
— Assessing significant accounting estimates for bias.
— Assessing the disclosures in the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in
the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the
financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and
cannot be expected to detect non-compliance with all laws and regulations.
4.
Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
The key audit matter How the matter was addressed in our audit
Revenue recognition
Revenue:
£302.6 million
(2021: £234.7 million)
Refer to Audit
Committee Report
(Significant issues
related to the financial
statement section),
note 3 Significant
Accounting Policies
(revenue section),
note 4 Material
accounting
judgements and key
sources of estimation
uncertainty (Critical
judgements in
applying the Group’s
accounting policies)
and note 5 Segment
reporting.
Revenue recognition relating to
misstatement of accrued and
deferred income
The Group had a range of revenue
streams across its components,
including licensing and services
revenue. There is a risk that
revenue may be recorded on an
inconsistent basis with the
contractual terms agreed with the
customer or not in accordance with
the Group’s accounting policy
regarding revenue recognition or
revenue may not be recognised in
the correct year.
The delivery of licensing or services
revenue may occur over multiple
accounting periods such that the
existence and accuracy of accrued
and deferred income is misstated at
the year end due to incorrect
revenue recognition as a
consequence of either fraud or
error.
Our procedures included, amongst others:
— Control operation: We obtained and documented our understanding of
the process for recording the recognition of revenue and tested the
design and implementation of the relevant control.
— Tests of detail: We examined a sample of contracts to assess revenue
recognition in accordance with the terms of the contracts and the
Group’s accounting policy on revenue recognition.
— We performed testing for a sample of revenue items recorded either
side of the year end to ensure that revenue was recognised in the
correct period.
— We assessed the level of deferred revenue and accrued revenue
recognised at the year end and tested a sample of deferred revenue
and accrued revenue balances to ensure they were in accordance
with the Group’s revenue recognition accounting policies.
— We considered the Group’s revenue accounting policies in accordance
with the requirements of IFRS 15.
— Disclosures: We assessed the disclosures presented in the financial
statements to explain revenue recognition, including key sources of
estimation uncertainty and judgments being applied.
Our results
— The results of our testing were satisfactory and we found the amount of
revenue recognised to be appropriate.
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FINANCIAL STATEMENTSFINANCIAL STATEMENTS
4.
Key audit matters: our assessment of risks of material misstatement (continued)
The key audit matter How the matter was addressed in our audit
Research and
development credits
(‘RDEC’)
RDEC receivable:
£3.2 million
(2021: £2.9 million)
Refer to Audit
Committee Report
(Significant issues
related to the financial
statement section),
note 3 Significant
Accounting Policies
(research and
development
expenditure credit
section) and note 4
Material accounting
judgements and key
sources of estimation
uncertainty (Critical
judgements in
applying the Group’s
accounting policies).
RDEC receivable is
recorded within other
receivables in note 15.
Recognition of research and
development credits
The Group claims research and
development (‘R&D’) tax credits
under the UK Research and
Development Expenditure Credit
scheme.
A key audit matter has been
identified in relation to the
appropriateness of management
judgements regarding eligibility of
costs incurred for the RDEC claims,
together with the adequacy of
disclosure in the financial
statements.
Our procedures included, amongst others:
— Control operation: We obtained and documented our understanding of
the process to calculate the qualifying R&D costs and assess the
eligibility of the year end receivable balance. We tested the design and
implementation of the relevant control.
— Tests of detail: We examined the supporting documentation prepared
by the Group to determine qualifying R&D costs.
— We performed testing for a sample of the R&D costs included in RDEC
claims to underlying workings and documentation.
— We utilised KPMG tax specialists to assist us in assessing the approach
and judgements adopted over the qualifying R&D costs and the
eligibility of those costs for RDEC claims, together with the conclusions
reached by management on the quantification of amounts to be
included in the financial statements.
— Disclosures: We assessed disclosures presented in the financial
statements over RDEC receivable, including key judgments being
applied.
Our results
— The results of our testing were satisfactory and we found
management’s judgement regarding the assessment of the eligibility of
the costs incurred for the RDEC claims receivable to be appropriate and
the disclosures to be adequate.
Investments in
subsidiaries
£6.5 million
(2021: £6.5 million)
Refer to Company note
2 Significant
Accounting Policies
(investment in
financial assets
section) and Company
note 4 Investments in
subsidiaries.
Recoverability of investments in
subsidiary
The Company holds an investment
of £6.5m in subsidiary undertakings
and is accounted for at cost less any
provision made for impairment.
The recoverability of the
investments in subsidiaries is not at
high risk of significant misstatement
or subject to significant judgement.
However, due to their materiality in
the context of the Company
financial statements this is
considered to be the area that had
the greatest effect on our overall
audit of the Company.
Our procedures included, amongst others:
— Tests of detail: We compared the carrying amount of 100% of the
amounts included in investments in subsidiaries with the respective
subsidiaries’ net assets values to identify whether the net assets values,
being an approximation of their minimum recoverable amount, were in
excess of the carrying amount.
— We consider the Group’s market capitalisation to the book value of the
investments in subsidiaries which indicated that the market
capitalisation exceeded the book value by £1.6 billion as at 31 March
2022.
Our results
— The results of our testing were satisfactory and we found the
carrying amount of the investments in subsidiaries to be acceptable.
Kainos Annual Report 2022
96
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KAINOS GROUP PLC CONTINUED
£53.2m
53.2
2.7
Adjusted Group PBT
Group materiality
5.
Our application of materiality and an overview of the scope of
our audit
Materiality for the Group financial statements as a whole was set at
£2.7m, determined with reference to a benchmark of Group profit
before tax, normalised to exclude acquisition related costs and post-
combination remuneration expenses of £7.2m, of which it represents
5%. We consider the basis of our materiality to be one of the important
considerations for shareholders of the Company in assessing the
financial performance of the Group. It is linked to the key earnings
measures discussed when the Group presents the financial results. The
Group’s reported adjusted profit before tax is detailed in note 5. In
addition to acquisition related costs and post-combination
remuneration expenses, the Group also adjusts for amortisation of
purchased intangibles and share based payments expense and related
The components within the scope of our work accounted for the
p
ercentages illustrated below.
The remaining 4% of total Group revenue, 3% of Group profit
before tax and 5% of total Group assets is represented by 13
reporting components, none of which individually represented
more than 1% of any of total Group revenue, Group profit before
tax or total Group assets. For the residual components, we
performed analysis at an aggregated group level to re-examine
our assessment that there were no significant risks of material
misstatement within these.
costs to present adjusted profit before tax; these amounts are not
excluded from our materiality calculation.
Materiality for the Company financial statements as a whole was set at
£1.0m, determined with reference to a benchmark of Company total
assets, of which it represents 1.5%. In line with our audit methodology,
our procedures on individual account balances and disclosures were
performed to a lower threshold, performance materiality, so as to
reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
In applying our judgement in determining the percentage to be applied
to the benchmark for Group and Company, the following qualitative
factors, had the most significant impact, increasing our assessment of
materiality and included:
• the Group has no external debt; and
• the stability of the business environment in which it operates.
We applied Group materiality to assist us determine the overall audit
strategy.
Performance materiality was set at 75% of materiality for the financial
statements as a whole, which equates to £2.0m for the Group and
£0.7m for the Company. In applying our judgement in determining
performance materiality for the Group and Company, the following
factors were considered to have the most significant impact,
increasing our assessment of performance materiality:
• the low number and value of misstatements detected in the prior
year financial statement audit;
• the low number and severity of deficiencies in control activities
identified in the prior year financial statement audit; and
• the stability in the senior management and key financial reporting
personnel over the last three years.
We applied performance materiality to assist us determine what risks
were significant risks and the procedures to be performed.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £130k, in addition to
other identified misstatements that warranted reporting on
qualitative grounds.
Of the Group’s 25 reporting components, we subjected 9 to full scope
audits for group purposes and 3 to specified risk-focused audit
procedures. The latter were not individually financially significant
enough to require a full scope audit for group purposes, but did
present specific individual risks that needed to be addressed.
The work on these components, including the audit of the Company,
was performed by the Group team. The audit was performed using
the materiality levels set out above.
Adjusted group profit
before tax
G
roup revenue
Group total assets
G
roup materiality
£2.7m
£2.7m
Whole financial
statements materiality
£2.0m
Whole financial
statements performance
materiality
£0.1m to £2.2m
Range of materiality at 12
components
£130k
Misstatements reported to
the audit committee
Group adjusted profit before tax
F
ull scope for group audit
purposes 2022
Specified risk-focused audit
procedures 2022
Residual components
4
97%
93
5
95%
90
8
96%
88
Kainos Annual Report 2022
97
FINANCIAL STATEMENTS
6.
We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. The other information comprises the information
included in the Directors’ report and the Strategic report and
Corporate Governance sections of the Annual Report. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
7.
Opinions on other matters prescribed by the Companies Act
2006
Strategic report and directors’ report
Based solely on our work on the other information undertaken
during the course of the audit:
— we have not identified material misstatements in the
strategic report or the directors’ report;
— in our opinion the information given in the strategic report
and the directors’ report for the financial year is consistent
with the financial statements; and
— in our opinion, the strategic report and the directors’ report
have been prepared in accordance with the Companies Act
2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
We have reviewed the directors’ statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
— Directors' statement with regards the appropriateness of
adopting the going concern basis of accounting and any
material uncertainties identified set out in the Directors’
Report and Corporate Governance Statement (Going
concern and long-term viability section);
— Directors’ explanation as to their assessment of the Group's
prospects, the period this assessment covers and why the
period is appropriate set out in the Directors’ Report and
Corporate Governance Statement (Going concern and long-
term viability section);
— Director’s statement on whether it has a reasonable
expectation that the Group will be able to continue in
operation and meets its liabilities set out in the
Directors’
Report and Corporate Governance Statement (Going
concern and long-term viability section);
7.
Opinions on other matters prescribed by the Companies Act
2006 (continued)
— Directors' statement on fair, balanced and understandable
and the information necessary for shareholders to assess the
Group's position and performance, business model and
strategy set out in the Directors’ Report and Corporate
Governance Statement (Responsibility statement of the
directors’ in respect of the annual financial report section);
— Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks and the
disclosures in the annual report that describe the principal
risks and the procedures in place to identify emerging risks
and explain how they are being managed or mitigated set out
in the Strategic Report (Risk factors and uncertainties
section);
— Section of the annual report that describes the review of
effectiveness of risk management and internal control
systems set out in the Audit Committee Report (Risk
management and internal control section); and
— Section describing the work of the audit committee set out in
the Audit Committee Report.
8.
We have nothing to report on the other matters on which
we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
— adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
—
the Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
—
certain disclosures of directors’ remuneration specified by
law are not made; or
—
we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
9.
Respective responsibilities and restrictions on use
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities
statement set out in the Directors’ Report and Corporate
Governance Statement (Directors’ responsibilities statement in
respect of the Annual Report and the financial statements
section), the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error; assessing the Group and Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or
to cease operations, or have no realistic alternative but to do so.
Kainos Annual Report 2022
98
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KAINOS GROUP PLC CONTINUED
9. Respective responsibilities and restrictions on use
(continued)
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud, other irregularities or error,
and to issue an opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise
from fraud, other irregularities or error and are considered
material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities
.
The Company is required to include these financial statements in
an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This
auditor’s report provides no assurance over whether the annual
financial report has been prepared in accordance with that format.
The purpose of our audit work and to whom we owe our
responsibilities
Our report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s 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 and the
Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
John Poole (Senior Statutory Auditor)
for and on behalf of KPMG, Statutory Auditor
Chartered Accountants
The Soloist Building
1 Lanyon Place
Belfast
BT1 3LP
20 May 2022
Kainos Annual Report 2022
99
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2022
Note
2022
(£000s)
2021
(£000s)
CONTINUING OPERATIONS
REVENUE
5 302,632 234,694
Cost of sales
5 (162,386 ) (116,396 )
GROSS PROFIT
5 140,246 118,298
Operating expenses
6 (93,625 ) (68,232 )
Impairment (loss)/gain (including amounts recovered)
on trade receivables and accrued income 24 (606 ) 269
OPERATING PROFIT 46,015 50,335
Finance income
Finance expense
(74 ) (78 )
PROFIT BEFORE TAX 45,993 50,341
Income tax expense 8 (10,225 ) (10,740 )
PROFIT FOR THE YEAR
EARNINGS PER SHARE
Basic
10 29.1 p 32.5 p
Diluted 10 28.5 p 32.1 p
2022
(£000s)
2021
(£000s)
PROFIT FOR THE YEAR 35,768 39,601
Items that may be reclassified subsequently to profit or loss:
Foreign operations – foreign currency translation differences
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Kainos Annual Report 2022
100
Note
2022
(£000s)
2021
(£000s)
NON-CURRENT ASSETS
Goodwill 11 18,765 3,121
Other intangible assets 11 5,993 3,288
Property, plant and equipment 12 14,867 10,287
Right-of-use assets 14 3,166 3,857
Investments in equity instruments 1,343 1,225
Deferred tax asset 16 4,282 4,020
CURRENT ASSETS
Trade and other receivables 15 38,358 36,609
Prepayments 15 4,377 2,777
Accrued income 15 39,462 18,354
Treasury deposits 17 – 18,028
Cash and cash equivalents 17 76,609 62,896
TOTAL ASSETS 207,222 164,462
CURRENT LIABILITIES
Trade payables and accruals 19 (49,199 ) (35,976 )
Deferred income 19 (30,966 ) (21,985 )
Current tax liabilities 19 (1,959 ) (2,863 )
Lease liabilities 18 (1,093 ) (1,249 )
Provisions 20 (872 ) –
Other tax and social security 19 (11,917 ) (10,652 )
(96,006 ) (72,725 )
NON-CURRENT LIABILITIES
Provisions 20 (1,258 ) (1,735 )
Lease liabilities 18 (2,268 ) (2,394 )
(3,526 ) (4,129 )
TOTAL LIABILITIES (99,532 ) (76,854 )
NET ASSETS 107,690 87,608
EQUITY
Share capital 21 619 614
Share premium account 6,433 5,737
Capital reserve 3,548 662
Share-based payment reserve 15,171 9,083
Translation reserve 251 (477 )
Retained earnings 81,668 71,989
TOTAL EQUITY 107,690 87,608
These financial statements were approved by the Board of Directors and authorised for issue on 20 May 2022.
They were signed on its behalf by:
Richard McCann
Director
20 May 2022
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2022
Kainos Annual Report 2022
101
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2022
Share
capital
(£000s)
Share
premium
(£000s)
Capital
reserve
(£000s)
Share-
based
payment
reserve
(£000s)
Translation
reserve
(£000s)
Retained
earnings
(£000s)
Total
equity
(£000s)
BALANCE AT 31 MARCH 2020 610 5,446 664 5,610 655 46,169 59,154
Profit for the year
Other comprehensive income
Total comprehensive income for the year – – – – (1,132 ) 39,601 38,469
Equity-settled share-based payment
Current tax for equity-settled
share-based payments
Deferred tax for equity-settled
share-based payments
Issue of share capital
Dividends
BALANCE AT 31 MARCH 2021 614 5,737 662 9,083 (477 ) 71,989 87,608
Profit for the year
Other comprehensive income
Total comprehensive income for the year – – – – 728 35,768 36,496
Equity-settled share-based payment
Current tax for equity-settled
share-based payments
Deferred tax for equity-settled
share-based payments
Issue of share capital – share options
exercised
Issue of shares as purchase consideration – – 1,286 – – – 1,286
Transfer between reserves
19
Dividends
BALANCE AT 31 MARCH 2022
20
19 Premium on shares issued as consideration in FY20 reclassified from share premium account to capital reserve, in accordance with the requirements of
the Companies Act 2006, S612.
20 £10.3 million relates to exercised or lapsed options and is considered distributable.
Kainos Annual Report 2022
102
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2022
Note
2022
(£000s)
2021
(£000s)
CASH FROM OPERATING ACTIVITIES
PROFIT FOR THE YEAR 35,768 39,601
Adjustments for:
Finance income (52 ) (84 )
Finance expense 74 78
Tax expense 8 10,225 10,740
Share-based payment expense 3,727 4,513
Depreciation of property, plant and equipment 12 1,538 921
Depreciation of right-of-use assets 14 1,654 1,786
Amortisation of intangible assets 11 1,890 383
Loss on disposal of property, plant and equipment 8 114
Post-acquisition remuneration settled by shares 2,950 760
Increase/(decrease) in provisions 20 395 (793 )
OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING CAPITAL 58,177 58,019
Increase in trade and other receivables (22,996 ) (9,262 )
Increase in trade and other payables 16,571 18,397
CASH GENERATED FROM OPERATING ACTIVITIES 51,752 67,154
Income taxes paid (7,089 ) (7,213 )
NET CASH FROM OPERATING ACTIVITIES 44,663 59,941
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 52 84
Purchases of property, plant and equipment 12 (5,819 ) (1,468 )
Acquisition of other investments (74 ) (200 )
Amounts withdrawn/(placed) on treasury deposit 17 18,028 (18,028 )
Acquisition of subsidiaries net of cash acquired 26 (16,768 ) –
NET CASH USED IN INVESTING ACTIVITIES (4,581 ) (19,612 )
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 9 (27,419 ) (16,026 )
Interest paid (74 ) (78 )
Repayment of lease liabilities (1,409 ) (1,763 )
Proceeds on issue of shares 2,301 293
NET CASH USED IN FINANCING ACTIVITIES (26,601 ) (17,574 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 13,481 22,755
Cash and cash equivalents at beginning of year 17 62,896 40,785
Effect of exchange rate fluctuations on cash held 232 (644 )
CASH AND CASH EQUIVALENTS AT END OF YEAR 76,609 62,896
Kainos Annual Report 2022
103
FINANCIAL STATEMENTS
1. General information and basis of preparation
under the Companies Act 2006 and is registered in England and Wales (company registration number 09579188),
having its registered office at 21 Farringdon Road, 2nd Floor, London EC 1M 3HA. The Company is listed on the
London Stock Exchange.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the
‘Group’). The parent company financial statements present information about the Company as a separate entity
and not about its Group.
The Group financial statements have been prepared and approved by the Directors in accordance with UK-
adopted International Accounting Standards (‘UK-Adopted IFRS’). The Company has elected to prepare its
parent company financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (‘FRS101’). The financial statements are presented in Pounds Sterling, generally rounded to the
nearest thousand.
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became
UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK
Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards in its
consolidated financial statements on 1 April 2021. This change constitutes a change in accounting framework
however, there is no impact on recognition, measurement or disclosure.
The Group financial statements are prepared on a historical cost basis except for the following items which are
measured at fair value or grant date fair value:
• share-based payment arrangements;
• business combinations; and
• equity investments that are in the scope of IFRS9.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods
presented in these consolidated financial statements and have been applied consistently by the Group other than
those detailed in changes in accounting policies.
The financial statements were authorised for issue by the Directors on 20 May 2022.
2. Adoption of new and revised standards
In the current year, the Group and Company have applied the following standards and amendments that are
effective for an annual period that begins on or after 1 January 2021. Their adoption has not had any material
impact on the disclosures or on the amounts reported in these financial statements.
Amendments to IFRS16: Covid-19 Related Rent Concessions
Amendments to IFRS9, IAS39, IFRS7, IFRS4 and IFRS16: Interest Rate Benchmark Reform – Phase 2
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Kainos Annual Report 2022
104
New and revised IFRS standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised
UK-adopted IFRS standards that have been issued but are not yet effective.
Amendments to IAS37: Onerous Contracts – Cost of Fulfilling a Contract 1 January 2022
Amendments to References to the Conceptual Framework in IFRS3 1 January 2022
Amendments to IAS16: Property, Plant and Equipment – Proceeds before Intended Use 1 January 2022
Annual Improvements to IFRS Standards 2018-2020 1 January 2022
Amendments to IAS8 Accounting Policies, Changes in Accounting Estimates and Errors
to introduce a new definition for accounting estimates
1 January 2023*
Amendments to IAS1 Presentation of Financial Statements and IFRS Practice Statements
2 Making Materiality Judgements
1 January 2023*
Amendments to IAS12 Income Taxes – Deferred Tax Related to Assets and Liabilities
Arising from a Single Transaction 1 January 2023*
IFRS17 Insurance Contracts 1 January 2023*
Amendments to IAS1 Presentation of Financial Statements: Classification of Liabilities as
Current or Non-current and Classification of Liabilities as Current or Non-current
On hold
*Not yet endorsed by the UK endorsement board.
The Directors do not expect that the adoption of the standards listed above will have a material impact on the
financial statements of the Group in future periods.
3. Significant accounting policies
Going concern
The financial statements have been prepared on a going concern basis.
The Directors consider there to be no material uncertainties that may cast significant doubt on the Group and
Company’s ability to continue to operate as a going concern. The Directors have a reasonable expectation that
the Group and the Company have adequate resources to continue in operational existence for the foreseeable
future, being at least 12 months from the date when these financial statements are authorised for issue.
Accordingly, they continue to adopt the going concern basis in the preparation of these financial statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and
position are summarised in the Strategic Report. The principal risks, uncertainties and risk management
processes are also described in the Strategic Report. The Group’s policies and objectives with regards to financial
risk management is further described in note 24 of the financial statements.
Functional and presentational currency
These consolidated financial statements are presented in Pounds Sterling, which is the Company’s functional
currency.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from
the date on which control commences until the date on which control ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency
transaction gains or losses) arising from intra-group transactions, are eliminated.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
105
FINANCIAL STATEMENTS
Business combinations
Acquisitions of businesses are accounted for using the acquisition method.
The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at
acquisition date fair value, and the amount of any non-controlling interests in the acquiree. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS3
Business Combinations are recognised at their fair values at the acquisition date.
Any deferred and contingent consideration is measured at fair value at the date of acquisition. If an obligation to
pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is
not remeasured, and settlement is accounted for within equity. Otherwise, other contingent consideration is
remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss. Deferred and contingent consideration that is assessed as being
payment for post-combination services (remuneration) is expensed as incurred in the post-combination period.
Acquisition-related costs, other than those associated with the issue of debt or equity securities, are expensed as
incurred and included in operating expenses.
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• if the business combination is achieved in stages, the fair value of the existing equity interest in the
acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Identifiable intangibles are those which can be sold separately, or which arise from contractual or legal rights
regardless of whether those rights are separable.
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing,
goodwill acquired in a business combination is allocated to the cash-generating unit which represents the lowest
level within the Group at which goodwill is monitored. Cash-generating units to which goodwill has been allocated
are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired.
If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
Revenue
Revenue is recognised to depict the transfer of promised services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those services. The Group has adopted the
five-step approach to the timing of revenue recognition based on performance obligations in customer contracts.
This involves identifying the contract with customers, identifying the performance obligations, determining the
transaction price, allocating the price to the performance obligations within the contract and recognising revenue
when the performance obligations are satisfied.
Revenue from the Group’s activities is recognised as detailed below.
The Group recognises a contract asset (accrued income) when the value of the satisfied performance obligations
is in excess of the payment due to the Group or a contract liability (deferred income) when the amount of
unconditional consideration is in excess of the value of satisfied performance obligations. Once a right to receive
consideration is unconditional, that amount is recognised as a receivable.
Contract assets are represented by accrued income (note 15) and contract liabilities are represented by deferred
income (note 19) and onerous contract provisions (note 20).
Kainos Annual Report 2022
106
Service revenue
Time and materials contracts
Contracts for the provision of software-related services generally tend to be ‘time and materials’ contracts
whereby the customer is contractually bound to pay for services for each hour or day spent in delivering a
contractually agreed services scope. These contracts typically have no payment milestones, refunds or bundling
with other services or products. Such services are recognised as a performance obligation satisfied over time in
line with the chargeable ‘time and materials’ which are allocated to the contracted project.
Fixed price contracts
Other contracts for the provision of software-related services are contracted on a fixed price basis. The Directors
have assessed that the stage of completion determined as a proportion of the total hours expected for the project
that has elapsed at the end of the reporting period is an appropriate measure of progress towards complete
satisfaction of the performance conditions under IFRS15. This is reviewed on a monthly basis. Payment for services
are not due from the customer unless milestones have been achieved or the project is complete, therefore a
contract asset is recognised over the period in which the services are performed representing the Group’s right to
consideration for the services performed to date. Where costs are anticipated to be in excess of revenues an
onerous contract will be recognised.
Support
Revenue relating to support services are recognised over time. The transaction price allocated to these services is
recognised as a contract liability at the time of the initial sales transactions and is released on a straight-line basis
over the contracted term in line with the estimated delivery of performance obligations.
Third party goods
Revenue from the sale of goods is recognised when control of the goods has transferred to the customer, usually
on delivery of the goods.
Software as a Service (SaaS)
SaaS is charged on a subscription basis and the revenue is recognised pro-rata over the period that the service
is provided.
Managed service subscription
Subscription revenue for the management of software applications for customers in the cloud will be recognised
pro-rata over the period the service is provided.
Commission revenue
Commission income is earned when the Group secures orders for end-user access to Workday Adaptive
Planning software. Depending on the terms of the underlying agreement with Workday, Inc., performance
obligations are either satisfied at the point the order is secured or over the subscription period and revenue is
recognised accordingly.
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 unless another systematic basis is more representative
of the time pattern in which economic benefits of the lease are consumed.
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 when it can be readily determined. If this
rate cannot be readily determined the Group uses its incremental borrowing rate, which is typically applied.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
107
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
The lease liability is presented as a separate line in the consolidated statement of financial position.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use
asset) whenever:
• The lease term has changed or there is a significant event or change in circumstances resulting in a change in
the assessment, in which case the lease liability is remeasured by discounting the revised lease payments using
a revised discount rate.
• The lease payments change due to a change in expected payment under a guaranteed residual value, in
which case the lease liability is remeasured by discounting the revised lease payments using an unchanged
discount rate.
• A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case
the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease
payments using a revised discount rate at the effective date of the modification.
Right-of-use asset
The right-of-use asset comprises the initial measurement of the corresponding lease liability, lease payments
made at or before the commencement day, less any lease incentives received and plus any initial direct costs. It is
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 at commencement of the lease 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.
The depreciation starts at the commencement date of the lease. The Group does not have any leases that include
purchase options or that transfer ownership of the underlying asset at the end of the lease term.
The Group applies IAS36 to determine whether a right-of-use asset is impaired and accounts for any identified
impairment loss as described in the ‘Property, Plant and Equipment’ policy.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currencies of Group companies at
the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at
the exchange rate at the reporting date. Non-monetary items that are measured based on historical cost in a
foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences
are generally recognised in profit or loss and presented within operating expenses.
Foreign operations
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated into GBP at the exchange rates at the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during
that period, in which case the exchange rates at the date of transactions are used. Foreign currency differences
are recognised in the statement of comprehensive income and accumulated in the translation reserve until the
foreign operation is disposed of, at which point the relevant proportion of the accumulated amount is recycled
to profit or loss.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be received. Government grants that compensate the Group
for expenses incurred are recognised in profit and loss on a systematic basis in the periods in which the related
costs for which the grants are intended to compensate are recognised. The Group has elected to present grants
related to income as a reduction to the related expense within operating expenses.
Kainos Annual Report 2022
108
Research and Development Expenditure Credit
Research and Development Expenditure Credits are accounted for as having the substance of a government
grant and accordingly this income is accounted for under IAS20 Accounting for Government Grants. The grants
are recognised on the basis of the fair value of claims made and are recognised within operating expenses in the
profit and loss. A corresponding other receivable is recognised at the time the grants are earned.
Retirement benefit costs
The Group operates three defined contribution pension schemes and the pension charge represents the amounts
payable by the Group to the funds in respect of the year. Differences between contributions payable in the year and
contributions actually paid are shown as either accruals or prepayments in the statement of financial position.
Taxation
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that
it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
A provision is recognised for those matters for which the tax determination is uncertain, but it is considered
probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best
estimate of the amount expected to become payable. The assessment is based on the judgement of tax
professionals within the Company supported by previous experience in respect of such activities and in certain
cases based on specialist independent tax advice.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the income statement because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit. In addition, a deferred tax liability is
not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only recognised to the extent that it is
probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary
differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the
asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or
the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the
reporting date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
109
FINANCIAL STATEMENTS
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Property, plant and equipment
Property under construction is carried at cost, less any recognised impairment loss. Cost includes professional
fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy.
Depreciation of these assets, determined on the same basis as other property assets, commences when the assets
are ready for their intended use.
Property, plant and equipment assets are stated at cost less accumulated depreciation and accumulated
impairment loss.
Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and
property under construction) less their residual values over their useful lives, using the straight-line method,
on the following bases:
Long-term leasehold property 2.5%
Leasehold improvements Over the term of the lease up to five years
Fixtures and fittings 20%
Office equipment 25%-33%
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any).
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. The gain or loss arising on the disposal or scrappage of an
asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in the income statement.
Acquired intangible assets
Separately identified intangible assets acquired in a business combination are initially recognised at their fair
value (which is regarded as their cost). Intangible assets are subsequently stated at fair value or cost less
accumulated amortisation and any accumulated impairment losses. Amortisation is recognised on a straight-line
basis over the estimated useful life of the asset. The carrying value of intangible assets is reviewed for impairment
if events or changes in circumstances indicate the carrying value may not be recoverable.
Estimated useful lives typically applied are as follows:
• Customer relationships – over 3-7 years
• Order backlog – over 10-15 months
Kainos Annual Report 2022
110
Internally generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from development (or from the development phase of an internal
project) is recognised if, and only if, all of the following conditions have been demonstrated:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the recognition criteria listed above. Where no internally
generated intangible asset can be recognised, development expenditure is recognised in the income statement in
the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately
in profit or loss.
Trade receivables
Trade receivables, which typically have 30-day credit terms, are initially recognised and carried at their original
invoice amount. Given the short lives of the trade receivables, there are generally no material fair value movements
between initial recognition and the derecognition of the receivable and are subsequently stated at cost less
expected credit losses. The Group applies the simplified approach which requires expected lifetime losses to be
recognised from the initial recognition of the receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months
or less. All of the cash and cash equivalents balance is available for use by the Group.
Treasury deposits represent bank deposits with an original maturity of over three months and are held with a
fixed rate of interest. Treasury deposits are held to collect and are SPPI (solely payments of principal and
interest) compliant.
The Group has not recognised an expected credit loss on cash and cash equivalents as it is deemed not material.
Investments in financial assets
Investments in equity shares, which are all unquoted equity investments, are stated at fair value through profit or
loss (FVTPL).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
111
FINANCIAL STATEMENTS
Impairment of financial assets
The Group recognises a loss allowance at an amount equal to lifetime expected credit loss (ECL) on trade
receivables and accrued income in accordance with the simplified approach as set out in IFRS9. The ECL is
updated at each reporting date to reflect changes in credit risk.
The Group measures loss allowances at an amount equal to lifetime ECL, except for bank balances for which
credit risk (i.e., the risk of default occurring over the expected life of the financial instrument) has not increased
significantly since initial recognition, which are measured as 12-month ECL. Loss allowances for trade receivables
and contract assets are always measured at an amount equal to lifetime ECL.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition
and when estimating ECL, the Group considers any change in credit quality of the amounts owing from the date
the credit was initially granted up to the reporting date. This includes both quantitative and qualitative information
and analysis, based on the Group’s historical experience and informed credit assessment and including forward-
looking information.
ECLs are a probability-weighted estimate of credit losses estimated using a provision matrix.
The Group recognises a loss allowance of 100% against all receivables older than six months at the reporting date.
Financial liabilities
Financial liabilities are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently
measured at amortised cost using the effective interest method, with interest expense recognised on an effective
yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability,
or where appropriate, a shorter period, to the amortised cost of a financial liability.
Derecognition of financial assets and financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and
the consideration paid and payable is recognised in profit or loss.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to
another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received, and the
amount of the receivable can be measured reliably.
Kainos Annual Report 2022
112
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous
contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received under it.
Share-based payments
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at
the grant date. The fair value excludes the effect of non-market-based vesting conditions.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest.
At each statement of financial position date, the Group revises its estimate of the number of equity instruments
expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the share-based payment reserve.
The fair value of the amount payable to employees in respect of share options settled in cash is recognised as an
expense with a corresponding increase in liabilities, over the period during which the employees become
unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date
based on the fair value of the options. Any changes in the liability are recognised in profit or loss.
4. Material accounting judgements and key sources of estimation uncertainty
In applying the Group’s accounting policies, which are described in note 3, the Directors are required to make
judgements (other than those involving estimations) that have a significant impact on the amounts recognised
and to make estimates and assumptions about the carrying amounts of the assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations (which are presented separately
below), that the Directors have made in the process of applying the Group’s accounting policies and that have the
most significant effect on the amounts recognised in financial statements.
Product development expenditure
The Group invests on a continual basis in the development of new and enhanced features in the product suite.
There is a continual process of enhancements to and expansion of the overall product suite. Judgement is
required in assessing whether the development costs meet the criteria for capitalisation. These judgements have
been applied consistently year to year. In making this judgement, the Group evaluates, amongst other factors,
whether there are future economic benefits beyond the current period, the stage at which technical feasibility has
been achieved, management’s intention to complete and use or sell the product, the likelihood of success,
availability of technical and financial resources to complete the development phase and management’s ability to
measure reliably the expenditure attributable to the project. Research and product development expenditure
incurred on minor or major upgrades, or other changes in software functionality, does not satisfy the criteria in
order to capitalise. Such expenditure is therefore recognised as an expense.
Therefore, judgement is required in determining the practice for capitalising development costs. The accounting
policy for research and product development is in note 3 and in the current year there are no development
expenses that have been capitalised (2021: £nil). The total product development expenditure in the period is
£6.2 million (2021: £4.2 million). R&D expenditure credit (‘RDEC’) grants received from HMRC and product
development expenditure incurred are presented gross in note 6.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
113
FINANCIAL STATEMENTS
Generally, commercial viability of new products is not proven until all high-risk development issues have been
resolved through testing pre-launch versions of the product. As a result, technical feasibility is proven only after
completion of the detailed design phase and formal approval, which occurs just before the products are ready to go
to market. Certain development costs are incurred for specific projects and there is a lack of certainty that the work
may have future economic benefit on future projects. Accordingly, development costs have not been capitalised.
Costs which are incurred after the general release of internally generated software, or costs which are incurred in
order to enhance existing products are expensed in the period in which they are incurred and included within the
research and development expense in the financial statements.
RDEC income
Judgements are made regarding the assessment of the eligibility of product development expenditure incurred for
RDEC claims. The Group’s assessment of eligible expenditure must align with the definition of R&D for RDEC
purposes. This assessment is more difficult in some industries such as software development resulting in judgement
over the qualifying R&D costs and the eligibility of these costs for the RDEC claim. The unrecognised component of
RDEC as at 31 March 2022 is £5.0 million (2021: £4.6 million) and represents the Group’s determination of the value
subject to this judgement. This portion is recognised when this judgement has been removed either via formal
acceptance of the claim value submitted or the expiry of the enquiry window. The net value of RDEC receivable as
at 31 March 2022 is £3.2 million (2021: £2.9 million) and is included within other receivables in the statement of
financial position.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period
that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are discussed below.
Revenue recognition
Service revenue
Kainos charges for its digital services on a time and materials or fixed price basis. Where there are fixed price
contracts, revenue is recognised based on the stage of completion. Stage of completion is measured by reference
to costs incurred to date as a percentage of total estimated costs. The Group estimates costs to complete
its contractual obligations by reference to the current run rate of these costs until contractual completion.
The estimation of stage of completion is sensitive to future uncertainties such as technical challenges, timescale
changes and commercial issues. During the year revenue relating to fixed price project income was £24.4 million
(2021: £15.6 million). The associated carrying values of accrued and deferred income at 31 March 2022 were
£5.1 million (2021: £2.9 million) and £2.1 million (2021: £0.7 million) respectively.
5. Segment reporting
All of the Group’s revenue during the year ended 31 March 2022 and for the year ended 31 March 2021 was derived
from continuing operations.
The Group’s Executive Directors are considered to be the Chief Operating Decision Maker (CODM) of the Group.
They use internal management reports to assess both performance and strategy of the Group and the two specialist
business areas: Digital Services and the Workday Practice. Accordingly, management has determined the reportable
segments of the Group to be these areas. No aggregation of segments has occurred for reporting purposes.
Our Digital Services include full lifecycle development and support of customised Digital Services for public sector,
healthcare and commercial customers.
Our Workday Practice is closely linked to Workday, Inc.’s software suite, which includes cloud-based software for
Human Capital Management (‘HCM’), Financial Management and Planning, enabling enterprises to organise their
staff efficiently and support their financial reporting requirements. We have developed two proprietary software
tools, Smart Test and Smart Audit (collectively ‘Smart’).
Kainos Annual Report 2022
114
The following is an analysis of the Group’s revenue and results by reportable segment:
2022
12 months to 31 March
Digital Services
(£000s)
Workday Practice
(£000s)
Consolidated
(£000s)
REVENUE 199,831 102,801 302,632
Cost of sales (122,430) (39,956) (162,386)
GROSS PROFIT 77,401 62,845 140,246
Direct expenses
21
(21,723) (37,598) (59,321)
CONTRIBUTION 55,678 25,247 80,925
Central overheads
21
(22,132)
Net finance expense (22)
ADJUSTED PRE-TAX PROFIT 58,771
Share-based payments expense and related costs (3,727)
Amortisation of acquired intangible assets (1,890)
Compensation for post-combination remuneration (5,520)
Acquisition-related expenses (1,641)
PROFIT BEFORE TAX 45,993
2021
12 months to 31 March
Digital Services
(£000s)
Workday Practice
(£000s)
Consolidated
(£000s)
REVENUE 161,572 73,122 234,694
Cost of sales (89,578) (26,818) (116,396)
GROSS PROFIT 71,994 46,304 118,298
Direct expenses
21
(16,419) (27,366) (43,785)
CONTRIBUTION 55,575 18,938 74,513
Central overheads
21
(17,446)
Net finance income 6
ADJUSTED PRE-TAX PROFIT 57,073
Share-based payments expense and related costs (4,513)
Amortisation of acquired intangible assets (383)
Compensation for post-combination remuneration (1,836)
PROFIT BEFORE TAX 50,341
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
21 Direct expenses plus central overheads plus share-based payment expense and acquisition-related expenses (including amortisation of acquired
intangible assets and compensation for post-combination remuneration) equals the sum of operating expenses plus impairment losses and reversals
on trade receivables and accrued income. Direct expenses are expenses that are directly attributable to each division.
Kainos Annual Report 2022
115
FINANCIAL STATEMENTS
The Group’s revenue from external customers by geographic location is detailed below:
2022
(£000s)
2021
(£000s)
United Kingdom & Ireland 215,606 175,710
North America 58,712 38,099
Central Europe 27,125 19,631
Rest of world 1,189 1,254
302,632 234,694
Disaggregation of the Group’s revenue is presented in the following tables:
Digital
Services
2022
(£000s)
Digital
Services
2021
(£000s)
Workday
Practice
2022
(£000s)
Workday
Practice
2021
(£000s)
Total
2022
(£000s)
Total
2021
(£000s)
Type of revenue
Services 188,630 151,163 64,475 46,920 253,105 198,083
SaaS and related 5,947 5,385 38,295 26,159 44,242 31,544
Third party and other 5,254 5,024 31 43 5,285 5,067
199,831 161,572 102,801 73,122 302,632 234,694
Revenue recognition
At a point in time 5,254
5,024
31 43 5,285 5,067
Over time 194,577 156,548 102,770 73,079 297,347 229,627
199,831
161,572
102,801 73,122 302,632 234,694
Digital Services
2022
(£000s)
2021
(£000s)
Public
108,400 102,180
Commercial
25,120 15,653
Healthcare
66,311 43,739
199,831 161,572
Workday Practice
Public
2,582 3,314
Commercial
98,678 65,428
Healthcare
1,541 4,380
102,801 73,122
Total
302,632 234,694
Kainos Annual Report 2022
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Revenue for the Workday Practice can also be analysed as follows:
2022
(£000s)
2021
(£000s)
Workday Practice
Workday Services
70,868 48,972
Smart
31,933 24,150
102,801 73,122
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in
note 3. Segment assets and liabilities are not reported to the CODM on a segmental basis and are therefore not
disclosed.
The following table provides information about receivables, accrued income and deferred income from contracts
with customers.
Note
2022
(£000s)
2021
(£000s)
Trade receivables 15 35,228 33,739
Accrued income 15 39,462 18,354
Deferred income 19 (30,966) (21,985)
Accrued income relates to the Group’s right to consideration for work completed and delivered but not invoiced
as at year end and is transferred to trade receivables when an invoice is issued to the customer. Customers are
typically invoiced on a monthly basis and consideration is payable when invoiced. During the year £18.4 million
(2021: £16.9 million) of accrued income recognised at 31 March 2021 (31 March 2020) was invoiced.
Deferred income relates to advance consideration received from customers, where revenue is recognised over
time as the services are provided/delivered to customers. During the year, all of the opening deferred revenue
balance (2021: all) has been recognised as revenue.
The aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations at the end
of the reporting period is £259.7 million (2021: £206.2 million). The majority of this balance will be recognised within
12 months of the reporting date.
The Group’s non-current assets (excluding deferred tax assets) are located as follows:
2022
(£000s)
2021
(£000s)
Northern Ireland 16,318 13,091
Rest of UK 3,815 3,585
Republic of Ireland – 1
United States of America 12,748 3,654
Finland 8,737 –
Other 2,516 1,447
Significant customer
No single customer contributed 10% or more to the Group’s revenue for the year ended 31 March 2022.
One customer, a Digital Services client, accounted for £22.5 million or 10% of total Group revenue during the year
ended 31 March 2021.
Kainos Annual Report 2022
117
FINANCIAL STATEMENTS
6. Profit for the year
Profit for the year has been arrived at after charging/(crediting):
Note
2022
(£000s)
2021
(£000s)
Total staff costs 7 168,395 125,962
Government grants (479) (2,193)
Research and development expensed as incurred 6,176 4,162
Research and Development Expenditure Credit (3,205) (3,643)
Depreciation of property, plant and equipment 12 1,538 921
Depreciation of right-of-use assets 14 1,654 1,786
Loss on disposal of property, plant and equipment 8 114
Net foreign exchange loss/(gain) 62 (128)
Amortisation of acquired intangibles 11 1,890 383
The analysis of auditor’s remuneration is as follows:
2022
(£000s)
2021
(£000s)
Fees payable to the Group’s auditor for the audit of the Group’s annual accounts 93 72
Fees payable to the Group’s auditor for the audit of subsidiaries 57 38
Total audit fees 150 110
Fees payable to the Group’s auditor for other services to the Group:
Review of interim report 23 17
Total audit-related fees 173 127
Non-audit fees – –
Total audit and non-audit fees 173 127
Total % of non-audit fees 0% 0%
7. Staff numbers and costs
The average number of persons employed by the Group during the year, analysed by category, is as follows:
2022
Number
2021
Number
Technical 1,705 1,283
Administration 234 190
Sales 158 111
2,097 1,584
The aggregate payroll costs of these persons were as follows:
Note
2022
(£000s)
2021
(£000s)
Wages and salaries 141,588 105,972
Social security costs 14,120 10,946
Contributions to defined contribution plans 6,010 4,531
Share-based payments 22 6,677 4,513
168,395 125,962
Kainos Annual Report 2022
118
The split of remuneration between cost of sales and operating expenses is as follows:
2022
(£000s)
2021
(£000s)
Cost of sales 99,999 72,164
Operating expenses 68,396 53,798
168,395 125,962
8. Tax expense
The following tax was recognised in recognised in the income statement:
Note
2022
(£000s)
2021
(£000s)
CURRENT TAX EXPENSE:
Current year (UK) 7,882 9,233
Current year (overseas) 4,011 2,433
Adjustments in respect of prior years (1,043) (47)
10,850 11,619
DEFERRED TAX 16
Origination and reversal of temporary differences (1,187) (879)
Adjustment to prior years 637 –
Change in tax rate (75) –
(625) (879)
10,225 10,740
In addition to the amount charged to the statement of comprehensive income, the following amounts relating to
tax have been recognised directly in relation to share-based payments.
2022
(£000s)
2021
(£000s)
CURRENT TAX
Permanent element of share-based payment deduction 1,610 441
DEFERRED TAX
Deferred tax on share-based payments (883) 1,804
Effect of rate change 603 –
Total tax recognised directly in equity 1,330 2,245
UK corporation tax has been calculated at 19% (2021: 19%) of the estimated taxable profit for the year, the
prevailing rate at the balance sheet date. Taxation for other jurisdictions is calculated at the rates prevailing in
the respective jurisdictions. The effective tax rate for 2022 was 22% (2021: 21%).
On 24 May 2021, the UK Finance Act 2021 was substantively enacted, increasing the corporate tax rate to 25%
effective from 1 April 2023. The change to the main rate of corporation tax was substantively enacted by the
balance sheet date and therefore included in these financial statements. Temporary differences have been
remeasured using these enacted tax rates that are expected to apply when the liability is settled, or the asset
realised. The impact of this remeasurement has resulted in an uplift in deferred tax assets of £0.9 million.
We envisage our future effective tax rates to be broadly in line with the main UK corporation tax rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
119
FINANCIAL STATEMENTS
The Group’s tax charge can be reconciled to the profit in the income statement and effective tax rate as follows:
2022
(£000s)
2021
(£000s)
Profit before tax on continuing operations 45,993 50,341
Tax at the UK corporation tax rate of 19% (2021: 19%) 8,739 9,565
Expenses not deductible for tax purposes 1,050 544
Tax exempt income (35) (60)
Effect of foreign exchange on consolidation 214 (65)
Effect of tax rates in foreign jurisdictions 671 803
Adjustments to tax charge in respect of prior years (406) (47)
Change in UK tax rates (8) –
Tax expense for the year 10,225 10,740
Effective tax rate 22% 21%
9. Dividends
2022
(£000s)
2021
(£000s)
Amounts recognised as distributions to equity holders in the period:
Interim dividend for 2022 of 7.1p per share 8,774 –
Final dividend for 2021 of 15.1p per share 18,645 –
Interim dividend for 2021 of 6.4p per share – 7,831
Special dividend paid September 2020 of 6.7p per share – 8,195
27,419 16,026
The Board has proposed a final dividend in respect of the year ended 31 March 2022 subject to approval by
shareholders at the Annual General Meeting. This dividend has not been recognised as a liability in these financial
statements and there are no tax consequences. The proposed final dividend, if approved by shareholders, will be
15.1p per share (£18.7 million in total) and payable on 28 October 2022 to all shareholders on the Register of
Members on 7 October 2022, and with an ex-dividend date of 6 October 2022.
Kainos Annual Report 2022
120
10. Earnings per share
Basic
The calculation of basic earnings per share (EPS) has been based on the following profit attributable to ordinary
shareholders and weighted-average number of ordinary shares outstanding.
2022
(£000s)
2021
(£000s)
Profit attributable to ordinary shareholders 35,768 39,601
Thousands Thousands
Issued ordinary shares at 1 April
122,785 122,089
Effect of shares held in trust (863) (917)
Effect of share options vested and exercised
802 646
Effect of shares issued related to a business combination
31 –
Effect of shares issued related to free share awards
49 80
Weighted average number of ordinary shares at 31 March
122,804 121,898
Basic earnings per share 29.1p 32.5p
Diluted
The calculation of diluted EPS has been based on the following profit attributable to ordinary shareholders and
weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential
ordinary shares.
2022
(£000s)
2021
(£000s)
Profit attributable to ordinary shareholders 35,768 39,601
Thousands Thousands
Weighted average number of ordinary shares (basic)
122,804 121,898
Effect of share options in issue 1,256 611
Effect of shares held in trust
863 917
Effect of potential shares to be issued related to a business combination
410 –
Weighted average number of ordinary shares (diluted) at 31 March
125,333 123,426
Diluted earnings per share 28.5p 32.1p
The average market value of the Company’s shares for the purpose of calculating the dilutive effect of share
options was based on quoted market prices for the year during which the options were outstanding.
At 31 March 2022, 39,451 options (2021: 47,067) were excluded from the diluted weighted average number of
ordinary shares calculation because their effect would have been anti-dilutive.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
121
FINANCIAL STATEMENTS
Adjusted
Adjusted basic and adjusted diluted earnings per share is calculated using the adjusted profit for the year measure.
2022
(£000s)
2021
(£000s)
Adjusted profit for the year 47,726 45,400
Thousands Thousands
Weighted average number of ordinary shares for the purposes of
basic earnings per share
122,804 121,898
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
125,333 123,426
Adjusted basic earnings per share 38.9p 37.2p
Adjusted diluted earnings per share 38.1p 36.8p
11. Intangible assets and goodwill
Cost
Goodwill
(£000s)
Order
backlog
(£000s)
Customer
relationships
(£000s)
Total
(£000s)
At 1 April 2020
3,220 – 4,045 7,265
Exchange adjustments
(99) – (328) (427)
At 31 March 2021
3,121 – 3,717 6,838
Exchange adjustments
11 53 176 240
Acquisitions through business combinations
15,633 1,016 3,378 20,027
At 31 March 2022
18,765 1,069 7,271 27,105
Amortisation and impairment
At 1 April 2020
– – 56 56
Charge for the year
– – 383 383
Exchange adjustments
– – (10) (10)
At 31 March 2021
– – 429 429
Charge for the year
– 328 1,562 1,890
Exchange adjustments
– 5 23 28
At 31 March 2022
– 333 2,014 2,347
Carrying amount
At 31 March 2022
18,765 736 5,257 24,758
At 31 March 2021
3,121 – 3,288 6,409
Amortisation of customer relationships is calculated using the straight-line method over a period ranging from
3 to 7 years.
Amortisation of order backlog is calculated using the straight-line method over a period ranging from
10 to 15 months.
Amortisation of acquired intangibles is included within operating expenses in the consolidated income statement.
Kainos Annual Report 2022
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Impairment testing of goodwill
The carrying amount of goodwill has been allocated to cash-generating units (CGU) as follows:
2022
(£000s)
2021
(£000s)
Kainos Workday Adaptive Practice 3,162 3,121
Workday Services North America 7,375 –
Workday Services Central Europe 8,228 –
Total 18,765 3,121
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be
impaired. For the purpose of impairment testing, goodwill is allocated to the CGU which represents the lowest level
within the Group at which goodwill is monitored.
The recoverable amount of the relevant CGU has been determined based on a value-in-use calculation using cash
flows derived from financial projections covering a three-year period, with cash flows thereafter calculated using a
terminal value methodology. The Group considers the three-year period to be appropriate as it aligns with the
period underpinned by financial budgets and forecasts for the Group.
Key assumptions
The pre-tax discount rates used in the calculations were as follows:
2022 2021
Workday Adaptive Practice 11-12% 11-12%
Workday Services North America 11-12% –
Workday Services Central Europe 12-13% –
Discount rates represent the Group’s pre-tax discount rate adjusted for the risk profiles of the individual CGUs.
The terminal value growth rates used in the calculations were as follows:
2022 2021
Workday Adaptive Practice 2% 2%
Workday Services North America 2% –
Workday Services Central Europe 2% –
Projected cash flows are most sensitive to assumptions regarding future growth of the CGU and its profitability.
The values applied to these key assumptions are derived from a combination of external and internal factors,
based on past experience together with management’s future expectations about business performance.
Summary of results
As a result of this review, no impairment has been identified.
Sensitivity analysis
The Group conducted an analysis of the sensitivity of the impairment test to changes in the key assumptions.
Management concluded that no reasonably possible change in any of the key assumptions would reduce the
recoverable amount below its carrying value.
Kainos Annual Report 2022
123
FINANCIAL STATEMENTS
12. Property, plant and equipment
Cost
Property
under
construction
(£000s)
Property and
leasehold
improvements
(£000s)
Office
equipment
(£000s)
Fixtures
and fittings
(£000s)
Total
(£000s)
At 1 April 2020
7,431 2,783 5,412 1,340 16,966
Additions
599 – 725 144 1,468
Disposals
– (1,192) (1,058) (880) (3,130)
At 31 March 2021
8,030 1,591 5,079 604 15,304
Acquisition through business combinations
– 223 69 15 307
Additions
177 733 3,939 970 5,819
Disposals
– – (1,270) (14) (1,284)
At 31 March 2022
8,207 2,547 7,817 1,575 20,146
Accumulated depreciation
At 1 April 2020
– 2,202 3,657 1,253 7,112
Charge for the year
– 73 710 138 921
Eliminated on disposals
– (1,105) (1,031) (880) (3,016)
At 31 March 2021
– 1,170 3,336 511 5,017
Charge for the year
– 185 1,266 87 1,538
Eliminated on disposals
– – (1,262) (14) (1,276)
At 31 March 2022
– 1,355 3,340 584 5,279
Carrying amount
At 31 March 2022
8,207 1,192 4,477 991 14,867
At 31 March 2021
8,030 421 1,743 93 10,287
Property under construction
During the year ended 31 March 2020, the Group acquired a site for development of Kainos’ future Belfast
headquarters at a purchase price of £7.4 million. Costs incurred since the purchase of the site of £0.8 million relate
to legal and professional fees and demolition works.
No capital commitments relating to this site exist at 31 March 2022.
Kainos Annual Report 2022
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
13. Subsidiaries
The subsidiary undertakings at 31 March 2022 are in the table below. All principally operate in their country of
incorporation.
Subsidiary undertakings Incorporated Registered office Principal activity
Proportion of
ordinary share
capital held
Kainos Software Limited Northern Ireland Kainos House,
4-6 Upper Crescent,
Belfast, BT7 1NT
Software
development
100%
Kainos Software Ireland Limited Republic of
Ireland
The Greenway, Ardilaun
Court, Block C, Suite 408,
112-114 Saint Stephen’s
Green, Dublin 2
Software
development
100%
Kainos Software Poland Spólka z.o.o Poland Tryton Business House, ul.
Jana z Kolna 11, 80-864
Gdańsk
Software
development
100%
Kainos Trustees Limited Northern Ireland Kainos House,
4-6 Upper Crescent,
Belfast, BT7 1NT
Share Scheme
Trustee
100%
Kainos Managers Limited Northern Ireland Kainos House,
4-6 Upper Crescent,
Belfast, BT7 1NT
Property
company
100%
Kainos Evolve Limited Northern Ireland Kainos House,
4-6 Upper Crescent,
Belfast, BT7 1NT
Software
development
100%
Kainos WorkSmart Limited Northern Ireland Kainos House,
4-6 Upper Crescent,
Belfast, BT7 1NT
Software
development
100%
Kainos WorkSmart Inc. US WeWork Tower Place, 3280
Peachtree Road, Atlanta,
Georgia, 30305,
USA
Software
development
100%
Kainos Evolve Inc. US WeWork Terminus, 3280
Peachtree Road NE,
Atlanta, Georgia, 30305,
USA
Software
development
100%
Kainos WorkSmart GmbH Germany The Squaire 12, Am
Flughafen Hessen,
Frankfurt 60549
Software
development
100%
Kainos WorkSmart ApS Denmark Office no. 280110080
Harsdorffs Hus Office Club
Kongens Nytorv 5
1050 Copenhagen
Software
development
100%
Kainos Canada Inc. Canada 20 Wellington Street East,
Suite 500, Toronto,
ON, M5E 1C5
Software
development
100%
Kainos WorkSmart SAS France 3-5 Rue Saint Georges TMF
Pole 750008, Paris,
France
Software
development
100%
Kainos WorkSmart Oy Finland Salomonkatu 17
A 00100 Helsinki
Finland
Software
development
100%
Kainos Annual Report 2022
125
FINANCIAL STATEMENTS
Subsidiary undertakings Incorporated Registered office Principal activity
Proportion of
ordinary share
capital held
Formulate Kainos Limited England 2nd Floor,
21 Farringdon Road,
London, EC1M 3HA
Software
services
100%
Kainos Planning, LLC US 355 S. Teller Street, Suite
200, Lakewood,
Colorado, 80226,
USA
Software
services
100%
KW Software Oy Finland c/o TMF Finland Oy,
Frottaiankatu 9 B 3,
00130, Helsinki
Software
services
100%
Kainos AB Sweden Vasagatan 11
111 20 Stockholm,
Sweden
Software
services
100%
Kainos the Netherlands B.V. Netherlands Gustav, Mahlerplein 2,
1082MA, Amsterdam
The Netherlands
Software
services
100%
Kainos Belgium BV Belgium 2060 Wommelgem
Nijverheidsstraat 70,
Belgium
Software
services
100%
Kainos OÜ Estonia Harju maakond, Tallinn,
Lasnamäe linnaosa,
Valukoja tn 8/1, 11415
Estonia
Software
services
100%
Kainos Worksmart S.R.L. Romania Bucureşti Sectorul 4,
Calea Văcăreşti,
Nr. 391, Sun Office, intrarea
A, birou 313, Campus
Registration 11, Etaj 3,
Romania
Software
services
100%
Kainos AS Norway c/o Azets Insigt AS,
Drammensveien, 151, 0277
Oslo
Software
services
100%
Blackline Group, Inc. US Software
services
100%
Kainos Argentina S.A.U. Argentina Av. del Libertador 498, 13th
floor, ‘South’,
Buenos Aires
Software
services
100%
Kainos (Philippines) Inc. Philippines 24/Floor Philam Life Tower,
8767 Paseo de Roxas
Avenue, Brgy. Bel-Air,
Makati City, NCR,
Philippines 1226
Software
services
100%
There are no significant restrictions on the ability of the Group to access or use assets and settle liabilities.
Kainos Annual Report 2022
126
14. Right-of-use assets
Cost
Property
(£000s)
Other
(£000s)
Total
(£000s)
1 April 2020 6,239 113 6,352
Additions 1,446 – 1,446
Disposals (195) – (195)
Exchange adjustments (232) – (232)
At 31 March 2021 7,258 113 7,371
Additions 1,025 – 1,025
Acquisitions through business combinations 358 – 358
Disposals (2,099) (26) (2,125)
Exchange adjustments 13 – 13
At 31 March 2022 6,555 87 6,642
Accumulated depreciation
1 April 2020 1,845 39 1,884
Charge for the year 1,758 28 1,786
Elimination on disposal (114) – (114)
Exchange adjustments (42) – (42)
At 31 March 2021 3,447 67 3,514
Charge for the year 1,639 15 1,654
Elimination on disposal (1,666) (26) (1,692)
Exchange adjustments – – –
At 31 March 2022 3,420 56 3,476
Carrying amount
At 31 March 2022 3,135 31 3,166
At 31 March 2021 3,811 46 3,857
The Group leases several assets including buildings and vehicles. The average lease term is 4.2 years (2021: 2.6
years) with an option to renew the lease after the end of lease term. The Group is not committed to any leases that
have not already commenced as at 31 March 2022. The maturity analysis of lease liabilities is presented in note 18.
Kainos Annual Report 2022
127
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
Amounts recognised in profit or loss:
2022
(£000s)
2021
(£000s)
Depreciation expense on right-of use assets 1,654 1,786
Interest expense on lease liabilities 66 77
Expense relating to short-term and low value leases 877 775
Amounts recognised in statement of cash flows:
2022
(£000s)
2021
(£000s)
Total cash outflow for leases 2,352 2,615
At 31 March 2022, the Group is committed to £0.5 million (2021: £0.2 million) for short-term leases.
15. Trade and other receivables
2022
(£000s)
2021
(£000s)
Trade receivables 35,228 33,739
Other receivables 3,130 2,870
38,358 36,609
Prepayments 4,377 2,777
Accrued income 39,462 18,354
82,197 57,740
The Group’s accrued income (contract asset) balance solely relates to revenue from contracts with customers.
Movements in the accrued income balance were driven by transactions entered into by the Group within the
normal course of business in the year.
Trade receivables and accrued income are shown net of a loss allowance for impairment. Further information is
disclosed in note 24.
Kainos Annual Report 2022
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
16. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon
during the current and prior reporting period.
Accelerated
capital
allowances
(£000s)
Share-based
payment
(£000s)
Tax
losses
(£000s)
Short-term
Temporary
Differences
(£000s)
Deferred
tax on
acquisitions
(£000s)
Total
(£000s)
At 1 April 2020 (56) 667 303 722 (77) 1,559
Foreign exchange – – – (152) – (152)
Adjustment for prior years (14) – (289) 300 (66) (69)
Debit to retained earnings – 1,803 – – – 1,803
(Debit)/credit to profit (77) (256) – 1,345 (133) 879
At 31 March 2021 (147) 2,214 14 2,215
(276)
4,020
Foreign exchange – – – 52
–
52
Arising on acquisition – – – –
(135)
(135)
Adjustment for prior years 6 – (9) (705)
71
(637)
Rate change (46) (96) 1 216
–
75
Rate change (OCI) – 603 – –
–
603
Debit to retained earnings – (883) – –
–
(883)
(Debit)/credit to profit (177) 90 (6) 1,143
137
1,187
At 31 March 2022 (364) 1,928 – 2,921 (203) 4,282
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.
The following is the analysis of the deferred tax balances (after offset):
2022
(£000s)
2021
(£000s)
Deferred tax asset 4,282 4,020
4,282 4,020
Deferred tax assets have been recognised in respect of all temporary differences giving rise to deferred tax assets
where the Directors believe it is probable that these assets will be recovered.
17. Cash and cash equivalents and treasury deposits
2022
(£000s)
2021
(£000s)
Cash at bank and in hand 61,385 54,843
Short-term deposits 15,224 8,053
Cash and cash equivalents 76,609 62,896
Treasury deposits – 18,028
Total cash and cash equivalents and treasury deposits 76,609 80,924
Treasury deposits represent bank deposits with an original maturity of over three months and are held with a fixed
rate of interest.
Kainos Annual Report 2022
129
FINANCIAL STATEMENTS
Short-term deposits are made for varying periods of between one day and three months, depending on the
immediate cash requirements of the Group, and earn interest at the respective fixed short-term deposit rates.
18. Lease liabilities
2022
(£000s)
2021
(£000s)
Less than one year 1,141 1,344
One to five years 2,329 2,412
3,470 3,756
Less: unearned interest (109) (113)
3,361 3,643
Analysed as:
Non-current 2,268 2,394
Current 1,093 1,249
The Group does not have a significant liquidity risk with regard to its lease liabilities.
Reconciliation of movement of liabilities to cash flows arising from financing activities
2022
(£000s)
2021
(£000s)
1 April 3,643 4,085
New leases 1,025 1,446
Acquisition through business combinations 358 –
Cash flow on principal (1,409) (1,763)
Cash flow on interest (66) (78)
Non-cash movement (190) (47)
31 March 3,361 3,643
19. Trade and other payables
2022
(£000s)
2021
(£000s)
Trade payables and accruals 49,199 35,976
Deferred income 30,966 21,985
Current tax liabilities 1,959 2,863
Other tax and social security 11,917 10,652
94,041 71,476
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs,
including payroll. For most suppliers, no interest is charged on payables.
The deferred income can arise in respect of support contracts billed quarterly or annually in advance and SaaS
agreements which are billed annually in advance, with revenue being recognised for both over the contracted
period. The period end deferred income balance will be recognised within 12 months.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
Kainos Annual Report 2022
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
20. Provisions
Other provisions are analysed as follows:
2022
(£000s)
2021
(£000s)
Property-related provision 1,391 1,299
Onerous contract provision 739 436
2,130 1,735
2022
(£000s)
2021
(£000s)
Current 872 436
Non-current 1,258 1,299
2,130 1,735
Property-
related
Onerous
contract Total
(£000s) (£000s) (£000s)
At 1 April 2021 1,299 436 1,735
Additional provision in the year 160 671 831
Utilisation of provision (68) (368) (436)
At 31 March 2022 1,391 739 2,130
Property-related provision
The property-related provision represents management’s best estimate of the Group’s liability for future
contractual repair works at the end of the lease period recognised at the commencement of the lease.
The relevant properties have lease end dates ranging from August 2022 to September 2026.
Onerous contract provision
Regular review of all customer contracts identified three loss-making contracts. Management has determined that
the combined remaining cost of completing these contracts exceeds expected revenue resulting in an expected
total loss of £0.7 million. The total loss has been provided for in ‘other provisions’ in accordance with IAS37. £0.7
million of this loss is expected to be incurred in the period to 31 March 2023. The Directors are satisfied with this
approach and have assessed that the total provision is reasonable.
Kainos Annual Report 2022
131
FINANCIAL STATEMENTS
21. Share capital and reserves
Share capital
2022
(£000s)
2021
(£000s)
ISSUED AND FULLY PAID:
Ordinary shares
Opening balance 614 610
Issued during the year 5 4
Total share capital 619 614
The Company has one class of ordinary share which carries no right to fixed income. The Company’s Articles of
Association do not specify any limit on the total authorised share capital of the Company. The holders of ordinary
shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company.
At 31 March 2022, the Company has 124,078,432 issued ordinary shares (2021: 122,785,147) with a nominal value
of £0.005 each.
During the year the Group issued 1,092,341 shares due to the exercise of vested options and the award of shares
under the UK SIP and ROI Restricted share schemes. The exercise price of options exercised during the year
ranged from £0.005 per share to £4.03 per share.
The Group issued 64,767 ordinary shares as purchase consideration on the acquisition of Une Consulting SRL
which occurred on 1 September 2021 (note 26) and 136,177 ordinary shares in respect of post-acquisition
remuneration.
Nature and purpose of reserves
Share-based payment reserve
The share option reserve comprises the charge for share options and equity-settled compensation for post-
combination services.
Capital reserve account
The capital reserve arises from the capital reorganisation which occurred in 2015, together with the fair value of
consideration given in excess of the nominal value of the ordinary shares issued on the acquisition of subsidiaries
(interest of at least 90%) on share for share exchange, in accordance with requirements of Section 612 of the
Companies Act 2006.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial
statements of foreign operations.
Kainos Annual Report 2022
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
22. Share-based payments
Share-based payments
The Group has the following equity-settled share-based payment arrangements:
Kainos Group Performance Share Plan (PSP)
Share options are granted to employees as determined by the Remuneration Committee and will only vest in
accordance with the performance conditions established by the Committee. The options cannot generally be
exercised within three years and have a maximum life of 10 years. The options will be settled by the issue of new
shares and there are no cash settlement alternatives. Options ordinarily are forfeited if the employee leaves the
Group before the options vest.
The specific performance conditions relating to the Group Performance Share Plan are described in further detail
as part of the Directors’ Remuneration Report.
Company Share Option Plan (CSOP)
Share options are granted to employees as determined by the Remuneration Committee. The CSOP is a sub-plan
of the PSP and permits the Company to grant CSOP options which have tax advantages pursuant to the
provisions of Schedule 4 to the Income Tax (Earnings & Pensions) Act 2003 (‘Schedule 4’). The options cannot be
ordinarily exercised within three years and have a maximum life of 10 years. Exercise of the options will be settled
by the issue of shares and there are no cash alternatives. Options ordinarily are forfeited if the employee leaves the
Group before the options vest.
Save as you Earn (SAYE) Scheme
The Group has an all-employee share plan open to UK employees. Employees who participate enter into a savings
contract under which they agree to save between £5 and £100 per month (or such limit as may be permitted by the
tax legislation governing SAYE schemes from time to time) for three years. Options cannot be ordinarily exercised
within three years and must be exercised within six months of the end of the three-year period. Options ordinarily are
forfeited if the employee leaves the Group before the options vest. There are no cash settlement alternatives.
Republic of Ireland Share Option Scheme
The Group has a share option scheme for employees of Kainos Software Ireland Limited. This scheme utilised the
PSP Scheme to grant options to all eligible employees. Options cannot be ordinarily exercised within three years
and must be exercised within six months of the end of the three-year period. The options will be settled by shares
and there are no cash alternatives. Options ordinarily are forfeited if the employee leaves the Group before the
options vest.
UK Share Incentive Plan (SIP)
The Group has established a Share Incentive Plan for UK employees. Under this scheme all eligible employees are
awarded a number of shares determined by length of service of each employee at a specified date for each
respective grant. The shares are held in trust for each employee by Equiniti Share Plan Trustees Limited, which also
administers the scheme. A minimum period of three years is imposed before the employee can withdraw. There are
no cash settlement alternatives.
Republic of Ireland Restricted Share Scheme
The Group introduced a Restricted Share Scheme for all eligible employees of Kainos Software Ireland Limited.
Under this scheme all eligible employees were awarded a number of shares determined by length of service of
each employee. A minimum period of five years and one week is imposed before the employee can withdraw any
free shares. The shares are held in trust for the employees until they vest. There are no cash settlement
alternatives.
Kainos Group plc Poland Share Plans
In order to replicate the share-based awards available to staff in the UK and Ireland, the Group implemented the
Kainos Group plc Poland Share Plan. The Remuneration Committee may grant Share Options or Conditional Share
Awards (CSA) to employees of the Group’s Polish subsidiary. Share options will not generally be exercisable within
three years and have a maximum life of 3.5 years. Conditional Share Awards may be granted for free or at a
purchase price determined by the Committee. Conditional Share Awards will generally be subject to a minimum
three-year vesting period. All options and awards will be satisfied out of newly issued shares and there are no cash
settlement alternatives. Options and awards ordinarily are forfeited if the employee leaves the Group before
vesting occurs.
Kainos Annual Report 2022
133
FINANCIAL STATEMENTS
Fair values and awards outstanding
The fair value of shares awarded under the UK SIP scheme and the Republic of Ireland Restricted Share scheme is
calculated using the average middle market closing share price for the five days prior to award date. The total
charge is adjusted for attrition and recognised on a straight-line basis over the three-year vesting period.
For share awards under the PSP, SAYE, CSOP, Republic of Ireland (ROI) and Poland share option schemes, the fair
value has been measured using the Black-Scholes model. During the year options were granted on 29 June 2021
and 10 December 2021 (2021: 30 June 2020, 3 July 2020 and 3 December 2020) under the PSP, CSOP and Poland
CSA schemes. The aggregate of the estimated fair values of the options granted on those dates is £5.7 million
(2021: £3.2 million). The following table lists the key inputs to the model used in the year of grant. Expected volatility
was determined by calculating the historical volatility of the Group’s share price over an appropriate period to the
period assessed at grant date.
PSP
Granted
during year
to 31 March
2022
Granted
during year
to 31 March
2021
Weighted-average exercise price £0.01 £0.01
Fair value at grant date £8.79-£13.96 £4.23-£6.81
Share price at grant £14.66 £7.54
Expected volatility 47% 47%
Expected life (years) 4.0 3.5
Risk-free interest rate 0.4% 0.0%
Expected dividends per annum 1.1% 2.0%
CSOP
Granted
during year
to 31 March
2022
Granted
during year
to 31 March
2021
Weighted-average exercise price £14.66 £7.54
Fair value £3.11 £2.26
Share price at grant £14.66 £7.35
Expected volatility 47% 47%
Expected life (years) 4.0 4
Risk-free interest rate 0.4% 0.0%
Expected dividends per annum 1.1% 2.0%
UK SAYE
Granted
during year
to 31 March
2022
Granted
during year
to 31 March
2021
Weighted-average exercise price – £6.20
Fair value – £2.61
Share price at grant – £7.54
Expected volatility – 47%
Expected life (years) – 3.25
Risk-free interest rate – 0.0%
Expected dividends per annum – 2.0%
Kainos Annual Report 2022
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ROI share options
Granted
during year
to 31 March
2022
Granted
during year
to 31 March
2021
Weighted-average exercise price – £6.20
Fair value – £2.61
Share price at grant – £7.54
Expected volatility – 47%
Expected life (years) – 3.25
Risk-free interest rate – 0.0%
Expected dividends per annum – 2.0%
Poland share options
Granted
during year
to 31 March
2022
Granted
during year
to 31 March
2021
Weighted-average exercise price – £6.20
Fair value – £2.61
Share price at grant – £7.54
Expected volatility – 47%
Expected life (years) – 3.25
Risk-free interest rate – 0.0%
Expected dividends per annum – 2.0%
Poland CSA
Granted
during year
to 31 March
2022
Granted
during year
to 31 March
2021
Weighted-average exercise price £0.01 £0.01
Fair value £17.36 £11.79
Share price at grant £18.09 £12.08
Expected volatility 48% 47%
Expected life (years) 3.5 3.5
Risk-free interest rate 0.5% 0%
Expected dividends per annum 1.1% 1.2%
Reconciliation of outstanding share options and share awards
No. of share options 2021/2022
PSP
(000s)
CSOP
(000s)
UK SAYE
(000s)
ROI
(000s)
Poland
(000s)
Total
(000s)
Outstanding at 31 March 2021 645 421 822 28 539 2,455
Granted during period 89 28 – – 42 159
Exercised during the period (124) (135) (413) (17) (237) (926)
Forfeited during the period (11) (30) (59) (1) (37) (138)
Outstanding at 31 March 2022 599 284 350 10 307 1,550
Exercisable at the end of the year 236 170 – – – 406
Kainos Annual Report 2022
135
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
Weighted average exercise price 2021/2022
PSP
£
CSOP
£
UK SAYE
£
ROI
£
Poland
£
Outstanding at 31 March 2021 0.005 3.26 4.72 4.40 2.74
Granted during period 0.005 14.66 – – 0.005
Exercised during the period 0.005 1.87 3.36 3.36 2.52
Forfeited during the period 0.005 6.11 5.59 6.20 2.56
Outstanding at 31 March 2022 0.005 4.76 6.20 6.20 2.56
Exercisable at the end of the year 0.005 2.16 – – –
Number of share options 2020/2021
PSP
(000s)
CSOP
(000s)
UK SAYE
(000s)
ROI
(000s)
Poland
(000s)
Total
(000s)
Outstanding at 31 March 2020 627 519 455 18 451 2,070
Granted during period 132 57 403 12 229 833
Exercised during the period (107) (150) (2) – (86) (345)
Forfeited during the period (7) (5) (34) (2) (55) (103)
Outstanding at 31 March 2021 645 421 822 28 539 2,455
Exercisable at the end of the year 216 255 – – 6 477
Weighted average exercise price £0.005 £1.79 £3.36 – £3.36 –
The weighted average share price at the date of exercise of share options exercised during the year was £17.43
(2021: £9.77).
The options outstanding at 31 March had an exercise price in the range of £0.005 to £14.66 (2021: £0.005 to £7.34)
and a weighted-average contractual life of 4.48 years (2021: 3.99 years).
Restricted shares
UK SIP
(000s)
ROI
(000s)
Total
(000s)
Outstanding at 31 March 2021 1,398 32 1,430
Granted during period 212 3 215
Released during the period (62) (9) (71)
Forfeited during the period (131) (1) (132)
Outstanding at 31 March 2022 1,417 25 1,442
Restricted shares
UK SIP
(000s)
ROI
(000s)
Total
(000s)
Outstanding at 31 March 2020 1,463 62 1,525
Granted during period 297 5 302
Released during the period (315) (33) (348)
Forfeited during the period (47) (2) (49)
Outstanding at 31 March 2021 1,398 32 1,430
Kainos Annual Report 2022
136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Cash-settled share-based payment arrangements
The fair value of the amount payable to employees in respect of share options, which are settled in cash,
is recognised as an expense with a corresponding increase in liabilities, over the period during which the
employees become unconditionally entitled to payment. Based on share price information the liability is
remeasured at each reporting date and at settlement date. At 31 March 2022 the liability recognised was
£1.9 million (2021: £2.1 million).
Expense recognised in the profit or loss
The Group recognised a total expense of £6.7 million related to share-based payment transactions during the
year (2021: £5.3 million). Of this amount £6.1 million (2021: £3.5 million) has been recognised as an employee
benefit expense in the share-based payment reserve. The remaining charge relates to cash-settled share-based
payment arrangements and national insurance contributions associated with share-based payment
arrangements.
Compensation for post-combination services
Of the total expense recognised above, £3.0 million (2021: £0.8 million) relates to compensation for post-
combination remuneration. In connection with the Group’s acquisitions there are contingent consideration
arrangements in place, which are subject to future service conditions being met and are settled through the
allotment of shares. This equity-settled share-based payment expense is recognised over the service periods
based on the grant date fair value.
23. Pensions
The Group operates three defined contribution retirement benefit schemes. The assets of the schemes are
held separately from those of the Group in independently administered funds under the control of trustees.
The total cost charged to the income statement of £6.0 million (2021: £4.5 million) represents contributions
payable to these funds by the Group at rates specified in the rules of the schemes. As at 31 March 2022,
contributions of £0.1 million (2021: £0.1 million) were payable to the funds and are included in trade creditors
and accruals (note 19).
Kainos Annual Report 2022
137
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
24. Financial instruments
Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and liabilities. The carrying
amount of all financial assets and liabilities not measured at fair value are considered to be a reasonable
approximation of fair value.
31 March 2022
FVPL
(£000s)
Financial
assets at
amortised
cost
(£000s)
Other
financial
liabilities
(£000s)
Total
(£000s)
Fair
value
(£000s) Level
Financial assets measured at fair value:
Investments in equity instruments 1,343 – – 1,343 1,343 3
Financial assets not measured at fair value:
Trade and other receivables – 38,358 – 38,358 – –
Cash and cash equivalents – 76,609 – 76,609 – –
Financial liabilities measured at fair value:
Cash-settled share-based payments 1,947 – – 1,947 1,947 1
Financial liabilities not measured at fair value:
Trade payables – – 3,803 3,803 – –
Other tax and social security – – 11,917 11,917 – –
31 March 2021
FVPL
(£000s)
Financial
assets at
amortised
cost
(£000s)
Other
financial
liabilities
(£000s)
Total
(£000s)
Fair
value
(£000s) Level
Financial assets measured at fair value:
Investments in equity instruments 1,225 – – 1,225 1,225 3
Financial assets not measured at fair value:
Trade and other receivables – 36,609 – 36,609 – –
Cash and cash equivalents – 62,896 – 62,896 – –
Treasury deposits – 18,028 – 18,028 – –
Financial liabilities measured at fair value:
Cash-settled share-based payments 2,086 – – 2,086 2,086 1
Financial liabilities not measured at fair value:
Trade payables – – 2,375 2,375 – –
Other tax and social security – – 10,652 10,652 – –
Kainos Annual Report 2022
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Measurement of level 3 fair values
Investment in equity instruments
The Group continues to hold an investment in equity instruments in an unlisted company. The fair value of the
investment is considered to be consistent with initial cost as there has been no material change in the underlying
business and its environment since initial investment.
Financial risk management objectives
The Group’s Corporate Treasury function provides services to the business, manages and forecasts cash balances
on each bank account held and researches available facilities and reports to the CFO on the financial risks relating
to the operations of the Group. These risks include market risk (including currency risk, interest rate risk and price
risk), credit risk and liquidity risk.
The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which
provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and
non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure
limits is reviewed by the CFO and the Finance function on a continuous basis. The Group does not enter into or
trade financial instruments, including derivative financial instruments, for speculative purposes. There are no
financial derivatives held at year end (2021: nil).
The Finance function reports to the Group’s Audit Committee, an independent body that monitors risks and policies
implemented to mitigate risk exposures.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates. This risk is measured through the Group’s budgeting and cash flow forecasting processes, which
identify net foreign currency exposures in Polish Zloty, Euro and US Dollars. The Finance function quantifies and
suggests risk mitigation measures to manage the risk in accordance with Group policies and obtains CFO approval
for implementation of these risk mitigation procedures.
There has been no change to the nature of market risk which the Group was exposed to during the year.
Foreign currency risk management
The Group considers currency risk to relate to the sales and purchases made by Group subsidiaries in a currency
other than their functional currency, resulting in foreign currency trade receivables and trade payables balances.
The table below details this exposure:
Liabilities Assets
2022
(£000s)
2021
(£000s)
2022
(£000s)
2021
(£000s)
Polish Złoty
2,577 1,933 3,126 1,840
Euro
184 3,176 2,210 5,657
US Dollar
706 5,510 3,752 4,728
Canadian Dollar
517 116 – 480
Danish Krone
– 38 170 517
Swedish Krona
204 19 76 –
Kainos Annual Report 2022
139
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
Foreign currency sensitivity analysis
The following exchanges rates were applied at the reporting date.
2022 2021
Polish Złoty
5.481 5.461
Euro 1.179 1.172
US Dollar 1.314 1.374
Canadian Dollar 1.642 1.734
Danish Krone 8.773 8.719
Swedish Krona 12.184 12.002
The following table details the Group’s sensitivity to a 1% increase in sterling units (GBP) against the relevant
foreign currencies. The sensitivity analysis includes only outstanding foreign currency-denominated monetary
items and adjusts their translation at the year-end for a 1% change in foreign currency rates. A positive number
below indicates an increase in profit and other equity where sterling strengthens 1% against the relevant currency.
For a 1% weakening of sterling against the relevant currency, there would be a comparable impact on the profit
and other equity and the balances below would be opposite:
Euro impact PLN impact USD impact
2022
(£000s)
2021
(£000s)
2022
(£000s)
2021
(£000s)
2022
(£000s)
2021
(£000s)
1% increase in
strength of GBP
(20) 25 (5) (1) (30) (8)
Forward foreign exchange contracts
The Group may enter into forward foreign exchange contracts to manage the risk associated with anticipated
costs for a period up to 12 months.
There were no forward contracts entered into during the year and subsequently there are no outstanding forward
contracts at 31 March 2022 (2021: nil).
The Group does not currently hedge expected future revenue denominated in Euro or US Dollars. The Finance
function minimises exposure to currency risk by converting surplus foreign currency balances into pounds sterling
on a regular basis while ensuring the balance remaining in foreign currency is sufficient to meet working capital
requirements.
Interest rate risk management
The Group has no borrowings and therefore the exposure to interest rate risk is limited to the rates received as
interest income on cash deposits. Bank deposit interest income amounted to £0.1 million during the year ended
31 March 2022 (2021: £0.1 million). Due to the limited exposure to interest rate risk no sensitivity analysis has
been performed.
Kainos Annual Report 2022
140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Credit risk management
Trade receivables and accrued income
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. In order to minimise credit risk, the Group has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial
loss from default. The concentration of credit risk is limited due to the customer base consisting largely of public
sector bodies, state agencies and blue-chip corporates. The Group uses publicly available financial information
and its own trading records to rate its major customers.
The typical credit period extended to customers is 30 days. Generally, no interest is charged on outstanding trade
receivables. The maximum exposure on trade receivables and accrued income, as at the reporting date, is their
carrying value.
Credit approvals and other monitoring procedures are also in place to ensure that follow-up action is taken to
recover overdue debts on an ongoing basis. Furthermore, the Group reviews the recoverable amount of each trade
debt and accrued income balance on an individual basis at the end of the reporting period to ensure that an
adequate loss allowance is made for irrecoverable amounts.
Expected credit losses are measured using a provisioning matrix based on the Group’s historical experience and
informed credit assessment, and adjusted, when required, to take into account current macro-economic factors.
The provision matrix is calculated separately for exposures based on the industry in which the customer operates.
For certain significant customers the Group applies credit judgement that is determined to be predictive of the
risk of expected credit loss, taking into account external ratings, financial statements and other available
information before applying a provision matrix to the residual population.
Accrued income relates to contractual revenue recognised not yet invoiced and is assessed for recoverability at
the reporting date. At 31 March 2022, accrued income of £39.5 million (2021: £18.4 million).
The following table provides information about the exposure to credit risk and ECLs.
31 March 2022
Expected
loss rate
(%)
Gross carrying
amount
(£000s)
Loss
allowance
(£000s)
Accrued income <1 39,614 152
Not past due 2 22,979 562
Past due 0-30 days 4 9,765 368
Past due 31-60 days 11 1,608 169
Past due 61-90 days 5 1,444 76
Past due 90 days -179 days 28 847 240
Past due 179 days + 100 468 468
Balance at 31 March 2022 3 76,725 2,035
31 March 2021
Expected
loss rate
(%)
Gross carrying
amount
(£000s)
Loss
allowance
(£000s)
Not past due 2 7,528 160
Past due 0-30 days 3 16,284 423
Past due 31-60 days 6 5,654 315
Past due 61-90 days 2 1,935 34
Past due 90 days -179 days 5 3,438 168
Past due 179 days + 100 451 451
Balance at 31 March 2021 4 35,290 1,551
Kainos Annual Report 2022
141
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
The movement in the allowance for impairment during the year was as follows:
2022
(£000s)
2021
(£000s)
Balance at the beginning of the period 1,551 1,840
Remeasurement of loss allowance 1,669 269
Amounts written off (122) –
Amounts recovered during the year (1,063) (558)
Balance at the end of the period 2,035 1,551
Trade receivable and accrued income concentration risk
The Group has evaluated the concentration of risk with respect to its trade receivables and accrued income
balance and considers it to be low. No single customer represents more than 10% of either the trade receivables or
accrued income balances at 31 March 2022 (2021: no single customer represented more than 10% of the trade
receivables balance, two customers represented 11% of the accrued income balance).
The table below presents the combined trade receivables and accrued income balances by geographic region at
31 March:
2022
(£000s)
2021
(£000s)
United Kingdom & Ireland 47,941 39,299
North America 18,064 8,861
Central Europe 8,225 3,812
Rest of world 460 121
74,690 52,093
Cash and cash equivalents
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies. As at 31 March 2022, all of the Group’s funds were held in counterparty banks
with ratings of ‘A’ and above (as assessed by Fitch or Moody’s).
The Group’s exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate
value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by
counterparty limits that are reviewed and approved by the CFO in line with Group policies.
The ECL in respect of cash and cash equivalents is deemed not to be material.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an
appropriate liquidity risk management framework for the management of the Group’s short-, medium- and
long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining
adequate reserves, banking facilities, by continuously monitoring forecast and actual cash flows, and by matching
the maturity profiles of financial assets and liabilities.
Cash and cash equivalents comprise cash and short-term bank deposits. The interest rates obtained on the
Group’s bank deposits during the year attracted interest at below 1.0% per annum. The carrying amount of these
assets is approximately equal to their fair value. Cash and cash equivalents at the end of the reporting period as
shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated
statement of financial position.
The Group expects to meet its obligations from existing cash balances and future operating cash flows.
The Group has a strong period end cash and treasury deposit balance of £76.6 million (2021: £80.9 million) and no
borrowings. The Group does not anticipate requiring additional credit facilities to manage liquidity.
Kainos Annual Report 2022
142
Note 18 details the contractual maturity analysis for lease liabilities. There is no difference between the carrying
value of trade creditors and accruals and the contractual cash flows in relation to these amounts. The financial
liabilities of the Group, with the exception of lease liabilities (note 18), will be settled within 12 months of the
financial year end.
Capital risk management
The Group manages its capital to ensure that all Group entities will be able to continue as going concerns while
maximising the return to shareholders. The Group’s overall strategy remained unchanged throughout the period
1 April 2021 to 31 March 2022. The capital structure of the Group consists of Company equity only (comprising
issued capital, reserves and retained earnings). The Group is not subject to any externally imposed capital
requirements and has no borrowings.
25. 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.
Remuneration of key management personnel
The remuneration of the Executive and Non-Executive Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in IAS24 Related Party Disclosures.
2022
(£000s)
2021
(£000s)
Short-term employee benefits (emoluments) 1,432 1,435
Post-employment benefits (pension contributions) 12 18
Gains on exercise of share options 656 –
Share-based payments charge 153 162
2,253 1,615
Pension
One Director is a member of the Group’s defined contribution pension schemes (2021: one). Two directors receive
additional salary in lieu of pension contributions.
Share options
Two Directors exercised options over shares in the Group (2021: none).
Highest paid director
Remuneration of the highest paid director was £0.4 million (2021: £0.4 million), including pension contributions of
£nil (2021: £nil). The highest paid director exercised no share options in the year (2021: nil).
Further information about the remuneration of individual directors is provided in the Directors’ Remuneration Report.
Aggregate Executive Directors’ remuneration
2022
(£000s)
2021
(£000s)
Short-term employee benefits (emoluments) 1,094 1,135
Post-employment benefits (pension contributions) 12 18
Gains on exercise of share options 656 –
Share-based payments charge 153 162
1,915 1,315
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
143
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
26. Acquisitions
Cloudator
On 1 June 2021, Kainos acquired the entire share capital of Cloudator OY and its five subsidiaries. Founded in 2011
in Helsinki, Finland, Cloudator offers services for the full suite of Workday enterprise cloud applications, including
Workday Financial Management, Workday Human Capital Management and Workday Adaptive Planning.
Cloudator is one of the most experienced Workday Services Partners in the Nordics with projects spanning the
globe. The acquisition of Cloudator’s Workday division further increases Kainos’ Workday presence in Europe.
From 1 June 2021, Cloudator has contributed revenue of £3.9 million and a profit of £0.7 million. If the acquisition
had incurred on 1 April 2021, management estimates that revenue for the 12 months ended 31 March 2022 would
have been £4.6 million and £0.9 million profit would have been recognised for this period.
The following table summarises the recognised amounts of assets and liabilities assumed at the acquisition date.
The purchase price adjustment with respect to the final working capital statement is provisional pending
finalisation but is not expected to change significantly. The fair value assessment for other balances is complete.
Fair value
(£000s)
Right-of-use asset 358
Trade and other receivables 778
Accrued income 201
Cash and cash equivalents 1,551
Trade and other payables (2,572)
Lease liabilities (358)
Deferred tax liabilities (135)
Deferred revenue (191)
Intangible assets 675
Fair value of identifiable net liabilities 307
Goodwill 8,351
Total consideration 8,658
Satisfied by:
(£000s)
Cash 8,782
Purchase price adjustment (124)
Total consideration 8,658
The purchase price is subject to finalisation of a net working capital adjustment and remains unsettled at year end.
(£000s)
Cash consideration 8,782
Less cash and equivalents acquired (1,551)
Net cash outflow 7,231
Kainos Annual Report 2022
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Goodwill
Goodwill has arisen on the acquisition and reflects the future economic benefits arising from assets that are not
capable of being identified individually and recognised as separate assets and is pending finalisation of the fair
value of the assets acquired and liabilities assumed at the acquisition date. The goodwill reflects the skilled and
assembled workforce of the acquired entity and the anticipated profitability and synergistic benefits arising from
the combination. None of the goodwill recognised is expected to be deductible for tax purposes.
Acquisition-related costs
The Group incurred acquisition-related costs of £0.5 million on legal and due diligence costs. These costs have
been included in operating expenses.
Une Consulting
On 1 September 2021, the Group acquired 100% of the share capital of Argentina-based Une Consulting SRL and
the trade and assets of Une Consulting LLC (‘Une’). Une has an experienced team of consultants who are working
across multiple international projects in the Americas, as well as Europe and Asia. The acquisition adds to Kainos’
growing presence in North and South America, whilst enhancing the Group’s ability to bring value to its customers.
From 1 September 2021, Une has contributed revenue of £1.6 million and £0.8 million profit for the period. If the
acquisition had incurred on 1 April 2021, management estimates that revenue for the 12 months ended 31 March
2022 would have been £2.8 million and profit for that period would have been £1.3 million.
The following table summarises the recognised amounts of assets and liabilities assumed at the acquisition date
.
Fair value
(£000s)
Property, plant and equipment 275
Cash and cash equivalents 76
Trade and other receivables 159
Trade and other payables (128)
Fair value of net identifiable assets 382
Goodwill 1,916
Total consideration 2,298
Satisfied by:
(£000s)
Cash 1,012
Shares issued (64,767 ordinary shares) 1,286
Total consideration 2,298
(£000s)
Cash consideration 1,012
Less cash and equivalents acquired (76)
Net cash outflow 936
Shares issued
The fair value of ordinary shares issued was based on the listed share price on 1 September 2021, the effective
date of control (£19.86 per share).
Goodwill
Goodwill has arisen on the acquisition and reflects the future economic benefits arising from assets that are not
capable of being identified individually and recognised as separate assets and is pending finalisation of the fair
value of the assets acquired and liabilities assumed at the acquisition date. The goodwill reflects the skilled and
assembled workforce of the acquired entity and the anticipated profitability and synergistic benefits arising from
the combination. None of the goodwill recognised is expected to be deductible for tax purposes.
Kainos Annual Report 2022
145
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
Acquisition-related costs
The Group incurred acquisition-related costs of £0.2 million on legal and due diligence costs. These costs have
been included in operating expenses.
Blackline Group Inc.
On 1 January 2022, the Group acquired 100% of the share capital of United States-based Blackline Group.
Established in 2009 and headquartered in Washington state, Blackline Group is a speciality services firm that
focuses on procurement and is an experienced advisory partner for Workday Strategic Sourcing (formerly Scout
RFP). The acquisition of Blackline Group further strengthens Kainos’ capabilities in the Workday, Inc.’s ecosystem
and will allow Kainos to offer best-in-class Workday Strategic Sourcing advisory services to its customers,
complementing its already deep expertise across Workday Financial Management, Workday Human Capital
Management and Workday Adaptive Planning. The acquisition will further enhance Kainos’ Workday presence in
North America and Europe by adding over 50 spend management and procurement consultants from Blackline
Group who will support the expansion of Kainos’ Workday capabilities, client base, and expertise.
From 1 January 2022, Blackline Group has contributed revenue of £2.2 million and £0.4 million profit for the period.
If the acquisition had incurred on 1 April 2021, management estimates that revenue for the 12 months ended
31 March 2022 would have been £8.7 million and profit for that period would have been £1.7 million.
The following table summarises the recognised amounts of assets and liabilities assumed at the acquisition date.
The purchase price adjustment with respect to the final working capital statement is provisional pending
finalisation but is not expected to change significantly. The fair value assessment for other balances is complete.
Fair value
(£000s)
Property, plant and equipment 32
Cash and cash equivalents 328
Trade and other receivables 226
Deferred income (239)
Trade and other payables (405)
Intangible assets 3,719
Fair value of net identifiable assets 3,661
Goodwill 5,366
Total consideration 9,027
Satisfied by:
(£000s)
Cash 8,929
Purchase price adjustment 98
Total consideration 9,027
The purchase price adjustment remains outstanding at year end.
(£000s)
Cash consideration 8,929
Less cash and equivalents acquired (328)
Net cash outflow 8,601
Kainos Annual Report 2022
146
Goodwill
Goodwill has arisen on the acquisition and reflects the future economic benefits arising from assets that are not
capable of being identified individually and recognised as separate assets and is pending finalisation of the fair
value of the assets acquired and liabilities assumed at the acquisition date. The goodwill reflects the skilled and
assembled workforce of the acquired entity and the anticipated profitability and synergistic benefits arising from
the combination. None of the goodwill recognised is expected to be deductible for tax purposes.
Acquisition-related costs
The Group incurred acquisition-related costs of £0.3 million on legal and due diligence costs. These costs have
been included in operating expenses.
Compensation for post-combination services
In respect of both current and prior period acquisitions of the Group, additional compensation for post-
combination services of up to £8.6 million will be payable in future periods to January 2025, subject to future
service conditions being met. Amounts relating to compensation for post-combination services are recognised
as an expense over the service period. During the year, a charge of £5.5 million (2021: £1.8 million) has been
recognised for compensation for post-combination services in operating expenses. Of this amount £3.0 million
(2021: £0.8 million) relates to share-based payment arrangements and has been credited to equity.
Planalyse
On 9 February 2022, Kainos BV entered into a customer referral agreement with Planalyse BV (‘Planalyse’), a
Netherlands-based Workday Adaptive Planning partner. As part of the agreement, Planalyse referred all existing
customers to Kainos BV, and the Group welcomed their six existing employees. Although not a material transaction
in the context of these financial statements it is worthy of note given this transaction further strengthens Kainos’
Workday Adaptive Planning delivery capabilities across Europe.
27. Subsequent events
There have been no significant events subsequent to year end that would require adjustment or disclosure in these
consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
147
FINANCIAL STATEMENTSFINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2022
Note
2022
(£000s)
2021
(£000s)
NON-CURRENT ASSETS
Investments in subsidiaries 4 6,524 6,524
Receivables 5 10,251 9,108
16,775 15,632
CURRENT ASSETS
Receivables 5 8,321 4,672
Prepayments 398 232
Cash at bank and in hand 41,511 45,219
50,230 50,123
Payables: Amounts falling due within one year 6 (1,319) (1,233)
NET CURRENT ASSETS 48,911 48,890
TOTAL ASSETS LESS CURRENT LIABILITIES 65,686 64,522
NET ASSETS 65,686 64,522
CAPITAL AND RESERVES
Share capital 7 619 614
Share premium account 6,433 5,737
Share-based payments reserve 15,171 9,083
Capital reserve 8,820 5,934
Profit and loss account 34,643 43,154
SHAREHOLDERS’ FUNDS 65,686 64,522
As permitted by section 408 of the Companies Act 2006, the parent Company has elected not to present its
own profit and loss account for the year. The parent Company reported a profit for the year of £18.8 million
(2021: £36.0 million).
The financial statements of Kainos Group plc (registered number 09579188) were approved by the Board of
Directors and authorised for issue on 20 May 2022. They were signed on its behalf by:
Richard McCann
Director
20 May 2022
Kainos Annual Report 2022
148
Share
capital
(£000s)
Share
premium
account
(£000s)
Share-based
payments
(£000s)
Capital
reserve
(£000s)
Retained
earnings
(£000s)
Total
equity
(£000s)
Balance at 31 March 2020 610 5,446 5,610 5,936 22,731 40,333
Profit and total
comprehensive income
– – – – 36,043 36,043
Issue of share capital
– share options exercised
4 291 – (2) – 293
Equity settled share-based
payments
– – 3,473 – – 3,473
Current tax for equity-settled
share-based payments
– – – – (15) (15)
Deferred tax for equity-settled
share-based payments
– – – – 421 421
Dividends paid – – - - (16,026) (16,026)
Balance at 31 March 2021 614 5,737 9,083 5,934 43,154 64,522
Profit and total comprehensive
income
– – – – 18,758 18,758
Issue of share capital
– share options exercised
5 2,296 – – – 2,301
Equity settled share-based
payments
– – 6,088 – – 6,088
Current tax for equity-settled
share-based payments
– – – – 34 34
Deferred tax for equity-settled
share-based payments
– – – – 116 116
Transfer between reserves
22
– (1,600) – 1,600 – –
Issue of shares as purchase
consideration
– – – 1,286 – 1,286
Dividends – – – – (27,419) (27,419)
Balance at 31 March 2022 619 6,433 15,171
23
8,820 34,643 65,686
COMPANY STATEMENT OF CHANGES IN EQUITY
22 Premium on shares issued as consideration in FY20 reclassified from share premium account to capital reserve, in accordance with the requirements of
the Companies Act 2006, S612.
23 £10.3 million relates to exercised or lapsed options and is considered distributable.
Kainos Annual Report 2022
149
FINANCIAL STATEMENTS
1. General information
Kainos Group plc (‘the Company’) is a public company limited by shares incorporated in the United Kingdom
under the Companies Act 2006 and is registered in England and Wales (company registration number 09579188),
having its registered office at 21 Farringdon Road, 2nd Floor, London EC1M 3HA.
2. Significant accounting policies
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (‘FRS101’). In preparing these financial statements, the Company applies the recognition,
measurement and disclosure requirements of UK-adopted international accounting standards (‘Adopted IFRSs’)
but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below
where advantage of the FRS101 disclosure exemptions has been taken. The Company transitioned to UK-adopted
international accounting standards for the financial statements on 1 April 2021. This change constitutes a change
in accounting framework; however, there is no impact on recognition, measurement or disclosure.
In these financial statements, the Company has applied the exemptions available under FRS101 in respect of the
following disclosures:
• Cash flow statement and related notes;
• Certain disclosures regarding revenue;
• Certain disclosures regarding leases;
• Comparative period reconciliations for share capital;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• Disclosures in respect of the compensation of key management personnel.
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the
exemptions under FRS101 available in respect of the following disclosures:
• IFRS2 Share-based payments in respect of Group settled share-based payments
• Certain disclosures required by IFRS13 Fair Value Measurement, and the disclosures required by IFRS7
Financial Instrument Disclosures.
The financial statements have been prepared on the historical cost basis. The principal accounting policies
adopted are the same as those set out in note 3 to the consolidated financial statements, including the following
policies applicable to the Company.
Investments in financial assets
Investments in subsidiaries are stated at cost and, where appropriate, less allowances for impairment.
Share-based payments
Where the Company has granted rights to its equity instruments to employees of other Group companies, such
arrangements are accounted for as equity-settled share-based payment arrangements. The share-based
payment expense relating to employees of other Group companies is recharged to these companies.
Accounting judgements and key sources of estimation uncertainty
The Directors have identified no key sources of estimation uncertainty that may have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Furthermore,
no individual judgements have been made that have a significant impact on the Company financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Kainos Annual Report 2022
150
3. Profit for the year
Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own
profit and loss account. The parent Company reported a profit for the year of £18.8 million (2021: £36.0 million).
The auditor’s remuneration for audit and other services is disclosed in note 6 to the consolidated financial
statements.
The average monthly number of employees (including Executive Directors) was two, Dr Brendan Mooney and
Richard McCann (2021: two).
2022
(£000s)
2021
(£000s)
Wages and salaries 884 706
Social security costs 89 86
Other pension costs 33 23
Share-based payments 129 115
1,135 930
Pension amounts for Dr Brendan Mooney and Richard McCann are payments in lieu of pension.
Further information about share-based payments is provided in note 22 to the consolidated financial statements.
4. Investments in subsidiaries
(£000s)
Cost and carrying amount
At 31 March 2021 and 31 March 2022 6,524
Details of the Group’s subsidiaries at 31 March 2022 are included in note 13 of the consolidated financial statements.
5. Receivables
2022
(£000s)
2021
(£000s)
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
Amounts owed from Group undertakings 9,433 8,415
Deferred tax assets 818 693
10,251 9,108
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Amounts owed from Group undertakings 8,123 4,641
Current tax assets 36 –
Other receivables 162 31
8,321 4,672
The deferred tax asset relates to share-based payments.
Amounts owed from other Group companies are unsecured and carry interest of between 3%-5% per annum
charged on the average outstanding loan balances. Management has assessed that the estimated credit loss on
such balances is insignificant and, on this basis, have not provided for an expected credit loss on this balance.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
Kainos Annual Report 2022
151
FINANCIAL STATEMENTS
6. Payables: Amounts falling due within one year
2022
(£000s)
2021
(£000s)
Trade creditors and accruals 1,261 1,141
Amounts owed to Group undertakings 21 21
Other tax and social security 37 37
Current tax liabilities – 34
1,319 1,233
Amounts owed to other Group companies are repayable on demand, unsecured and carry interest of between
3%-5% per annum charged on the average outstanding loan balances.
7. Share capital
Information on share capital and movements during the year is included in note 21 of the consolidated financial
statements.
8. Distributable reserves
The Company’s distributable reserves as at 31 March 2022 total £44.9 million (2021: £52.2 million).
Kainos Annual Report 2022
152
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Kainos Group plc
Registered Office
2nd Floor
21 Farringdon Road
London
EC1M 3HA
COMPANY INFORMATION
DEFINITION OF TERMS
Definition of terms
We use the following definitions for our key metrics:
Adjusted pre-tax profit: profit before tax excluding the
effect of share-based payment expense, acquisition-
related expenses including amortisation of acquired
intangible assets and post-combination remuneration
expense (relating to contingent deferred consideration
subject to future service conditions).
Annual Recurring Revenue (ARR): the value at the end of
the accounting period of the software and subscription
recurring revenue annualised.
Backlog: the value of contracted revenue that has yet to
be recognised.
Bookings: the total value of sales contracted during
the period.
Carbon net zero: any CO
2
released into the atmosphere
from a company’s entire value chain is reduced as
much as possible and the rest is removed.
Carbon neutral: any CO
2
released into the atmosphere
from a company’s entire value chain activities is
balanced by an equivalent amount being removed.
Cash conversion: cash generated from operating
activities as a percentage of adjusted EBITDA.
Adjusted EBITDA: calculated as being adjusted pre-tax
profit excluding interest, tax, depreciation of property,
plant and equipment and right-of-use assets, and
amortisation of intangible assets.
Net revenue retention (NRR): is the percentage of
recurring revenue from existing customers we retained
over the year. This considers increases or reductions in
customer spending and those customers where the
engagement has ended; it does not include revenue
from new customers. NRR therefore shows how our
business could continue to grow solely from our current
customer base alone, without acquiring any new ones.
Organic revenue: our revenues excluding revenue from
acquisitions completed in the year.
Software as a service (SaaS): is a software distribution
model that delivers application programs over the
Internet, with users typically accessing the program
through a web browser. Users pay an on-going
subscription to use the software rather than purchasing
it once and installing it.
Science based targets initiative (SBTi): partnership
between Carbon Disclosure Project (CDP), the United
Nations Global Compact, World Resources Institute
(WRI) and the World Wide Fund for Nature (WWF)
created to encourage companies to design clearly
defined emission reduction plans in line with the Paris
agreement goals.
Business Address
Kainos House
4-6 Upper Crescent
Belfast
BT7 1NT
Northern Ireland
Email: investorrelations@kainos.com
Registrar
Link Group
34 Beckenham Road
Kent
BR3 4TU
Email: enquiries@linkgroup.co.uk
kainos.com
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