Kainos Annual Report 2023
2023 ANNUAL REPORT
TRUE PARTNERS
CHANGE THE WORLD
TOGETHER
CONTENTS
Strategic report
01 Financial highlights
02 Operational 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
24 Our environmental, social and
governance (ESG) commitments
50 Financial review
52 Key Performance Indicators (KPIs)
54 Risk factors and uncertainties
59 Viability and non-financial
information statements
Corporate governance
60 Director's biographies
62 Corporate Governance Report
67 Nominations Committee Report
70 Audit Committee Report
76 Director's Remuneration Report
86 Annual Report on Remuneration
95 Directors Report
Financial statements
98 Independent Auditor’s Report to the
members of Kainos Group plc
105 Consolidated income statement
105 Consolidated statement of compre-
hensive income
106 Consolidated statement of financial
position
107 Consolidated statement of changes
in equity
108 Consolidated statement of cash
flows
109 Notes to the consolidated financial
statements
151 Company statement of financial
position
152 Company statement of changes in
equity
153 Notes to the Company financial
statements
156 Definition of terms
156 Company information
WE ARE A UK-HEADQUARTERED
IT PROVIDER WITH EXPERTISE
ACROSS THREE DIVISIONS:
DIGITAL SERVICES,
WORKDAY SERVICES, AND
WORKDAY PRODUCTS.
Kainos is listed on the London Stock Exchange
(LSE: KNOS).
For further information, please visit
www.kainos.com
01
Kainos Annual report 2023
“WE HAVE RECORDED OUR 13TH 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.”
£374.8
Revenue (m)
2022: £302.6m
£67.6
Adjusted pre-tax profit (m)
2022: £58.8m
£54.3
Statutory profit before tax (m)
2022: £46.0m
23.9p
Total dividend per share
2022: 22.2p
£108.3
Cash (m)
2022: £76.6m
£322.9
Contract backlog (m)
2022: £259.7m
£47.9
Product Annual Recurring Revenue (ARR) (m)
2022: £34.3m
33.1p
Diluted earnings per share (pence)
2022: 28.5p
£427.8
Bookings (m)
2022: £349.8m
42.5p
Adjusted diluted earnings per share
2022: 38.1p
FINANCIAL HIGHLIGHTS
Change +24% Change +40%
Change +18% Change +24%
Change +15% Change +16%
Change +41% Change +12%
Change by +22% Change by +8%
Kainos Annual report 2023
02
STRATEGIC REPORT
OPERATIONAL HIGHLIGHTS
88%
employee retention
We continue to grow
a global, talented and
engaged team.
We now have 2,990 people (2022: 2,692)
based across 22 countries.
Our employee retention has increased
to 88% (2022: 86%), and engagement
levels remain high, measuring 81% on
our internal surveys, and we were again
awarded ‘50 Best Places To Work in the
UK’ by Glassdoor.
+12%
increase in customer numbers
Excellent customer
service drives customer
satisfaction and retention,
underpinning revenue
growth.
Customer
approval rating
(1)
remains high at
99% (2022: 98%).
Existing customer
revenue increased
by 26% to £337.6
million (2022:
£267.7 million),
which represents
a Net Revenue
Retention of 126%.
+52%
increase in international growth
We continue to grow as
a global business with
over one-third of revenues
generated internationally.
Very strong international growth, up 52%
to £132.0 million (2022: £87.0 million), and
now representing 35% of total revenue.
+51%
increase in revenue for Commercial
Commercial sector
customers now generate
half our revenues.
Commercial
revenues are up
51% to £186.4
million (2022:
£123.8 million),
representing 50%
of total revenue.
Public sector
revenues up 24%
to £138.0 million
(2022: £111.0
million) or 37%
of revenue.
Healthcare
revenues, as
anticipated, have
reduced by 26% to
£50.4 million (2022:
£67.9 million),
which is 13% of
total revenue.
(1) 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.
For more information on
our people see pages 32 to 40
For more information on
our customers see page 18
Customer numbers
increased to 821
(2022: 731), an
increase of 12%.
03
Kainos Annual report 2023
+12%
increase in revenue for
Digital Services
In Digital Services, we
continue to deliver
significant digital
transformation
programmes
across the public
sector, commercial
sector and healthcare.
This extensive project portfolio has driven
strong revenue growth of 12%, with Digital
Services revenues increasing to £224.4
million (2022: £199.8 million).
Customer demand remains strong as
digital transformation continues to be a
business and political priority.
+49%
increase in revenue for
Workday Services
We continue to be the
leading pan-European
Workday specialist and
during the year we were
appointed Workday Phase
1 Prime partner in the
US market.
Workday Services recorded very strong
revenue growth of 49% (41% organic) to
£105.7 million (2022: £70.9 million).
Our international expansion continues
with North America now representing over
half of Workday Services revenues at
£55.9 million (2022: £30.4 million) an
increase of 84%.
+40%
increase in revenue for
Workday Products
Our Workday-related
products, Smart Test,
Smart Audit and Smart
Shield delivered very
strong growth, and
we remain on track to
achieve our target of
£100 million ARR by 2026.
Workday Products
revenues grew
40% to £44.7
million (2022:
£31.9 million) and
ARR increased by
40% to £47.9
million (2022:
£34.3 million).
We continued to
invest in our
Workday
Products,
increasing
research &
development
expenditure by
52%, to £9.1
million (2022: £6.0
million) and sales
& marketing
spend increased
135% to £10.8
million (2022:
£4.6 million).
2025
on track to achieve carbon net zero
We continue with our
ambition to be a
responsible organisation.
We retained our
carbon neutral
status in 2023 and
remain on track to
achieve carbon net
zero by 2025.
Our gender
balance improved,
with the proportion
of women in Kainos
increasing to
34% (2022: 33%),
well above the
industry average
of 22%
(2)
; and we
remain committed
to further
improvement.
We hosted over
1,800 young people
on our outreach
programmes,
including targeted
programmes
aimed at improving
gender diversity,
supporting social
mobility and for
those students
with special
educational needs.
(2) BCS diversity report 2022: Women in IT.
For more information on Workday
Services performance see page 19
For more information on Digital Services
performance see pages 18 to 19
For more information on Workday
Products performance see page 20
Kainos Annual report 2023
04
STRATEGIC REPORT
Purpose
“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.”
KAINOS AT A GLANCE
Our operating divisions
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,
deliver efficiencies, increase their
capabilities and future-proof their
businesses.
In healthcare, we help providers deliver a
service that is faster, more cost-effective
and patient-centric.
We deliver services to over 160 clients,
including Allied Irish Bank, NHS Digital,
and the Department for Environment
Food and Rural Affairs, and new clients
including the London Mayor’s Office for
Policing and Crime and the NHS Business
Services Authority.
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 300 international clients, we are
proud to work with customers such as
Kion Group (Germany), Shopify (Canada),
Novozymes (Denmark), Kone (Finland),
ASOS plc (UK), Takeaway.com
(Netherlands) and Match.com (USA).
Workday Products
We have developed three proprietary
software tools, Smart Test, Smart Audit
and Smart Shield.
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 Test was launched in 2014 and is
now used by over 350 clients, including
Webhelp (France), AT&T (USA), State of
Oregon (USA), Veolia ES (UK), Werner
Enterprises (USA), University of Miami
(USA) and Sentara Healthcare (USA).
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.
Smart Audit was launched in 2021 and is
now used by over 70 clients, including
Booking.com (Netherlands), Metropolitan
Museum of Art (USA), Magna International
(Canada) and Whole Foods (USA).
Smart Shield is a data masking tool that
can easily and seamlessly mask sensitive
data without impacting the Workday user
experience. It ensures that sensitive data
remains controlled when Workday
environments are made available to
broader internal or external teams, for
instance, during support and
maintenance activities, or for ongoing
internal Workday training and onboarding
programmes.
These tools are implemented as cloud-
based Software as a Service (SaaS)
solutions and customers utilise them
on a subscription basis.
Smart Shield was launched in 2022 and is
now used by over 40 clients including Ohio
State University (USA), Loews Corporation
(USA), John Lewis (UK) and Netflix (USA).
Commercial sector 50% (2022: 41%)
Public sector 37% (2022: 37%)
Healthcare 13% (2022: 22%)
13%
50%
37%
Digital Services
(60% of Group total)
5-year growth: 18% CAGR
Workday Services
(28% of Group total)
5-year growth: 47% CAGR
Workday Products
(12% of Group total)
5-year growth: 41% CAGR
£44.7m
£224.4m
REVENUE BY
OPERATING
DIVISION FY23
£105.7m
REVENUE BY
SECTOR
05
Kainos Annual report 2023
Antwerp
Atlanta
Belfast
Birmingham
Buenos Aires
Copenhagen
Derry
Dublin
Gdańsk
Hamburg
Indianapolis
London
Paris
Toronto
UK & Ireland 65% (2022: 71%)
North America 25% (2022: 19%)
Central Europe 9% (2022: 9%)
Rest of world 1% (2022: 1%)
65%
25%
9%
REVENUE BY
REGION
UK & Ireland 71% (2022: 72%)
Central Europe 16% (2022: 15%)
Americas 13% (2022: 13%)
71%
16%
PEOPLE BY
REGION
14
Offices worldwide
(2022: 20)
1%
13%
Staff and contractors
(2022: 2,692)
Employee retention
(2022: 86%)
Active customers
(2022: 731)
Customers who
rated our service
as good or better
(2022: 98%)
90%
Revenue from
existing customers
(2022: 88%)
£XXm
99%
821
88%
2,990
Our people
Our global position
Our customers
Financial
£374.8
Revenue (m)
2022: £302.6m
£67.6
Adjusted pre-tax
profit (m)
2022: £58.8m
£427.8
Bookings (m)
2022: £349.8m
£322.9
Contracted sales
backlog (m)
2022: £259.7m
Commercial sector 50% (2022: 41%)
Public sector 37% (2022: 37%)
Healthcare 13% (2022: 22%)
13%
50%
37%
Digital Services
(60% of Group total)
5-year growth: 18% CAGR
Workday Services
(28% of Group total)
5-year growth: 47% CAGR
Workday Products
(12% of Group total)
5-year growth: 41% CAGR
£44.7m
£224.4m
REVENUE BY
OPERATING
DIVISION FY23
£105.7m
REVENUE BY
SECTOR
£374.8
REVENUE
Kainos Annual report 2023
06
STRATEGIC REPORT
Consistency in a turbulent
environment
This is our eighth annual report as
a public company. On review of our
previous seven reports, it is obvious
that we have recycled many of the
adjectives that we have used to
describe our business performance –
with ‘consistency’ amongst the most
reused terms.
Those same seven reports also
describe an economic environment
that has been subject to significant
volatility. From localised events such
as Brexit to global impacts from the
pandemic, organisations have needed
to respond urgently to rapidly changing
circumstances.
That theme of turbulence is repeated
in this report. The ebb of the pandemic
has been followed by war in Ukraine,
the energy crisis, inflation, interest rate
rises, recession fears and, more recently,
concerns about the global banking
sector.
Despite the volatility seen throughout
the year, our execution has remained
consistent, and we have again recorded
strong growth and robust financial
performance, alongside pleasing
customer satisfaction and employee
engagement levels.
An excellent business performance
The digital transformation market
has been growing quickly for over a
decade, initially with a focus on the
replacement of ageing and inefficient
legacy systems. This driver has been
augmented by organisations striving
for greater agility, to allow them to
react quickly to changes, whether
accelerating new opportunities or, more
typically, responding to challenges.
As a result, our customers 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 £374.8 million, a
24% increase, and our adjusted pre-
tax profit growing 15% to £67.6 million.
Our moderated profit growth is mainly
because of increased investment in our
Workday Products, both in research
and development and in sales and
marketing, an increase of £9.3 million,
all of which was expensed in the year.
We also experienced increased salary
costs and the increased use of contract
staff during the year.
We continued to add to the talents of
our global team, as numbers increased
by 11% to 2,990 colleagues. Despite the
high demand for digital talent and the
global shortage of the same people,
our retention increased to 88%, with
further improvements in recent weeks
as people became increasingly cautious
about changing jobs. Our teams are
now based in 22 countries.
Our Digital Services division recorded
revenue growth of 12% to £224.4 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 Allied Irish
Bank, NHS Digital and the Department
for Environment Food and Rural Affairs,
and new clients including the Mayor's
Office for Policing and the NHS Business
Services Authority.
We are keen to open new opportunities
for Digital Services and our investments
continue to make progress. Our
international engagements in Central
Europe and Canada have continued to
grow, with our revenues now £9.6 million,
from £5.5 million a year ago. Collectively,
our Cloud, Data and AI and Intelligent
Automation practices now generate
£41.9 million, representing an increase
of 47% in the past year.
Our Workday Services team continues to
help forward-thinking organisations such
as Kone, Kion Group and Takeaway.com
deploy Workday’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
in July we were appointed Workday
Phase 1 Prime Status Partner for the US
market, accelerating our access to the
single largest global market for Workday
consulting services.
Over the course of the year our
Workday Product revenues grew 40%
to £44.7 million. Our products, Smart
Test (automated testing), Smart Audit
(compliance monitoring) and Smart
Shield (data masking) are used by
organisations like Netflix, Salesforce
and match.com. We believe that there
is an opportunity to grow our Workday
Product revenues to £100 million by 2026
and as a result we invested further in
product development (increased by
£3.1 million to £9.1 million) and in our sales
& marketing capacity during the year
(increased by £6.2 million to £10.8 million).
CHIEF EXECUTIVE OFFICER’S STATEMENT
“DESPITE THE VOLATILITY
SEEN THROUGHOUT THE
YEAR, OUR EXECUTION
HAS REMAINED
CONSISTENT, AND WE
HAVE AGAIN RECORDED
STRONG GROWTH AND
ROBUST FINANCIAL
PERFORMANCE.”
07
Kainos Annual report 2023
Being 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. Our climate
targets have now been certified by
SBTi, with our actual Scope 1, 2 and
3 emissions significantly below the
corresponding SBTi target. We are
increasingly able to record the carbon
and cost savings that our solutions
deliver to our customers, for instance
the United Nations International
Organisation for Migration where
the carbon saving of 594 tonnes per
year, represented a 92% reduction in
emission of IOM’s IT estate.
Gender diversity remains a challenge
within the wider technology sector,
where just 22% of roles are undertaken
by women. During the year, the
proportion of women in Kainos
increased from 33% to 34% reflecting
focused recruitment campaigns and
we recognise that a sustained effort is
required to make further improvements.
We seek to inspire the next generation of
digital talent and to improve the diversity
of the sector. Last year over 1,800 young
people participated in our outreach
programmes, where we had targeted
programmes aimed at improving
gender diversity and social mobility
for young people and for students with
special educational needs. Our digital
bursaries will support 60 young people
from backgrounds that are traditionally
under-represented at university.
Maintaining a confident outlook
The ongoing economic volatility means
that the pressure on our customers
remains intense. In response they are
looking to reduce their costs and increase
their organisation’s agility. Digital
transformation is a key foundation in
achieving both these ambitions and
the market will continue its growth,
especially as organisations redirect their
spending from inefficient legacy systems
to agile, modern systems. The execution
of our strategy has placed us in leading
positions within our core markets, which
allow us to look confidently to the future.
Our confidence is strengthened with
the success of our additional growth
initiatives:
Within Digital Services, our international
expansion and our Cloud, Data and AI
and Intelligent Automation practices
already generates revenues in excess
of £51 million; together these provide a
platform for further growth.
Workday’s focus on international
expansion creates a strong backdrop for
our European growth plans; at the same
time our appointment as a Workday
Prime Partner in the US market provides
accelerated access to the largest
Workday services market globally.
With our Workday Products, we can
accelerate the adoption of our software
across the Workday ecosystem,
creating a significant software business.
We can be certain that the economic
uncertainty will continue. While it is
sensible to be confident about our
markets, our customers and our abilities,
it is equally sensible to remain vigilant
and be responsive to any changes. That
too is a sentiment that has been reflected
in our previous seven annual reports.
A sense of gratitude
In each of our previous reports, the final
words of this statement have focused
on thanking our customers and our
colleagues; and this year we continue to
observe this important tradition.
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 we are
grateful for the trust and confidence
that our customers continue to place in
Kainos and the expertise, experience,
and energy of our colleagues, who have
been the driving force behind all that
we have achieved.
Brendan Mooney
Chief Executive Officer
£224.4m
Digital Services grew by 12%
2022: £199.8 million
£44.7m
Workday Product grew by 40%
2022: £31.9 million
Read our financial statement on
pages 50 to 51
Kainos Annual report 2023
08
STRATEGIC REPORT
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, the pandemic
has prompted a significant shift to
remote and hybrid working patterns,
which are likely to remain an important
feature of the workplace. Many
organisations have discovered that
their legacy systems do not function
well in a distributed environment and
this is driving a continued shift to cloud-
based systems.
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
Services and Digital Services divisions.
Demand for digital
transformation, building
bespoke systems
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 the coronavirus
pandemic.
Creating effective digital services
significantly reduces cost. For many
government services over the past
decade, 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
(3)
.
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 unique technical
elements of the service. This trend
has resulted in public sector spending
on digital transformation projects
increasing from £456 million in 2015
to £2.7 billion
(4)
in 2023.
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 11 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.
OUR MARKETS
TREND
1
TREND
2
TREND
3
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 all our divisions – Digital
Services, Workday Services and Workday
Products, providing very important
credibility with potential customers and
creating a meaningful barrier to entry.
09
Kainos Annual report 2023
Demand for digital
transformation, implementing
Workday
Workday’s success in attracting new
customers is a key driver for our
Workday Services division. Workday is
growing rapidly, with its most recent
results to 31 January 2023 showing
revenue growth of 21%. This compares
with growth in the overall Enterprise
Resource Planning (ERP) market which
is estimated at 6.2% per annum
(5)
.
The rapid uptake of Workday’s product
reflects its competitive advantages.
Workday’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 has also taken a different
approach when building its
implementation partner ecosystem.
While SAP and Oracle both have several
thousand implementation partners,
Workday, in order to ensure high-
quality project delivery, has appointed
just 49 partners to deploy its software
across its customer base. Workday now
has over 10,000 customers, including
more than 4,750 core HR and finance
customers. Kainos first engaged with
Workday in 2011 and is now one of
the most experienced participants in
Workday’s partner ecosystem. Kainos
remains the only specialist Workday
partner headquartered in the UK.
Other important drivers of growth for
us in our Workday Services division
include:
• existing Workday customers wanting
to implement additional Workday
modules;
• geographic expansion beyond our
strong presence in Europe;
• displacing other Workday partners
from existing customer engagements;
and
• Workday adding new modules and
capabilities to its system.
In our related Workday Products
division, growth drivers include:
• building our own software
components to provide niche
solutions which interact with
Workday’s platform, including Smart
Test (automated testing), Smart Audit
(compliance monitoring) and Smart
Shield (data masking); and
• utilising Workday Extend, which is
a newly introduced capability by
Workday to enable us to develop
applications and solutions 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
70% of current Workday customers are
located. We also continue to increase
market share with existing Workday
customers, while growing our portfolio
of Workday products.
New technologies creating
new opportunities
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 and
intelligence, 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.
(3) Government Digital Strategy: December 2013.
(4) TechMarketView Digital Evolution Model.
(5) Fortune Business Insights.
(6) The size of the digital solutions market in Central
(£1,496m), Health (£365m), Defence (£706m) and
Police (£139m) sectors for FY23 according to
TechMarketView’s Digital Evolution Model.
(7) This is an estimate of the services market where
Kainos is a Phase 1 partner.
(8) Estimated global Workday automated testing
market.
TREND
1
TREND
2
TREND
3
TREND
1
TREND
2
TREND
3
£2,706m
£1,100m
£625m
Digital Services
Addressable market
(6)
£2,706 million (2022: £1,919 million)
Example competitors: Deloitte,
Capgemini, BJSS, Atos, Equal
Experts, NTT Data.
Workday Services
Addressable market
(7)
£1,100 million (2022: £884 million)
Example competitors: One Source
Virtual, Alight, Collaborative Solutions.
Workday Products
Addressable market
(8)
£625 million (2022: £410 million)
Example competitors: Worksoft,
Turnkey, CloudBera.
Kainos Annual report 2023
10
STRATEGIC REPORT
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 Food Standards Agency are
excellent examples of projects that are
viewed as part of the UK’s national IT
infrastructure.
In our Workday Services projects, we
help forward-thinking organisations
deploy Workday’s software 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.
The products created by our Workday
Products team complement Workday’s
innovative Finance, HR and Planning
suite. We deploy our products to help
customers safeguard their Workday
systems.
OUR BUSINESS MODEL
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WHO WE ARE
We are a UK-headquartered
IT provider with expertise
across three divisions: Digital
Services, Workday Services,
and Workday Products.
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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
11
Kainos Annual report 2023
How we operate
Digital Services
We win new public sector and
healthcare projects primarily because
of our successful track record and is
facilitated by our position on major
frameworks
(9)
, for example, the Digital
Outcomes and Specialisms (DOS)
framework. We are the most successful
supplier on DOS, having delivered 37%
more services than the number two
supplier, as measured over the last
three years
(10)
.
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 quickly and
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 Services
Workday always contracts directly
with its end customer following a sales
campaign. During that sales campaign,
Workday will typically recommend a
shortlist of possible consulting partners
to the client who will then undertake
the project directly with the customer.
Globally, there are 49 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.
Workday Products
We gain our product customers through
a combination of outbound marketing
activities, in-person events and referrals
from existing Workday Services and
Workday Products customers. Typically,
a customer will take multiple products
over time and because our customer
satisfaction remains very high, our Net
Revenue Retention (NRR) is over 100%.
Our Workday Products contracts are
always direct with the end customer,
which allows us to control commercial
arrangements, understand the quality
of our customer service and it also helps
inform our future product roadmap.
Our commercial model
In both Digital Services and Workday
Services, we primarily charge clients
on a time and materials basis for
consultancy services. Fees are typically
charged monthly for work completed.
Within our Workday Products division
our revenue is derived from charging
for our own proprietary software. These
revenue streams relate primarily to our
existing cloud-based SaaS solutions,
Smart Test (automated testing), Smart
Audit (compliance monitoring) and
Smart Shield (data masking), although
we anticipate there will be additional
products of this type in the future.
All 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 our
Workday Services division, we are the
For more information on the performance
of our three divisions pages 18 to 20
(9) During FY23, we were active on 10 frameworks,
including Digital Outcomes and Specialists,
G-Cloud and Technology Services.
(10) Cumulative spend on DOS Lot 1 (Outcomes),
FY21-FY23. 1. Kainos – £264.6m, 2. Capgemini –
£192.5m, 3. Deloitte – £132.9m, 4. BJSS – £130.3m,
5. Cognizant - £100.3m.
Kainos Annual report 2023
12
STRATEGIC REPORT
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 customers range from SMEs
to some of the world’s largest and most
recognisable brands.
We survey our customers for feedback
on our performance every six months.
This feedback tells us that we achieve
best-in-class customer service, with
99% of our customers rating our service
as good or better. This underpins our
repeat revenue, with over 90% of our
revenue each year coming from existing
customers.
Our partner relationships
We have an excellent relationship with
Workday, having been a partner since
2011 and we have supported Workday’s
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 £150 million.
We feel the same sense of excitement
with our partnerships with Microsoft
and AWS. With over 90% 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, Smart
Audit and Smart Shield 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’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 be carbon neutral since
2021 and we are on schedule to achieve
our ambition of being carbon net zero
by 2025. We neutralise our 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 since 2015 have
benefited over 7,000 young people,
including 1,800 young people and those
with special educational needs in the
past 12 months.
More details are contained within the
Environmental, Social and Governance
(ESG) section of this report.
For more information on our
stakeholders see pages 42 to 46
OUR BUSINESS MODEL CONTINUED
Our people
Our reputation
Our customer relationships
Our partner relationships
13
Kainos Annual report 2023
People Progress in FY23 Priorities for FY24
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.
We will add to our existing talented
workforce by recruiting high calibre
people from school, college and
industry; we will continue to invest in
developing their skills and careers; and
we will continue to strive to be a great
employer.
Headcount increased by 298, to a
total of 2,990 colleagues (2022: 2,692).
This included 184 early careers
colleagues.
Invested over 18,000 days of technical
and skills development in our people.
Maintain high standards when
recruiting new applicants.
Ongoing investment in skills and
career development of all colleagues
in Kainos.
Employee retention increased to 88%.
We were ranked in the ’50 Best Places
to Work in the UK’ by Glassdoor.
As measured through Workday
Peakon, we have maintained high
levels of employee engagement (81%),
and high ratings for diversity and
inclusion (D&I) (84%) and wellbeing
(78%).
Maintain our high levels of employee
retention (achieve over 85%).
Maintain or improve our scores for
employee engagement, D&I and
wellbeing.
Involved over 1,800 young people and
those from under-represented groups
in our outreach programmes.
Continue to inspire and educate
young people and those from under-
represented groups for potential
careers in IT.
OUR STRATEGY
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.
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
long-term careers.
As part of this 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
locations, people and customers.
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.
Financial KPI
Non financial KPI
People CustomersMarkets
The three key pillars
of our strategy
1 2 3
Kainos Annual report 2023
14
STRATEGIC REPORT
Markets Progress in FY23 Priorities for FY24
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 Services and
Products client base.
Public sector revenues increased by
26% to £137.0 million (2022: £108.4
million).
Following the easing of pandemic-
related spending, healthcare revenues
decreased by 25% to £49.7 million
(2022: £66.3 million).
Grow our business 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 51% to £37.8 million
(2022: £25.1 million).
Continue to build reputation and
references in the sector to maintain
our accelerated growth.
International revenues from Central
Europe and North America increased
by 75% to £9.6 million (2022: £5.5
million).
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.
Workday Services
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;
and
• expand internationally, establishing
operations in countries with large
and growing numbers of Workday
customers.
Workday Services revenues
increased by 49% to £105.7 million
(2022: £70.9 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 by 40+
customers where earlier phases of
the project were undertaken by a
different partner.
Continue to excel in customer service.
International revenues increased by
60% to £81.1 million (2022: £50.7
million).
Achieved Workday Phase 1 Prime
Partner status in US, the largest
market for Workday consulting
services globally.
Maintain growth trajectory in all
regions, in particular develop the
Phase 1 opportunity in the US market.
Workday Products
Our focus is to:
• increase the number of Workday’s
customers who use our software;
• ensure high levels of customer
satisfaction driving strong Net
Revenue Retention (NRR); and
• invest in our existing products, and
develop additional products within
the Workday ecosystem, where our
blend of software skills and Workday
experience makes us uniquely
positioned.
Our customer numbers increased,
with 350+ customers using Smart Test,
70+ using Smart Audit and 40+ using
Smart Shield.
Revenues increased by 40% to £44.7
million (2022: £31.9 million).
Increase the total number of customers
using our software.
Increase the adoption of multiple
products by each customer.
NRR is over 100%, driven by customer
satisfaction levels of 99%.
Maintain our high levels of customer
satisfaction.
We successfully launched Smart
Shield (August 2022).
Overall investment, spanning product
development and sales & marketing,
increased by 88% to £19.9 million
(2022: £10.6 million).
Ensure that customer adoption and
revenues reflect the very strong
increase in investment.
Develop and launch one new product.
OUR STRATEGY CONTINUED
15
Kainos Annual report 2023
Customers Progress in FY23 Priorities for FY24
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 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.
Customer satisfaction levels recorded
as 99% (2022: 98%).
Net revenue retention recorded as
126% (2022: 134%).
Maintain high levels of customer
satisfaction, resulting in high levels of
net revenue retention.
New opportunities Progress in FY23 Priorities for FY24
In addition to the investment we make
in our Workday Products, our focus also
includes:
• continue to invest in our Cloud
(launched 2017), Data and Artificial
Intelligence (2019) and Intelligent
Automation (2020) practices, further
building capability and creating
international, high-growth
businesses;
• through our innovation process,
identify and promote ideas that have
the potential to become sizeable
revenue streams in the future.
Our practices continued to grow in
scale, achieving combined revenues of
£41.9 million (2022: £28.5 million) an
increase of 47%, and with 360
colleagues involved in the three areas
(2022: 305).
Maintain growth trajectory, embedding
our new activities across several of our
digital transformation projects.
Manage investment levels in line with
total ‘new opportunities’ investments.
Our innovation process evaluated
several new ideas, however none were
approved for further investment.
Increase the number of submissions to
the innovation process.
Financial KPI
Non financial KPI
For more information on our key
performance indicators see pages 52 to 53
Kainos Annual report 2023
16
STRATEGIC REPORT
DRIVING
SAFE
INNOVATION
17
Kainos Annual report 2023
Our overall performance
The level of digital transformation
undertaken by ambitious organisations
continues to increase as the industry
enters its second decade. Our
established track record in guiding
and supporting customers to deliver
their large-scale digital transformation
programmes, as they respond to
the changing demands in their
organisations, continues to provide the
bedrock for our own growth.
Our high levels of activity with our
customers have translated into an
excellent set of results for our financial
year.
Revenue for the year grew by 24% (20%
ccy) to £374.8 million (2022: £302.6
million) with adjusted pre-tax profit
(11)
increasing by 15% (increased 4% ccy)
to £67.6 million (2022: £58.8 million).
Adjusted pre-tax profit would have
been c.£6.1 million lower under constant
currency exchange rates.
In line with our previous guidance,
we have increased investment in our
software products, representing a total
of £9.3 million. Research & development
investment increased to £9.1 million
(2022: £6.0 million) and our product-
related sales & marketing investment
increased to £10.8 million (2022: £4.6
million).
Our sales performance underlines
our success in winning business –
extensions to existing contracts,
additional projects placed by existing
customers and winning new customers.
Bookings for the year increased by
22% (20% ccy) to £427.8 million (2022:
£349.8 million), which resulted in a 24%
increase in the contracted backlog to
£322.9 million (2022: £259.7 million).
As at 31 March 2023, we had a very
strong cash balance of £108.3 million
(2022: £76.6 million), representing 104%
cash conversion (2022: 83%).
Our people
We are clear that our success is driven
by the ability, energy and expertise of
the people in Kainos.
Since last year, our headcount has
grown by 298 to 2,990 people (2022:
2,692). Of our colleagues, 7% are
contractors (2022: 12%). By region, UK &
Ireland increased to 2,130 people (+190),
Central Europe increased to 465 people
(+50) and the Americas increased to 395
people (+58).
Our employee engagement levels
remain high. We now utilise Workday
Peakon to continuously assess
employee engagement and have
achieved a rating of 81%. For the second
consecutive year, we were awarded ‘50
Best Places to Work For in the UK’ by
Glassdoor, the online career community.
During the year, 88% of our colleagues
made the choice to stay and develop
their career within Kainos (2022:
86%). For much of the year, the global
shortage of digital skills created
recruitment and retention challenges,
however these eased during the last
weeks of the financial year.
OPERATIONAL REVIEW
“OUR HIGH LEVELS OF
ACTIVITY WITH OUR
CUSTOMERS HAVE
TRANSLATED INTO
AN EXCELLENT SET
OF RESULTS FOR OUR
FINANCIAL YEAR.”
(11) The Financial Review section includes
reconciliations between adjusted pre-tax
profit and profit before tax numbers.
Kainos and DVSA have been in
partnership for nearly ten years, and
have developed multiple award-winning
solutions together, encompassing cloud,
digital transformation and Artificial
Intelligence across the MOT scheme, the
practical driving test, and the driving
theory test.
For the past year, we have focused on
bringing to life the future of safe driving,
investigating the impact of emerging
technologies and the opportunities
they offer to services that have barely
changed in nearly 100 years.
We have trialled virtual reality for the
hazard perception test, a key part of a
driver’s learning journey, and focused
on making the experience of booking
the test more accessible and equitable
for all users. Using machine learning,
we helped to identify fraud throughout
the MOT test network and created
an intelligent risk ratings tool to help
DVSA identify potential fraudulent test
centres.
Kainos remains a key innovation partner
to DVSA, making the roads safer for
millions of people across the UK.
Kainos Annual report 2023
18
STRATEGIC REPORT
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 – 99% of
respondents to our customer surveys
rated our service as ‘good’ or above
(2022: 98%).
Existing customers continue to trust
us to deliver their most challenging
projects, and this is reflected in our
revenues, with 90% of revenues coming
from our existing clients (2022: 88%). We
have also gained new customers during
the year, and we now work with 821
customers (2022: 731).
From a sector perspective we have a
well-diversified business, with 50% of
our revenues from commercial clients
(2022: 41%), 37% from public sector
organisations (2022: 37%), and 13% from
healthcare customers (2022: 22%).
Our international client base has
also expanded and as a result our
international revenues have grown by
52% to £132.0 million (2022: £87.0 million).
Regionally, UK & Ireland accounts for
65% of our business (2022: 71%), North
America for 25% (2022: 19%), Central
Europe for 9% (2022: 9%), with the rest of
the world representing 1% (2022: 1%).
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 12% (12% ccy) to
£224.4 million (2022: £199.8 million).
Bookings, at £238.2 million (2022:
£215.0 million), represented an increase
of 11% (11% ccy) and as a result,
contracted backlog increased by 6% to
£140.9 million (2022: £132.7 million).
During the year our healthcare revenues
decreased as pandemic-related
expenditure reduced. With strong
opportunities in both the public sector
and commercial sector we reallocated
a number of teams to projects in these
larger sectors.
Overall, public sector now represents
61% of divisional revenues (2022:
54%), healthcare 22% (2022: 33%) and
commercial sector 17% (2022: 13%).
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,
which is underpinned by a new digital
transformation policy which outlines
50 of 75 services to be digitised by 2025.
As a result of this commitment, our
revenues increased by 26% to
£137.0 million (2022: £108.4 million).
Within central government, we continue
to consolidate our strong position
across key accounts, securing new
contracts to deliver digital programmes
in Driver and Vehicle Standards
Agency and Foreign Commonwealth
& Development Office. Beyond our
existing accounts, we are also delivering
projects with new areas, in Defence
(Defence Science & Technology
Laboratory – Artificial Intelligence
Delivery Partner) and the Mayor’s Office
for Policing (Cloud Migration Partner).
Commercial sector
In the UK, the commercial sector total
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 customers.
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 Nets Group and New
Ireland and new customers such as
Investment Management Corporation of
Ontario (IMCO), Danske Bank and Allied
Irish Bank.
Reflecting these higher activity
levels, our revenues increased 51% to
£37.8 million (2022: £25.1 million).
Healthcare sector
As flagged in our November update, our
healthcare revenues reduced during the
year to £49.7 million (2022: £66.3 million),
a reduction of 25%.
The reduction in revenue is largely
attributable to the easing of pandemic-
related spending, although the merging
of our customers NHS Digital and
NHS X to form NHS England’s new
Transformation Directorate has also
had an impact.
More positively, excluding pandemic-
related expenditure, our healthcare
revenues have been rising steadily,
increasing by 85% from £19.4 million
in 2019 to current levels. This year,
our customers have included the
Department for Health and Care Wales,
where we delivered their Patient App,
Genomics England and Our Future
Health.
Revenue (m)
grew by 12%
Bookings (m)
grew by 11%
Contracted backlog (m)
grew by 6%
OPERATIONAL REVIEW CONTINUED
2023 224.4
2022 199.8
2023 238.2
2022 215.0
2023 140.9
2022 132.7
Digital Services performance
19
Kainos Annual report 2023
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
Nets Group and in the commercial and
public sector in Canada with IMCO and
Government of Canada.
Our international revenues are reported
in the figures in the sectors listed above,
but for clarity, international revenues for
the division have increased by 75% to
£9.6 million (2022: £5.5 million).
Digital Services outlook
We remain extremely positive about
the future of digitisation in the UK
public sector 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 eighteen
months 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 a strong Workday client
base.
Workday Services performance
Revenue for the year grew by 49%
(40% ccy) to £105.7 million (2022: £70.9
million); contracted backlog increased
by 42% to £72.8 million (2022: £51.1
million); and bookings increased by 56%
(50% ccy) to £121.7 million (2022: £78.2
million).
The number of accredited Workday
consultants at Kainos increased by 27%
to 808 (2022: 638).
Having first engaged with Workday
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 49 partners globally accredited to
implement Workday’s innovative SaaS
platform.
From our initial strong base in UK &
Ireland, we expanded internationally
– into Northern and Central Europe
in 2015 and into the North American
market in 2018. Within Europe, we are
the leading Workday partner – this
leadership position is the result of high
satisfaction levels within our customer
base, coupled with our geographic
expansion in the region. Our European
customers, including those in the UK &
Ireland, generated 47% of total revenue
(2022: 57%).
A similar focus on customer success in
our North American market has resulted
in our appointment, in mid-2022, as a
Phase 1 Prime partner for the US market
– which remains the largest market
globally for Workday services. Our North
American customers generated 53% of
total revenue (2022: 43%).
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.
Workday Extend
Alongside these typical consulting
activities, there is a growing opportunity
linked to Workday Extend, Workday’s
Platform-as-a-Service offering
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 organisations
to build additional, specialised
functionality on the Workday platform
to further enhance customers’ Workday
deployment. As experts in Workday
Extend, we have helped organisations
such as Universal Music Group, Groupon
and Cardinal Health build Workday
Extend applications specific to their
requirements.
Workday Services outlook
Our strong performance provides
further evidence of the strength of the
Workday market. With Workday’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 target of achieving $10 billion
revenue by 2026
(12)
, up from c.$6 billion
today.
In addition, we believe that we can
outpace this rapid market growth by
continuing our international expansion,
especially within the US market, and
by replacing other Workday partners
in engagements where they are
underserving their customers.
Revenue (m)
grew by 49%
Bookings (m)
grew by 56%
Contracted backlog (m)
grew by 42%
2023 105.7
2022 70.9
2023 121.7
2022 78.2
2023 72.8
2022 51.1
(12) Workday, Inc.
Workday Services performance
Kainos Annual report 2023
20
STRATEGIC REPORT
Workday Products performance
Our Workday Products revenue
increased by 40% (26% ccy) to £44.7
million (2022: £31.9 million); the Annual
Recurring Revenue was £47.9 million
(2022: £34.3 million), an increase of
40% (33% ccy) and backlog increased
by 44% to £109.3 million (2022: £75.9
million).
Workday is a comprehensive SaaS
platform, but we have identified
opportunities to develop our
own software products that are
complementary to the platform and
that 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 is used by
over 350 global enterprise customers,
including Salesforce, Capital One and
Whole Foods.
Our second product, Smart Audit,
became generally available in August
2021 and has already been deployed
to over 70 customers including Chanel,
Arcbest and QBE Insurance. Smart
Audit is a compliance monitoring tool
that allows Workday customers to
maintain operational security controls
across 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 August 2022, we launched our third
product, Smart Shield, a data-masking
tool that can easily and seamlessly
mask sensitive data without impacting
the Workday user experience. It ensures
that sensitive data remains controlled
when Workday environments are made
available to broader internal or external
teams, for instance, during support
and maintenance activities, or for
ongoing internal Workday training and
onboarding programmes. Although just
released, Smart Shield is now used by
over 40 customers, including
Match.com and LKAB.
Workday Extend
In addition to the consulting services
opportunity linked to Workday Extend,
and described in the previous section,
the platform provides us further
opportunity to build products that are
embedded inside Workday. During 2023
we have developed a new product,
Employee Document Management,to
help customers manage and simplify
the full lifecycle of employee documents.
Although not yet generally available,
it is gaining traction with Workday
customers.
Workday Products outlook
For our existing Workday products, 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 are well positioned
to identify and develop additional
products for the Workday ecosystem.
Our growth will initially be determined
by the product-market fit of our new
products, followed by the penetration
into the Workday client base.
Revenue (m)
grew by 40%
Annual recurring revenue (m)
grew by 40%
Backlog (m)
grew by 44%
2023 44.7
2022 31.9
2023 47.9
2022 34.3
2023 109.3
2022 75.9
WORKDAY
EMPLOYEE
DOCUMENT
MANAGEMENT
Everyday hundreds of thousands of
sensitive employee-related documents
are generated, signed, uploaded
and stored in large multi-national
organisations that use Workday. But
a lack of a native, globally scalable
employee document management
(EDM) function has resulted in
organisations using third-party
solutions, creating poor employee
experience, compliance issues, and
inefficient processes.
In 2021, one of our European customers
faced similar challenges, with
documents held in SharePoint, SAP, and
filing cabinets. Through a roundtable
conversation convened by Kainos, we
explored the client’s need to deliver
an employee document management
function that would enhance user
Workday Products performance
21
Kainos Annual report 2023
experience as well as delivering
compliance and automation at scale.
We leveraged the power of Workday
Extend to design and build a solution
which we launched at Workday’s EU
Rising conference in November 2022.
In December, our first client went
live with Kainos Employee Document
Management across 11 countries in
EMEA and North America, enabling
15,000 employees to access all their
documents inside Workday.
The response to Kainos EDM has
been extraordinary with dozens of
organisations expressing interest,
and we have gone live with five more
customers over the past year.
Kainos Annual report 2023
22
STRATEGIC REPORT
Kainos Annual report 2023
22
STRATEGIC REPORT
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 £9.1 million
(2022: £6.2 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 is used across Kainos
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 (creating 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 services
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.
The team, now 32 people, including
externally recruited experts, has
allowed us to 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 over 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.
OPERATIONAL REVIEW CONTINUED
“WE TAKE THE VIEW THAT OUR
PEOPLE, WHO ARE OFTEN
DEEPLY ENGAGED WITH OUR
CUSTOMERS, ARE BEST PLACED
TO IDENTIFY INTERESTING
PROBLEMS.”
£9.1m
Research and development
expenditure, including product
investment
(2022: £6.2 million)
23
Kainos Annual report 2023
23
Kainos Annual report 2023
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 a level of maturity
and the impact they will have on our
business and clients.
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 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 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.
Read our innovation case studies
on pages 16, 20, 24 and 34
“THROUGH OUR DEDICATED
INCUBATOR, WE ACCELERATE
THE CREATION OF NEW
PRACTICES, WHICH FOCUS ON
BRINGING NEW TECHNOLOGIES
TO CUSTOMERS THROUGH
DEDICATED, HIGHLY SKILLED
PRACTITIONERS.”
Kainos Annual report 2023
24
STRATEGIC REPORT
Kainos Annual report 2023
24
STRATEGIC REPORT
BRING
AI INTO
FOCUS
25
Kainos Annual report 2023
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: Quality Education, Gender
Equality, Reduced Inequalities, Good
Health and Wellbeing and Climate
Action.
We are proud of our track record of
being a responsible business and we
are pleased to record further progress
in this report, particularly our ongoing
status as a carbon neutral business.
We are delighted that our employees
are also shareholders. Every year, we
gift shares to employees, and we also
operate a save-as-you-earn shared-
based scheme
(13)
. During the year we
allocated 1,217,521 shares under all
our share schemes, bringing the total
allocated since 2015 to 11,147,073 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, Brendan
Mooney.
• Social: CEO, 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.
(13) We operate share-gifting schemes in UK, Ireland, Poland and US
(from December 2022) and have cash equivalent schemes in all
our other locations. At a closing share price on 31 March 2023 of
1,382 pence, our FY23 allocation is valued at £16.8 million.
“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.”
The last few years have seen Kainos
invest in new practices focused on
Intelligent Automation and Artificial
Intelligence, which now have a combined
headcount of more than 150 people.
One of the areas we are now focusing
on is green software, developing
sustainable models for the services we
deliver to customers. And we are looking
at ways of applying new technology
to use our scarce resources better.
For example, software can be used to
make systems smarter to optimise our
consumption of energy, presenting new
opportunities for software suppliers to
innovate.
We have created a Cloud Carbon
Calculator which enables us to calculate
the carbon emissions saved as a result
of migrating from local data centres
and embracing cloud modernisation,
delivering startling reductions for
customers. Further work will be done to
collaborate with business and technical
leaders to incorporate sustainability into
our objectives and key results (OKRs),
software development lifecycle and
internal operational measures.
Kainos Annual report 2023
26
STRATEGIC REPORT
Environmental: protecting and
restoring our planet
HAVING ACHIEVED CARBON
NEUTRALITY
(14)
IN 2021, WE
REMAIN COMMITTED TO
BEING CARBON NET ZERO
BY 2025. OUR PROGRESS IS
ALSO REFLECTED IN OUR
IMPROVED RATING WITH
THE CARBON DISCLOSURE
PROJECT (CDP), WITH OUR
RATING NOW ‘B’.
In May 2022 we had our net zero Science
Based Targets initiative (SBTi) targets
confirmed (certificate KAIN-UNI-001-
OFF), where we have committed, to
reduce our Scope 1 and 2 emissions by
70% on an absolute basis and Scope 3
emissions by 45% on an intensity basis
by 2026, using 2020 as our base year. We
have invested in a market-leading tool,
Watershed, to easily report progress
towards these targets.
Building on our work this year, our
priorities for FY24 include carbon
reduction initiatives through
engagement with our suppliers, green
travel, education and awareness
activities and increased understanding
of the positive carbon-reduction impact
our delivery work has on customers.
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.
This year there were zero breaches
of any environmental regulations
(2022: zero).
Implementation of the TCFD framework
Our focus during the year was securing
offsetting projects to underpin our
carbon neutral status and ensuring
that we remain on track for achieving
carbon net zero by 2025.
Understanding our emissions and
setting reduction targets underpins our
carbon net zero ambition. We continue
to account for our emissions in line with
the GHG Protocols and as part of our
SBTi commitments will reduce Scope
1 and 2 GHG emissions by 70% on an
absolute basis and reduce Scope 3 GHG
emissions by 45% on an intensity basis
by FY26, using FY20 as our base year.
We completed our climate change
disclosure, for the third year using
CDP. This platform aligns with TCFD
recommendations enabling us to
continue 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 this
year’s submission to CDP
(15)
, alongside
our previous detailed disclosures.
Assessment of our former CDP
submissions and related feedback have
taken place and we have amended our
risk assessment processes to identify,
assess and respond to climate risks and
opportunities.
(14) 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.
(15) CDP responses.
ESG COMMITMENTS CONTINUED
27
Kainos Annual report 2023
Governance Priorities for FY24
a) Describe the Board’s oversight of
climate-related risks and opportunities.
Our Board has decided that the process of identifying, assessing and responding
to risks posed by climate change should form part of the Group Risk Register
and be assessed, reviewed and monitored by the Audit Committee, who will raise
appropriate matters to the main Board.
Our risk management framework and governance structure is described in further
detail in the Risks and opportunities’ section of this report.
b) Describe management’s role in
assessing and managing climate-
related risks and opportunities.
Environmental sustainability is a core focus for our business, with our CEO acting
as the ultimate sponsor and responsible individual for our strategy. This creates
continuity between operational and Board focus on this area.
Our Board Chair is the Non-Executive Director sponsor for climate-related issues.
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.
Operational activities are led by our Executive Sponsor Stephan Sakowicz,
alongside a dedicated Environmental Lead responsible for the day-to-day
co-ordination with our Sustainability Group.
Management ensures that climate-related risks and opportunities are
appropriately reviewed and acted upon, including monitoring and documenting
progress towards mitigating activities through our Enterprise Risk Register.
Carbon reduction initiatives FY24
• Engagement with our suppliers
• Green travel
• Education and awareness activities
• Increased understanding of our
impact on customers
Kainos Annual report 2023
28
STRATEGIC REPORT
Strategy Priorities for FY24
a) Describe the climate-related risks
and opportunities that 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 ‘moderate-to-major’, we
have assessed the impact of these events on our business as being ‘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
We use our Sustainability Group to assess potential opportunities in responding
to the climate crisis. Ideas are shared with our internal climate action community
(which has over 270 members) for feedback and further development.
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 being 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.
Potential areas of risk
Using our enterprise risk framework, our initial assessment of the impact of climate-
related risk to our business is moderate.
Our target of being a carbon net zero company by 2025, forms part of our
organisational strategy, and is identified as a key business objective towards
meeting our goals.
Through our supplier assessment process, we are addressing the climate risk
actions of our suppliers and looking for opportunities to better manage climate-
related risk.
Following feedback from our SBTi submission (mid-2022), we have reviewed each of
the climate risks for materiality and updated our Risk Register accordingly.
Potential areas of opportunity
Given the significant reduction that well-designed digital services can have on the
carbon footprint of an organisation, we expect the demand for our climate-related
services to grow significantly in the years ahead.
The Carbon Calculator is one such example, which allows organisations to calculate
the cost and carbon reduction of moving services or data from on-premise settings
to cloud locations.
c) Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-
related scenarios, including a
2-degree lower scenario.
We did not complete scenario planning for different climate-related scenarios this
year. Based on our assessment of TCFD, our Carbon Disclosure Project (CDP) report
and feedback, and our Net Zero Plan we believe we are aligned with a 1.5-degree
Paris commitment. For us, achieving our Science Based Target initiatives (SBTi) is
our priority.
ESG COMMITMENTS CONTINUED
29
Kainos Annual report 2023
Risks Priorities for FY24
a) Describe the organisation’s
processes for identifying and
assessing climate-related risks.
Our approach to assessing risks is described in more detail in ‘Risk factors and
uncertainties’ section of this report.
We added the climate-related reputational risk, 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 80 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 Priorities for FY24
a) Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process.
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).
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.
We have signed up to the SBTi and are committed to reduce absolute Scope 1 and 2
GHG emissions 70% by FY26 from a FY20 base year. We remain committed to reduce
Scope 3 GHG emissions 45% per unit of value added within the same timeframe.
The SBTi classifies targets against the long-term temperature pathways of well-
below 2°C and 1.5°C. SBTi’s Target Validation Team has classified our Scope 1 and 2
target ambition and has determined that it is in line with a 1.5°C trajectory.
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 disclose 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. From our base year (FY20) we have
reduced Scope 1 and 2 emissions by 59% and Scope 3 emissions by 9%. With our
headcount growth since FY20, we have reduced our overall emissions per average
number of employees (headcount intensity ratio) by 50%.
Our gross profit-driven Scope 3 SBTi target for FY23 was 16,069 tonnes. With our
actual FY23 Scope 3 emissions of 9,222 tonnes, we are ahead of the target set.
The FY23 SBTi target for Scope 1 and 2 emissions was set at 323 tonnes. Again, in
comparison with our actual FY23 Scope 1 and 2 emissions of 204 tonnes, we are well
ahead of the target set.
As noted, in line with SBTi we aim to reduce absolute Scope 1 and 2 GHG emissions
70% by FY26 from a FY20 base year and reduce Scope 3 GHG emissions 45% per unit
of value added within the same timeframe.
For more information on our risk factors
and uncertainties see pages 54 to 59
Kainos Annual report 2023
30
STRATEGIC REPORT
CDP (previously Carbon Disclosure
Project)
During the year we made our third
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. This year we
were awarded a ‘B’ rating (2022: ‘C’
rating) indicating that we are actively
managing our climate impact.
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 100 tonnes of carbon
dioxide equivalent (CO
2
e), relating to
oil-based central heating in our
premises (2022: 112 tonnes).
• Scope 2 describes emissions that result
during the generation of purchased
energy. These emissions largely relate
to our offices. We generated 25 tonnes
CO
2
e within the UK and a further 79
tonnes worldwide (total: 104 tonnes
CO
2
e ) (2022: 84 tonnes).
• Scope 3 emissions relating to business
travel. In FY23, our emissions in this
category increased to 1,911 tonnes
CO
2
e (2022: 382 tonnes).
• Scope 3 (full) emissions generated
indirectly from business activities.
In FY23, 9,222 tonnes of CO
2
e were
generated (2022: 7,539 tonnes),
inclusive of business travel.
Compared to 2022, our total emissions
for this year (9,426 tonnes CO
2
e) (2022:
7,735 tonnes CO
2
e) increased by 22%,
largely linked to an increase in business
travel and the 11% increase in staff
numbers and additional footprint
generated (e.g. commuting, electricity,
usage in the office and waste). There are
reduction initiatives in place to reduce
business travel, encourage “greener”
commuting, to move remaining offices
to 100% green power (where possible)
and to ensure that waste is fully
recycled in all our locations worldwide.
Our policies are being enhanced to
support these initiatives.
Compared against our base year (2020),
our emissions are significantly reduced.
Our Scope 1, 2 and Scope 3 business
travel emissions in 2020 were 5,524
tonnes CO
2
e; the same emissions for
the past year represented 2,115 tonnes
CO
2
e, a reduction of 62%.
Similarly, our total emissions (inclusive
of Scope 1, 2 and full Scope 3) for last
year represent a circa 9% reduction
from our 2020 base year, despite our
staff numbers increasing by 77% over
the same time period.
Our FY20 Scope 1, 2 and full Scope 3
emissions were 10,324 tonnes CO
2
e. As
a result, our carbon intensity figure
(tonnes CO
2
e per employee) has
reduced from 7.3 tonnes CO
2
e in 2020
to 3.6 tonnes CO
2
e in 2023, a reduction
of 51%.
In 2022 we offset our total emissions to
maintain our carbon neutrality status,
at a cost of £82,000 (2022: £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.
Collaborating with DEFRA Government
Digital Sustainability Alliance (GDSA)
We are working with DEFRA and the
wider UK Government to meet the
commitments defined within the
Greening Government ICT and Digital
Services Strategy 2020-2025, through
collaborative partnership. As part of this
activity, we signed the GDSA Charter in
January 2023.
ESG COMMITMENTS CONTINUED
31
Kainos Annual report 2023
Global tonnes of CO
2
e
GHG emissions data for period 1 April 2022 to
31 March 2023
2023 2022
UK Non-UK UK Non-UK
Combustion of fuels and operation of facility
(Scope 1)
77 23 86 26
Emissions from purchase of electricity, heat,
steam and cooling purchased for own use
(Scope 2)
25 79 15 69
Business travel (Scope 3) 1,343 568 275 107
Total emissions by location 1,445 670 376 202
TOTAL EMISSIONS FOR YEAR 2,115 578
Total emissions from activities for which the
Company is responsible (Scope 1 and 2) 2023 2022
kWh (thousand) 1,039 1,095
The following table expresses our annual emissions in relation to quantifiable factors
associated with our activities.
Intensity ratios
2023 2022
tCO
2
e/£ million revenue 5.64 1.91
tCO
2
e/average number of employees 0.81 0.28
Physical Server Decommissioning
Project
The decommissioning of all our
physical servers commenced in May
2019 and is now complete. This year
decommissioning accelerated, retiring
69 physical servers and 380 virtual
servers, our carbon emissions have
reduced by 19.6 tonnes CO
2
e per year as
a direct result of this project.
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.
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 disposed of our
Waste Electronic and Electrical
Equipment (WEEE) with two partners,
over 152 tonnes were reused, and 47
tonnes recycled. In total 201 tonnes
(100%) of WEEE was diverted from
landfill.
We are in the fourth year of our
arrangement with our disposal partners
and over that time we continue 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.
Office
Office
Office
Home
office
Home
office
Hybrid working
We support our colleagues in
working in the most effective way
possble
Kainos Annual report 2023
32
STRATEGIC REPORT
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.
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 employer.
A key part of achieving that ambition
is for our people to tell us when we get
it right and to tell us about the areas
where we can improve.
Historically we have used the Sunday
Times ‘Best Companies to Work For’
annual survey as a confidential way for
our colleagues to share this feedback.
Having first appeared in the Top 100
of companies back in 2012, we were
delighted to still be included in the
same list until we switched to Workday
Peakon.
While the insight that the Best
Companies survey provided was
incredibly valuable, the annual nature
of the survey made it more challenging
to assess the immediate impact of any
changes that we implemented. As a
result, we moved to Workday Peakon,
an intelligent listening platform that
allows for more timely feedback, provides
a holistic view of employee sentiment
and allows comparison against circa 350
global technology employers.
Peakon allows organisations to request
feedback at any interval; we ask our
collegues for feedback on a monthly
basis. Based on feedback from
our people, our level of employee
engagement remains high at 81%, as are
our ratings for diversity and inclusion
84% and wellbeing 78%.
We also continue to measure
engagement through Glassdoor, the
online career community with over 59
million users that enables current and
former employees to provide feedback
on companies. In May 2023, Kainos
had an approval rating of 86% and
83% of respondents would recommend
working at Kainos to a friend; these
are well above the average ratings
across 2.2 million companies of 74%
and 67% respectively. In early 2023, we
were once again designated to be in
the ‘50 Best Places to Work in the UK’
annual Employee Choice awards from
Glassdoor, ranked #No. 39.
ESG COMMITMENTS CONTINUED
Workday Peakon
Workday Peakon
Our listening platform
allows for timely feedback,
provides a holistic view of
employee sentiment and
allows comparison against
circa 350 global technology
employers.
33
Kainos Annual report 2023
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 2023, our headcount
grew by 298 to 2,990 people (2022:
2,692).
As part of our recruitment activity, we
continue to 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. This year 153
people joined as a result of a referral
from an existing employee.
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 88% of our colleagues made the
choice to stay and develop their career
at Kainos (2022: 86%).
We take great enjoyment in marking
the significant work anniversaries of our
colleagues. During the year 53 people
(2022: 100) celebrated their five-year
anniversary, and a further 60 marking
their 10, 15, 20, 25 or 30-year anniversary
of joining Kainos (2022: 58).
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 3,500 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 six years, our staff ideas portal
has received 504 suggestions. Of these,
126 have been implemented, 33 were
approved for implementation and 199
were not taken forward. Currently, 146
ideas are being more fully explored and
are in review.
Measures:
Peakon scores:
Engagement 81%
Diversity & Inclusion 84%
Wellbeing 78%
Glassdoor approval rating:
2023 86%
2022 86%
Staff retention:
2023 88%
2022 86%
Headcount: An increase of 298
(2022: 668)
2023 2,990 people
2022 2,692 people
Employee referrals:
2023 153 new people employed
2022 200 new people employed
Recognition awards:
2023 3,500+ awards received
2022 2,274 awards received
Kainos Annual report 2023
34
STRATEGIC REPORT
Wellbeing
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 portal
which is regularly updated with self-
care materials, articles, guides, learning
and hints and tips developed with and
by our people with the aim of helping
employees to manage their own
wellbeing and that of others.
During the year we measured 53,000
wellbeing engagements across all
our channels, including those on our
wellbeing portal, Yammer, webinars,
Workday Peakon and our Mindset tools.
a) Emotional wellbeing
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 2020 we have operated our online
Mindset wellbeing platform which is
designed to empower our people to
explore their own emotional wellbeing
through 25 practical learning modules
across a range of topics. Currently 1,492
people are actively using the platform,
giving the learning a 96% satisfaction
rating.
We launched our wellbeing app in 2021,
which covers physical and emotional
wellbeing, including fitness, nutrition,
mediation techniques and wellbeing
insights. To date, 533 people (2022: 479)
actively use the app.
In addition to these self-directed
activities, we have trained 44 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:
2023 1,492 people
2022 1,400 people
Using the wellbeing app:
2023 553 people
2022 479 people
Wellbeing champions:
2023 44 people
2022 31 people
Accessing the employee assistance
programme:
2023 164 people
2022 190 people
INNOVATING
WITH
ACADEMIA
We are proud to support Ulster
University's new Belfast campus in
launching an Artificial Intelligence
Research Centre (AIRC), and as a
leading digital technology company,
we're committed to promoting research
and skills development in Northern
Ireland.
ESG COMMITMENTS CONTINUED
35
Kainos Annual report 2023
The AIRC represents an innovative
collaboration between industry and
academic experts that aims to inspire
the next generation in harnessing the
power of Artificial Intelligence (AI) to
make a positive impact on society.
The partnership is made up of three
workstreams, focusing on knowledge
sharing, undertaking strategic research,
and developing best practice guides
for both industry and academia. We
will be surfacing problems from across
our broad customer base to gain
insight into industry-specific challenges
and conducting sessions with Ulster
University to identify opportunities that
fit with existing knowledge and research
interests.
The AIRC will explore how using ethical,
trustworthy and responsible AI can
deliver positive change for people
everywhere, as well as helping our
customers to work smarter, faster and
better in line with our ethos of delivering
change for good.
Kainos Annual report 2023
36
STRATEGIC REPORT
b) Physical wellbeing
Support for managing physical health
and energy is provided through our
self-directed mindset and wellbeing
platforms described earlier, and
through a range of activities that
include our wellbeing webinars,
women’s health initiatives, supported
cycling schemes and employee-led
sport, fitness and charity events.
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
decreased to 5.8 days (2022: 6.5 days),
which is slightly above the UK average
of 5.7 days.
Measures:
Absence levels:
2023 5.8 days per person
2022 6.5 days per person
Accessing private medical insurance:
2023 417 claims
2022 326 claims
Accessing permanent health insurance:
2023 3 people
2022 3 people
c) Social wellbeing
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.
Our network of 21 Location Advocates
is made up of interested people who,
working with local social committees,
plan and organise inclusive social
events that appeal to local teams.
These events aim to bring people
together virtually or in person to
connect, network and have fun. These
can be unique to individual offices (art
sessions, board game nights, quizzes),
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 meetups at a
team level. Kainos pays for all expenses
linked to these events.
Measures:
Staff entertainment expenditure:
2023 £2.0 million
2022 £1.2 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.
Our global capabilities are responsible
for developing the skills, qualifications
and confidence of our colleagues.
There are over 20 global capabilities,
covering disciplines such cyber security,
experience design, engineering and
reporting and analytics. We have 927
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
discussions to match their career
requirements.
Our people are supported by practical
tools such as our online coaching portal
comprising 24 self-study modules, with
over 800 people having completed the
learning to date.
People managers undertake our
Effective Manager programme, which
covers core management skills,
personal leadership skills, everyday
coaching and giving and receiving
feedback. Over 900 of our people
managers have completed this training,
which will be professionally accredited
in 2024.
1,492+
People using online Mindset tools
2022: 1,400
ESG COMMITMENTS CONTINUED
5.8
927
5.8 days
Sickness absence decrease
2022: 6.5 days
37
Kainos Annual report 2023
Alongside the career planning and
support, we invest heavily in training
and certifications for our people, with
over 18,000 trainings days completed
in the past year. 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.
Partly in response to the pandemic, we
transitioned our learning curriculum
and approach to a virtual delivery
model. This has increased the
global participation on our training
programmes, although it has reduced
the opportunity for our colleagues to
build their personal networks as they
would if they were attending in-person
courses.
Measures:
Number of promotions:
2023 466 people
2022 413 people
Annual appraisals completed:
2023 100%
2022 99.1%
Training expenditure:
2023 £1.8 million
2022 £1.4 million
e) Financial wellbeing
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 employees
in the UK, Ireland, Poland and US (from
December 2022) and operate cash-
equivalent schemes in all our other
locations. In addition, we operate
a save-as-you-earn shared-based
scheme. In FY23 we allocated 1,217,521
shares under all our share schemes,
bringing the total allocated to 11,147,073
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.
In the current economic climate, we
have increased our content aimed
at supporting people in situations
where there is significant financial
related pressure. This content includes
webinars and the publication of our
financial wellbeing guide. This guide
offers practical advice for managing
personal finances, including budgeting,
debt management and links to finding
out more about our Kainos reward
offerings.
Measures:
Shares allocated in 2023:
1,217,521
shares (£16.8 million at 31 March 2023
closing price
(16)
Shares allocated since 2015:
11,147,073
shares (£154.1 million at 31 March 2023
closing price
(16)
(16) KNOS closing share price on 31 March 2023 1,382 pence.
5.8
927
927
People Managers
2022: N/A
Kainos Annual report 2023
38
STRATEGIC REPORT
Kainos Annual report 2023
38
STRATEGIC REPORT
Diversity and inclusion
We have colleagues from 62 different
nationalities and, whilst diversity is
not only defined by nationality, we
appreciate the value of having a
diverse, international workforce.
We remain committed to 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
our business. 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 are an integral
part of our Company strategy because
we know that by having more culturally
diverse leadership and teams, we are
more likely to have increased staff
wellbeing and innovation, 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 into market.
With a more diverse and inclusive
culture, 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.
Measures: members in Employee
Network Groups (ENG):
Inspire (women):
2023 595 members
2022 446 members
Xpression (LGBTQ+):
2023 408 members
2022 321 members
Voice (ethnic diversity):
2023 327 members
2022 275 members
Neurodiversity ENG:
2023 213 members
2022 115 members
Our data
We continue to use our Workday VIBE
Index™ to understand the diversity that
exists across our business. Launched in
2021, VIBE (Value, Inclusion, Belonging
and Equity) empowers colleagues
to voluntarily disclose details about
ethnicity, disability, marital status,
religion, citizenship status, nationality,
sexual orientation, sex at birth and
gender identity.
To date, over 2,600 of our colleagues
have updated part or all of their
diversity information, representing
93% (2022: 90%) of all colleagues. This
ensures that our planned D&I activities
and the day-to-day work of our network
groups are focused on these areas that
are important to our people.
Over 3,300 people have now completed
our Inclusion, Equity, Diversity and
Equality eLearning (2022: 2,316).
Progress
This year our global D&I plan included
campaigns to help our people to
talk, learn and unite around our
differences. Examples include our
webinar speaker series which included
thought provoking discussions about
building confidence to talk about race,
how to practice everyday inclusion,
understanding unconscious bias, and
tackling excluding behaviour. Over 1,000
colleagues attended these sessions, and
over 2,400 colleagues have completed
our online unconscious bias eLearning
module.
Diversity and inclusion
We have colleagues from
62 different nationalities
39
Kainos Annual report 2023
Driven by our Inspire Employee Network
Group (women), we have established a
new male allies group. Involving 26 men
from across Kainos, the purpose is to
work with Inspire to champion women
in Kainos through increased awareness
of the challenges faced by women in
technology, and proactively ensure
support and change for the better.
Recent examples include increased
awareness and education about
women’s health, menopause awareness
and updated policies.
This year we were proud to sponsor
Harkin Summit, the international
disability employment conference.
Held for the first time outside the US,
this conference provided a powerful
opportunity for our people to showcase
our diversity and inclusion initiatives,
our inclusive design capability and
to connect with others to share
perspectives and experiences, all of
which is used to help shape the work of
our D&I Council and Network Groups.
Working with globally recognised
inclusion and diversity experts our
Executive Team participated in an
Inclusive Leadership programme
designed to equip the 17 participants
to recognise the key role they must
play in shaping a positive working
environment. It also sought to embed
inclusive leadership into their decision
making. The programme will continue
with a second cohort of leaders to be
delivered in the year ahead.
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.
Measures:
Employees opting to disclose their
diversity data:
2023 93%
2022 90%
Gender balance
Gender diversity remains a challenge
within the wider industry, where 22% of
roles in technology are undertaken by
women
(17)
and nationally, women hold
5% of executive management roles
(13)
.
In considering Kainos employees, there
are 946 women (2022: 787), 1,792 men
(2022: 1,520) and 55 colleagues that
are non-binary or transgender or have
chosen not to disclose this information
(2022: 42). Viewed as proportions, 34%
of our workforce are women (2022:
33%), 64% are men (2022: 65%), 2% are
non-binary, transgender or prefer not to
disclose this information (2022: 2%).
There are 229 women at manager level
or above (2022: 171) and two women
hold executive management roles
(2022: two). As proportions, women
holding manager level and above, roles
represent 29% (2022: 27%) with women
holding 12% of executive management
roles (2022: 12%).
On the Kainos Board, two of the four
(50%) Independent Non-Executive
Directors are women (2022: 50%).
Including the Executive Directors, 33%
of our Board are women (2022: 33%).
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.
Global D&I Council
Xpression
(LGBTQ+)
408
members
Inspire
(women)
595
members
Voice
(ethnic diversity)
327
members
Neurodiversity
213
members
(17) BCS diversity report 2022: Women in IT.
Kainos Annual report 2023
40
STRATEGIC REPORT
a) Develop the talents and careers
of women already in Kainos
Working with industry leadership
experts our six-month programme,
Empowering Leaders was delivered.
The programme focused on supporting
the continued development of the 14
women participants. In addition to the
personal development goals for those in
the programme, it established a cohort
of women role models, ambassadors
and advocates that are inspirational
for women in, or considering a career in,
the digital sector.
To further support our women in Kainos
our Inspire Employee Network Group
launched the third round of their
mentoring initiative. This programme is
designed to empower women in Kainos
to develop their own leadership skills as
mentors and to expand the knowledge
and skills for the mentees.
We have retained our partnership
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. This year we had seven finalists
across several awards and categories,
including Diverse Ethical Leadership,
active commitment to Driving Positive
Change for Women In Technology and
Innovation And Expertise in delivering
Digital Transformation.
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 414
young women in our virtual outreach
programmes, where over 1,800 students
participated.
Measures:
Gender identity:
2022 33%
65%
2023 34%
64%
Women Men Non-binary, transgender or prefer
not to disclose this information
Women at manager level and above:
2023 29%
2022 27%
Women at executive level:
2023 12%
2022 12%
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.
Since 2015, we have engaged over 7,000
young people in the UK, Ireland and
Poland through our outreach activities
and during the year were recognised
as “Inspirational STEM employer” and
“Outstanding Contributor” for widening
participation, diversity and inclusion at
this year’s X2 STEM Learning awards.
We have redeveloped our outreach
programmes to be either in-person
or virtual. In total, over 1,800 young
people were involved in one of our
programmes, offering students aged
14-19 an enjoyable and engaging insight
into the career opportunities available
in digital technology.
In addition to our popular virtual work
experience programme, 197 students
attended our global, one-week
CodeCamp event, over 300 young
people participated in our Digital
Insights events in Data Science and
Artificial Intelligence, and through
our CodeClub for young people aged
9-13, we hosted 94 young people
and included the launch of our first
CodeClub in Poland. This year also saw
the return of our in-person education
conference where over 300 students
came together to learn about the
latest advancements in the world of
technology.
This year we offered new learning to
support colleagues to become outreach
mentors, which significantly increased
participation – over 170 collegues
recorded over 500 days of mentoring
support for young people (2022: 74
mentors and 469 days).
Our Digital Bursaries are aimed at
widening the participation of young
people who are traditionally under-
represented at university. Launched
in 2021 and partnering with Queen’s
University Belfast and Birmingham City
University, we will support 60 young
people and women attending university.
53,000
Wellbeing engagements measured
across all our channels
2022: N/A
ESG COMMITMENTS CONTINUED
(18) PwC research report: Women in Tech.
2%
2%
229
229 women at manager level or above
2022: 171
500+ days
Over 170 colleagues recorded over 500+
days of mentoring support for young
people
2022: 74 mentors and 469 days
41
Kainos Annual report 2023
• We have continued our partnership
with the Now Group, A Social
Enterprise and Autism Charity.
Through their Digital Skills Academy,
we provide paid work placements for
young people seeking to gain entry-
level employment.
• To support people displaced by
the war in Ukraine, we have been
providing CV workshops, a six-week
coding programme and helped
secure funding for the development
of an automated mentoring platform
to support thousands of people
rebuilding their careers.
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 those
with a focus on technology.
In the year, we recruited 184 graduates
(2022: 142) and 22 placement students
(2022: 17). These roles were based across
our Amsterdam, Antwerp, Atlanta,
Belfast, Birmingham, Derry, Gdańsk,
Indianapolis, London, and Toronto
locations.
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, 84 young
people have joined us through this
programme (2022: 74).
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.
During the year, charitable donations
increased to £77,000 (2022: £45,000).
Everyone in Kainos can avail 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
and nature reserve maintenance;
over the past year this has seen an
increase in activities, particularly in
Gdańsk, supporting Ukrainian refugees.
Following the Russian invasion of
Ukraine, we have supported a local
charity in Gdańsk called Fundacja
Nagrodzkiego. Funds raised by staff,
combined with donations from Kainos,
have co-funded the purchase of a
van dedicated to supplying food and
other supplies to orphanages in the
Kramatorsk, Kherson, Chernihiv and
Kyiv region (15 tonnes delivered). The
same van has been used to transport
65 women and children back to safety
from areas experiencing heavy fighting
and bombardment.
We have also funded the renovation of
a bomb shelter in a primary school in
Kulykivka (Chernihiv region). Following
frequent Russian attacks on the civilian
buildings in the area, only schools with a
bomb shelter were permitted to remain
open. In December 2022, the shelter
restoration work was completed, and
700 children were able to safely return
to regular school education.
Measures:
Graduates and students employed:
2023 206
2022 159
Charity donations:
2023 206
2022 159
Virtual placements and insight
sessions:
856
provided
Digital inclusion bursaries:
48
young people since FY22 launch
(target being 60 by FY25)
EAYL apprenticeships:
84
places in ten years
60 BURSARIES
Our digital bursaries will support 60
young people from backgrounds that
are traditionally under-represented at
university
Kainos Annual report 2023
42
STRATEGIC REPORT
Governance:
Our stakeholders
OVER THE PAST 36 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.
Statement by the Directors in
performance of their statutory duties
under s.172(1) Companies Act 2006
The Directors of Kainos have an
obligation to act in accordance with a
general set of duties which are set out in
section 172 of the Companies Act 2006
(“Companies Act”).
Section 172 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, 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.
Directors are briefed on these duties
as part of their induction and through
regular ongoing training. They also
have access to professional advice
about these duties, from the Company
Secretary or, if necessary, from an
external independent advisor.
The Directors consider, both individually
and together, that they have exercised
care in their decision making, are
cognisant of their s.172 obligations,
and take into consideration the
needs and interests of the various
stakeholder groups as part of all Board
decision-making. Under section 172,
we consider our stakeholder groups to
be our workforce, 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.
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. The table below sets out
the stakeholder groups which the Board
has identified and provides examples
of the Board’s engagement with each of
these groups and the outcomes. Further
examples can be found throughout the
Strategic Report.
500+ days
Over 170 colleagues recorded over 500+
days of mentoring support for young
people
2022: 74 mentors and 469 days
ESG COMMITMENTS CONTINUED
43
Kainos Annual report 2023
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. This in turns helps us to attract
and retain the talent we need to fulfil our growth plans.
Further information regarding our workforce engagement is set out in the Corporate Governance Report and is referenced in
the Social: our people and our communities section of this report.
Employees
Their interests • Their reward and benefits.
• Their career progression.
• The training and development opportunities we create.
• Our culture and strategy.
• Teamwork and peer and manager support.
• Their health and wellbeing.
• Diversity and inclusion.
• Our ethical stance as a Company.
How we engage • We use the Workday Peakon employee engagement platform to measure engagement
and capture anonymous feedback on a monthly basis about our strengths and areas for
improvement.
• The Culture and Development Group (chaired jointly by the CEO and Chief People Officer) is the
Company’s formal workforce advisory panel. It meets monthly and reports regularly to the Board
on people-related 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.
• Our Executive Team hosts strategy review sessions with staff groups twice yearly to discuss
culture, engagement and performance.
• 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 • A high employee engagement score, currently recorded as 81% in Peakon.
• The outputs from the Peakon survey are shared with the Board on a six-monthly basis and the
same information is available to all staff through the Peakon online dashboards. Progress against
the continuous improvement plans created to address feedback is 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 11,023 posts to Yammer.
81%
A high employee engagement score
recorded in Peakon
2022: N/A
Kainos Annual report 2023
44
STRATEGIC REPORT
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.
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 800 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 and
receiving Board input and feedback.
Outcomes • We received 553 customer engagement surveys, with 99% 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 presented to the Board.
ESG COMMITMENTS CONTINUED
99%
We received 553 customer engagement
surveys, with 99% rating us ‘Good’,
‘Very good’ or ‘Excellent’ overall
2022: N/A
45
Kainos Annual report 2023
c) Our investors and shareholders
We value the support of our shareholders and recognise their interest in our strategy, our performance and our progress on key
strategic programmes.
Investors and shareholders
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 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 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.
Kainos Annual report 2023
46
STRATEGIC REPORT
d) Our communities
We believe that as a responsible business, we need to contribute to the communities within which we operate.
Further information regarding our community engagement is set out in the Corporate Governance Report and is referenced in
the Social: our people and our communities section of this report.
Communities
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 22 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.
• Community initiatives are managed within the relevant Board committees and discussed with the
full Board.
ESG COMMITMENTS CONTINUED
184 GRADUATES
We recruited 184 graduates and 22
placement students in 2023
2022: 142 graduates and 17 placement
students
47
Kainos Annual report 2023
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, which 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 Kainos. 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.
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, in asking our
people to limit travel, we continued
to minimise the impact that business
travel had on the environment.
Kainos Annual report 2023
48
STRATEGIC REPORT
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: 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 Kainos 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 Kainos 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.
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.
An independent whistleblowing hotline
is available and anonymous reporting is
facilitated with all reporting treated as
confidential.
The whistleblowing policy is proactively
communicated to the workforce and
there is mandatory Anti-Bribery and
Corruption training for all colleagues
which includes training on the
whistleblowing policy.
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 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 June 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 April 2023,
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 (2022: zero); and there were
zero breaches of our modern slavery
statement (2022: zero). There were
zero incidents referred through our
whistleblowing process (2022: zero).
Our six ethical principles
Wellbeing
Equality
Environment
Transparency
Integrity
Taking the
initiative
to make a
positive
difference
Our six ethical principles: 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.
ESG COMMITMENTS CONTINUED
Our six ethical principles
Our six ethical principles: 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.
49
Kainos Annual report 2023
Quality standards, data privacy
and security
Our commitment to delivering a high-
quality service to our customers has
been established over 36 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 our senior
management team.
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 the year there were no
incidents of data security or privacy
breaches that required reporting to the
Information Commissioner (2022: 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 SOC 2 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.
Our six ethical principles
Wellbeing
Equality
Environment
Transparency
Integrity
Taking the
initiative
to make a
positive
difference
Our six ethical principles: 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.
Kainos Annual report 2023
50
STRATEGIC REPORT
FY23 was another year of excellent
financial performance
In summary, we grew revenue by 24%
(20% ccy) to £374.8 million (2022: £302.6
million). Digital Services revenue rose
by 12% to £224.4 million (2022: £199.8
million), reflecting increased demand
for digital transformation, primarily
across the public and commercial
sectors. Workday Services revenue grew
49% (40% ccy) to £105.7 million (2022:
£70.9 million) driven by growth in North
America. Workday Products revenue
increased to £44.7 million (2022: £31.9
million), representing growth of 40%
(26% ccy) (2022: 32%). The Operating
Review provides more information on
our revenue performance.
Our overall gross margin was 47.3%
(2022: 46.3%). Digital Services’ gross
margin decreased to 38.1% (2022:
38.7%), mainly due to the two additional
UK bank holidays in the period. Workday
Services margin remained consistent at
54.2% (2022: 54.3%). Workday Products
margin increased to 76.6% (2022: 76.3%).
Operating expenses
Operating expenses increased by 33%
to £124.6 million (2022: £93.6 million).
The growth in operating expenses is
higher than revenue growth due to
the increased investment in Workday
Products in both sales and product
development.
Our investment in product development
increased to £9.1 million (2022: £6.0
million), all of which was expensed
during the period. We recognised £4.2
million of Research & Development
Expenditure Credit (RDEC) income
during the year (2022: £3.2 million).
Alternative performance measures
We use underlying results to manage
the business and measure performance
day-to-day. We believe that ‘adjusted
profit before tax’, ‘adjusted EBITDA’ and
‘adjusted diluted and basic earnings
per share’ better represent the Group’s
underlying performance and make
it easier to compare the Group’s
performance between periods.
Our adjusted results 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 we
use are not defined in UK-adopted
International Accounting Standards and
our definitions may not be comparable
with similarly titled performance
measures and disclosures in other
entities. The adjusted profit measures
reconcile to the reported numbers as
follows:
FINANCIAL REVIEW
“WE CONTINUE TO HAVE
A STRONG FINANCIAL
POSITION, WITH £108.3
MILLION OF CASH
(2022: £76.6 MILLION),
NO DEBT AND NET ASSETS
OF £129.3 MILLION
(2022: £107.7 MILLION).”
Adjusted profit measures
2023
(£000s)
2022
(£000s)
PROFIT BEFORE TAX 54,338 45,993
Share-based payment expense and related costs 6,346 3,727
Amortisation of acquired intangible assets 2,642 1,890
Compensation for post-combination services 4,176 5,520
Acquisition-related expenses 57 1,641
ADJUSTED PROFIT BEFORE TAX 67,559 58,771
PROFIT AFTER TAX 41,645 35,768
Share-based payment expense and related costs 4,886 2,907
Amortisation of acquired intangible assets 2,642 1,890
Compensation for post-combination services 4,176 5,520
Acquisition-related expenses 57 1,641
ADJUSTED PROFIT AFTER TAX 53,406 47,726
51
Kainos Annual report 2023
Adjusted EBITDA
2023
(£000s)
2022
(£000s)
ADJUSTED PROFIT BEFORE TAX 67,559 58,771
Depreciation of property, plant and equipment 2,249 1,538
Depreciation of right-of-use assets 1,163 1,654
Finance expense 71 74
Finance income (1,463) (52)
ADJUSTED EBITDA 69,579 61,985
Adjusted pre-tax profit increased by
15% to £67.6 million (2022: £58.8 million).
Profit before tax increased by 18% to
£54.3 million (2022: £46.0 million).
Corporation tax charge
The effective tax rate for the year was
23% (2022: 22%). This is higher than the
UK tax rate of 19% as we earn profits in
countries with higher corporation tax
rates than the UK.
Financial position
We continue to have a strong financial
position, with £108.3 million of cash
(2022: £76.6 million), no debt and net
assets of £129.3 million (2022: £107.7
million). Underlying trade receivables
and accrued income balance is similar
to last year at £74.5 million (2022: £74.7
million), despite the growth in revenue,
due to very strong cash conversion in
the period.
Property, plant and equipment
decreased to £9.5 million at the year
end (2022: £14.9 million). During the
year £5.2 million was transferred
from property, plant and equipment.
to investment property, reflecting
our agreement to sell part of the site
acquired in 2019 for the development
of our future headquarters in Belfast.
Furthermore, we listed property located
in Belfast for sale in February 2023. The
carrying value of this property (£0.3
million) has been transferred to assets
held for sale within current assets.
Cash flow and cash conversion
Cash conversion, which is cash
generated by operating activities as
a percentage of adjusted EBITDA,
remained strong at 104% (2022: 83%).
Dividend
Our progressive dividend policy
maximises shareholder returns, while
ensuring we have sufficient funds
to invest in long-term growth. The
proposed final dividend recommended
by Directors is 16.1p and, if approved by
shareholders, will be paid on 20 October
2023 to shareholders on the register on
29 September 2023, with an ex-dividend
date of 28 September 2023. This will
make the total dividend for the year
23.9p (2022: 22.2p) which will represent
a distribution of 56% of adjusted profit
after taxation (2022: 58%).
Richard McCann
Chief Financial Officer
19 May 2023
£374.8
Revenue (m)
2022: £302.6m
£67.6
Adjusted pre-tax profit (m)
2022: £58.8m
Kainos Annual report 2023
52
STRATEGIC REPORT
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.
KEY PERFORMANCE INDICATORS (KPIs)
£427.8
Bookings (m)
2022: £349.8
2023 427.8 million
2022 349.8 million
88%
Staff retention (%)
2022: 86%
99%
Overall customer satisfaction rating
(19)
(%)
2022: 98%
2023 99%
2022 98%
2023 88%
2022 86%
(19) Data collated from regular feedback surveys conducted with subset of Kainos customers over
the course of the year.
53
Kainos Annual report 2023
£374.8
Revenue (m)
2022: £302.6m
£67.6
Adjusted Pre-Tax Profit (m)
2022: £58.8m
Financial KPI
Non financial KPI
2,990
Number of staff
2022: 2,692
821
Number of customers
2022: 731
2023 374.8 million
2022 302.6 million
2023 67.6 million
2022 58.8 million
2023 821 customers
2022 731 customers
2023 2,990 employees
2022 2,692 employees
Kainos Annual report 2023
54
STRATEGIC REPORT
WE RECOGNISE THE
IMPORTANCE OF EFFECTIVE
RISK MANAGEMENT AND
THE NEED TO BE PROACTIVE
TO MITIGATE POTENTIAL
THREATS WHICH COULD
ADVERSELY IMPACT OUR
OPERATIONS, REPUTATION
AND FINANCIAL RESULTS.
WHILE WE CAN NEVER
ELIMINATE ALL RISK, WE
CONTINUE TO MONITOR
AND MANAGE THE
EFFECTIVENESS OF OUR
INTERNAL CONTROLS
THROUGH OUR RISK
MANAGEMENT FRAMEWORK
AND ASSOCIATED
GOVERNANCE STRUCTURES,
DEVELOPED TO HELP US
SAFEGUARD OUR PEOPLE,
OUR CUSTOMERS AND
OUR BUSINESS.
Risk governance
The Board has responsibility to
ensure that risk is managed across
our Company and understand that
effective risk management is essential
to meeting our strategic objectives.
The Board considers our risk
assessment framework and governance
structures to be robust and provide
assurance that risk is being identified,
monitored and managed effectively.
Risk management process
The Group Risk Register is our principal
tool for monitoring and reporting
risk. The Risk Register describes each
principal risk, its potential impact, the
likelihood of it materialising and any
appropriate mitigating controls to
reduce the risk to an accepted level.
Senior management co-ordinates the
register’s preparation, using input from
all areas of the business. An appropriate
senior manager is assigned ownership
of each risk and is responsible for
ensuring that appropriate controls
and mitigating actions are developed
to reduce the likelihood and potential
impact of the risk being realised. The
Audit Committee formally reviews the
Risk Register twice each year, with
flexibility to meet if there is emerging
risk or substantial changes to principal
risks which require attention.
When risks change significantly, they
are reported to the Board by the Audit
Committee who also update the Board
after each formal review of the Risk
Register.
While individual risks have changed
over the last year, our underlying risk
profile is not significantly different from
the previous report; however, we have
continued to strengthen and embed
cyber and data privacy controls into our
business, as well as a continued focus
on addressing climate-related risk.
Cyber and information security:
Cybersecurity and data privacy
continue to be principal risks for our
business as the threat landscape
evolves and becomes increasingly
complex. We have made significant
investments over the past year to
improve our cybersecurity capabilities
and enhance our data privacy practices
and we will continue to prioritise
cybersecurity and data privacy as key
risk areas going forward.
Climate-related risk: We are committed
to reducing our carbon impact and
achieving carbon net zero by 2025 and
aim to reduce absolute Scope 1 and 2
GHG emissions 70% by FY26 from a
FY20 base year and to reduce Scope 3
GHG emissions 45% per unit of value
added within the same timeframe. In
assessing the direct climate risk to our
business, for instance from extreme
weather events, we assess this as being
a 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’.
Detailed risk assessment
The following tables provide a summary
of our principal and emerging risks,
informed by our Group Risk Register.
The risks are not listed in order of
severity 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 are willing to accept to
support strategic objectives.
Where possible, we have taken steps
to manage or mitigate risk using a
combination of technical, operational
and legal controls, but we cannot
entirely safeguard against all of them.
RISK FACTORS AND UNCERTAINTIES
55
Kainos Annual report 2023
Risk Description Potential impact and mitigation
1. Long-term
climate change and
sustainability
Risk to:
Change:
With investors and
other stakeholders
increasingly focusing
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 lead to fines for
non-compliance, increasing costs for carbon offsetting and potential
reputational damage. Reputational damage may encourage colleagues
to leave Kainos or deter applicants from joining us; 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. We believe that achieving this ambitious target
mitigates this risk.
Further details are outlined in the Our Environmental, Social and
Governance (ESG) Commitments section.
People
Customers
Market
Key
Increased risk
No change of risk
Decreased risk
1. Long-term climate change and
sustainability
2. Cyber and information security
3. Increasing complexity of global data
protection laws
4. Increasing customer demands in a
competitive skills market
5. Partner relationships
6. Global macro-economic events
7. Exchange rate fluctuations
8. Non-compliance with laws and
regulations
1
2
3 4
5
6 7
8
IMPACT
LIKELIHOOD
Kainos Annual report 2023
56
STRATEGIC REPORT
Risk Description Potential impact and mitigation
2. Cyber and
information security
Risk to:
Change:
Cyber threats are
constantly adapting
and increasing in
number, frequency
and sophistication.
We must develop
appropriate controls
and protective
measures to ensure
the confidentiality,
integrity, and
availability of our
IT systems, both
internally and as part
of our service offerings
to customers.
Potential impact
By failing to protect sensitive data and information systems from cyber-
attacks, we face legal, financial and reputational risk which could reduce
short-term profits, expose us to regulatory fines (for example under
GDPR), lead to significant remediation costs and contractual liability, and
damage our customer relationships and market credibility.
Mitigation
We continue to monitor the cyber threat landscape and invest in
developing and strengthening our defences against cyber-attack. We
review and test the effectiveness of our ISMS controls against industry
best practice, assisted by independent external certification (ISO27001).
Regular updates on our security programme are provided to our
senior management team through the Cyber Steering and Audit
and Risk committee with representation from our Chief Information
Security Officer (CISO), Chief Information Officer (CIO), cyber security
and information security teams and from our legal and business
management.
We continue to improve and develop our technical, operational, and
contractual measures to address risk, coupled with regular, mandatory
training for all staff on information security and data privacy.
3. Increasing complexity
of global data
protection laws
Risk to:
Change:
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.
In Europe, GDPR
mandates a suite of
data privacy controls
to mitigate the risk
of unauthorised
disclosure of personal
information. Other
jurisdictions have
similar measures and
as we expand into new
regions, it is imperative
that we understand
and adhere to the
applicable controls.
Potential impact
Non-compliance could expose us to liability and financial penalties (for
example under GDPR), reduce profit and cash flow in the short-term, and
damage our customer relationships and credibility in the market.
Mitigation
We review the impact of information security and data privacy
regulations and legislation on us and our customers. These reviews
influence our internal controls and processes and the design of products,
solutions and working practices. Specific data privacy controls or
conditions are included, where relevant, to our customer or supplier
contracts.
We make staff aware of the potential impact of changing regulations
and provide targeted training within business divisions. Our 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 and 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, we ensure that:
– We review the relevant privacy laws.
– We put in place effective initial controls at the project level.
– As additional projects start, we standardise the controls for that
region and manage them centrally through the Data Protection
Officer function.
A Data Protection Steering body is in place, meeting monthly to ensure
that the data privacy mandate is prioritised, planned and governed
accordingly.
RISK FACTORS AND UNCERTAINTIES CONTINUED
57
Kainos Annual report 2023
Risk
Description Potential impact and mitigation
4. Increasing
customer demands
in a competitive
skills market
Risk to:
Change:
Increased market
demand for skills in
areas such as data
and AI, cybersecurity
and application
development may
introduce challenges
when recruiting new
people and retaining
our current skilled
employees.
Potential impact
This could impact our ability to provide solutions and services to
our customers, exposing us to liability, reducing profit and cash flow
in the short-term and causing damage to our reputation, customer
relationships and staff morale.
The continued global shortage of digital skills means the likelihood and
impact of this risk has remained constant from the previous year.
Mitigation
We have worked to become an employer of choice in some of our
key locations, notably Belfast, Birmingham and Gdańsk, and have a
team, processes and infrastructure dedicated to recruiting the most
appropriate candidates through 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.
Staff engagement is a key area where we continue to focus on ensuring
compelling financial rewards and benefits for our people, having clear
developmental and career progression opportunities and leveraging
feedback from regular surveys to create action plans to improve our
performance as employers.
5. Partner relationships
Risk to:
Change:
Losing access to
essential intellectual
property, or services
which could impact
partner-influenced
sales due to a
deterioration in
strategic partner
relationships.
Potential impact
Failure of partner relationships could reduce revenue, profit and
cash flow in the short-term and damage our reputation, customer
relationships and market confidence in us.
Mitigation
We have contracts to detail the relationship with our main partners,
including Workday, Microsoft and AWS. Our partner arrangements may
include access to proprietary materials such as training, know-how or
branding, which we require 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.
People
Customers
Market
Key
Increased risk
No change of risk
Decreased risk
Kainos Annual report 2023
58
STRATEGIC REPORT
Risk
Description Potential impact and mitigation
6. Global macro-
economic events
Risk to:
Change:
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.
• Increased
geopolitical
instability caused by
the Russian invasion
of Ukraine.
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 (60%), Workday Services
(28%) and Workday Products (12%);
• derived from separate sectors: commercial (50%), public sector (37%)
and healthcare (13%);
• spread over different regions: UK & Ireland (65%), North America (25%),
Central Europe (9%) and the rest of the world (1%); and
• from different business models: services (85%), Subscription (11%),
third party and other (4%).
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.
7. Exchange rate
fluctuations
Risk to:
Change:
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 treasury policy to mitigate currency risk, which we review and
approve annually.
8. Non-compliance with
laws and regulations
Risk to:
Change:
We must comply with
laws and regulations
applicable to us and
design our products
and services to meet
laws and regulations
applicable to our
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.
RISK FACTORS AND UNCERTAINTIES CONTINUED
People
Customers
Market
Key
Increased risk
No change of risk
Decreased risk
59
Kainos Annual report 2023
Viability statement
In accordance with Provision 31 of the
UK Corporate Governance Code, the
Directors have assessed our viability
over a three-year period, ending
31 March 2026. In making this
assessment, the Directors have
assessed the prospects of the Group
by considering the Group’s current
financial position, its recent and historic
financial performance and forecasts,
its business model and strategy and the
Principal Risks and uncertainties.
The Directors have reviewed the period
used for the assessment and consider
that three years remains appropriate.
Three years is considered sufficient to
assess the rate of change in each of our
three divisions and is appropriate given
the nature and investment cycle of a
technology business. It also aligns with
our strategic planning timeline.
In performing the assessment, the
Directors considered 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
the healthy cash balance, with no debt
from financial institutions.
The Directors also considered the risks
of regional and political changes in our
main markets on each of our business
areas.
The Board believes that our global
structure means we are less susceptible
to the effects of regional changes,
as the vast majority of our costs are
incurred in Sterling and most revenue
is also earned in Sterling. Revenues
earned in foreign currency, including
the Euro and US Dollar, have most of
their associated costs in the same
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 Directors’ review included
sensitivity analysis on the Group’s
future performance and solvency
over three years, taking into account
severe but reasonable scenarios
for the principal and emerging risks
facing the business. Based on this
assessment, the Directors have a
reasonable expectation that should
these risks manifest themselves, either
all or in part, the Group can manage
and mitigate the adverse outcomes,
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 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 continue to operate and meet its
liabilities as they fall due, for at least the
next three years.
Non-financial information
statement
We comply with the non-financial
reporting requirements contained
in sections s414CA and 414CB
of the Companies Act 2006. 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:
Brendan Mooney
Chief Executive Officer
19 May 2023
VIABILITY AND NON-FINANCIAL
INFORMATION STATEMENTS
Kainos Annual report 2023
60
CORPORATE GOVERNANCE
DIRECTORS’ BIOGRAPHIES
Tom Burnet (aged 55),
Chair
Appointed: 26 September 2019
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,
Non-Executive Chairman at Aker
Systems and Non-Executive Chairman
at Reward Gateway. He is also a Non-
Executive Director of the BMO Private
Equity Trust.
He started his career as an Army Officer
serving in the Black Watch (R.H.R.) and
is a member of the King’s Bodyguard in
Scotland.
Tom was appointed Company Chair
on 26 September 2019, having joined
the Board at the Company’s admission
to the market in July 2015. He is Chair
of the Nominations Committee and
a member of the Remuneration
Committee.
Brendan Mooney (aged 56)
Chief Executive Officer (CEO)
Appointed: 10 July 2015
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 previously served
as a Non-Executive Director on several
private technology companies, at the
Probation Service for Northern Ireland
and as a Lay Magistrate. Brendan has
received both an Honorary Doctor of
Science (DSc) and an Honorary Doctor
of Economics (DSc Econ) in recognition
of Kainos’ contribution to the economy.
He was appointed to the Board on the
Company’s admission to the market, on
10 July 2015.
He was appointed to the Board on the
Company’s admission to the market, on
10 July 2015.
Richard McCann (aged 58)
Chief Financial Officer (CFO)
Appointed: 10 July 2015
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. He 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 acquisitions and
investor relations. He was 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 and
was appointed to the Board on the
Company’s admission to the market on
10 July 2015.
Nominations Committee
Remuneration Committee
Audit Committee
Chair of Committee
Chair of Committee
Chair of Committee
Key
61
Kainos Annual report 2023
Andy Malpass (aged 61)
Independent Non-Executive
Director
Appointed: 10 July 2015
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 was
Group Finance Director of Fidessa
Group plc (formerly Royalblue Group
plc) which he joined in 1995, and where
he has also been Company Secretary.
He is currently a Non-Executive Director
and chair of the Audit Committee of
accesso Technology Group plc.
Andy was appointed to the Kainos
Board on the Company’s admission to
the market on 10 July 2015. He is Chair
of the Audit Committee.
Katie Davis (aged 58)
Independent Non-Executive
Director
Appointed: 20 November 2019
Katie holds a BS in Electrical
Engineering from the University of
Illinois at Champaign/Urbana. She is an
experienced leader, with a strong track
record of 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. She subsequently held
several senior positions in the Cabinet
Office, Home Office, Department of
Health and NHS. In 2012, Katie was
named as one of the 25 most influential
women in IT by Computer Weekly.
Katie was appointed to the Board
on 28 November 2019. She is Chair of
the Remuneration Committee and a
member of the Audit Committee and
Nominations Committee.
Rosaleen Blair (aged 57)
Independent Non-Executive
Director
Appointed: 1 January 2021
Rosaleen is the founder and Chair
of Alexander Mann Solutions (AMS),
a pioneer in the global workforce
solutions industry. She was 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
11,000 employees and operates in 100
countries.
Rosaleen is a serial entrepreneur
and adviser to numerous companies.
She 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 was 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.
Rosaleen was appointed to the Board on
1 January 2021. She is a member of the
Nominations Committee, Remuneration
Committee and Audit Committee.
Kainos Annual report 2023
62
CORPORATE GOVERNANCE
The Board believes in strong governance, and we recognise
the importance of complying with the various aspects of the
UK governance framework. This section of the Annual Report
outlines how we maintain high standards of corporate
governance, as well as summarising how each Board
Committee functions and their work during the year.
Statement of application of and compliance with the
UK Corporate Governance Code 2018
This section explains how we have applied the principles of
the 2018 UK Corporate Governance Code (‘the Code’), which
is available at www.frc.org.uk.
Throughout the financial year ended 31 March 2023 the
Company fully complied with all of the provisions of the Code
except for Provision 36, which we fully complied with from
June 2022, as explained below.
In our FY22 Annual Report, we noted an exception with
regards to Provision 36. Our Remuneration Policy (approved
at the September 2022 AGM) fully addresses this
requirement, whereby all Director share awards are now
subject to a three-year vesting period and an additional
two-year holding period prior to exercise. The new policy
applied to the share awards granted to Directors on
28 June 2022.
BOARD LEADERSHIP AND COMPANY PURPOSE
Aligned with our strategy, the Board’s role is to deliver
long-term success for Kainos and create value for its
stakeholders. Our purpose, values and strategy are set out
in full in the Strategic Report.
Stakeholder engagement
The Group’s long-term success depends on how it interacts
with its stakeholders. The Board welcomes interaction with all
stakeholders and is always available to employees, customers,
shareholders and communities, as an alternative to meetings
with the Executive Directors.
Full details of our stakeholder engagement are set out in our
Section 172 Statement, which is in the ‘Governance: our
stakeholders’ section in the Strategic Report.
Board and workforce engagement
We believe in the importance of dialogue between the
Board and the workforce and have created a number of ways
for this to happen, in addition to the Executive Directors’
regular interactions with the wider organisation.
Our Culture and Development Group (CDG)
The CDG comprises senior representatives from our different
business areas offering perspectives from a sector, practice,
region and technologist point of view. Chaired jointly by our
CEO and Chief People Officer, the CDG is a strategic group
that oversees all workforce-related matters and continuous
improvement (based on employee feedback).
The CDG meets monthly and key areas of focus this year
included: changes to people processes, talent development
and coaching offerings, wellbeing campaigns and support,
diversity and inclusion activities, our employer brand,
improved internal communications and introduction of our
new Peakon employee listening tool.
In 2020 we expanded the remit of the CDG, to make it a
formal workforce advisory panel, in accordance with Provision
5 of the Code. A CDG group member regularly presents to the
Nominations Committee and is invited to attend and
participate in the Remuneration Committee. The
Remuneration and Nominations Committees report the
findings of their respective meetings to the full Board.
During the year CDG members were involved in discussions
on changes, improvements and future plans impacting the
Group’s Annual Salary Review process, bringing the ‘employee
experience’ to the table.
Direct engagement
The Board schedules include regular presentations from
colleagues who have been leading key or innovative projects,
involved in winning a significant contract or responsible for
an important area of our business. There were 15 such
presentations to the Board during the year.
The Board’s schedule also includes meetings with the
Group’s senior leaders, typically in a social setting. Post
pandemic, the Board was pleased to resume meetings and
Board dinners with the Group’s Executive Team, senior
leaders and colleagues.
We also created opportunities for the Board to hear from
participants on some of our talent development programmes.
In the past year, representatives from our Earn as You Learn®
programme (apprenticeship programme) and our Inspiring
Leaders programme (aimed at developing the next
executives) presented to the Nominations Committee.
CORPORATE GOVERNANCE REPORT
63
Kainos Annual report 2023
Workday Peakon – listening to and engaging with
our people
In addition to the interaction with the Executive Team, senior
leaders and colleagues, on a monthly basis the Board receives
and reviews progress of our people approach and our key
people metrics (engagement, retention, recruitment).
In February 2023, we migrated from our ‘Best Companies’
annual survey to Workday Peakon, which allows us on a
monthly basis to capture and respond to feedback from all
our collegues. On a six-monthly basis, the Board will receive
a full update on our performance, setting out: our levels of
employee engagement, current trends, strengths and issues
that could impact employee retention, diversity and inclusion,
and health and wellbeing.
The more frequent capture and action of feedback and ideas
allows us to be more agile, focusing on the improvements that
underpin our ambition to be a great employer. In addition,
Peakon allows us to see how our engagement levels compare
with all other companies using Peakon, but especially the c.
350 other global companies from the IT and software sector.
Our global Diversity and Inclusion Group (D&I Group)
The D&I Group comprises diverse colleagues from across
Kainos. It supports the delivery of the D&I plan, aimed at
creating a workplace that reflects and contributes to the
diverse global communities in which Kainos operates. With
the support of four employee network groups, representing
women, ethnic diversity, LGBTQ+ and neurodiverse
colleagues, the group champions the adoption and
implementation of D&I initiatives throughout Kainos.
The D&I Group reports quarterly to our leadership teams and
every six months to the Nominations Committee, which
cascades to the Board.
Further information on our policy, objectives and progress
during the year can be found in the ‘Social: our people and
our communities’ section of the Strategic Report.
Board responsibilities
The Board is responsible for our corporate governance and
delegates operational control to the Executive Directors.
There is a written ‘Schedule of Matters Reserved for the
Board’, which covers key areas of the Group’s affairs.
This includes:
• approving the Annual Report and full year and interim
results announcements;
• adopting budgets or business plans;
• decisions on acquisitions, disposals and material financial
commitments;
• approving circulars, listing particulars and resolutions; and
• releasing inside information.
The Directors can seek independent legal advice at the
Company’s expense, if needed to carry out their duties.
The Directors also have access to the Company Secretary’s
advice and services.
Division of responsibilities
We have a formal written policy, available on the Investor
Relations section of our website, setting out the division of
responsibilities between the Chair, CEO and Senior
Independent Director (SID), so their roles complement
each other.
As Chair, Tom Burnet is principally responsible for leading the
Board, promoting constructive debate among the Directors,
facilitating communication with shareholders and overseeing
strategy. In accordance with Code Provision 3, the 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. In
addition, the Chair and all of the Board are available to meet
with shareholders at the Group’s Annual General Meeting.
As CEO, Brendan Mooney is responsible for all aspects of our
operations. He leads and develops our strategic plans and
identifies risk factors.
As SID, Andy Malpass provides a sounding board for the Chair
and acts as an intermediary for the other Directors and
shareholders.
Shareholder engagement is primarily the responsibility
of the Executive Directors, supported by the Investor Relations
team. Our CEO and CFO meet analysts and institutional
shareholders throughout the year, with detailed updates
following our interim and full year results. Regular feedback
from these meetings is provided to the Board. Formal
feedback is also obtained by our PR and financial advisors
and reported to the Board.
Board changes during the year
There were no appointments or changes to the Board during
the year.
Board Committees
The Board’s principal committees are the Audit, Nominations
and Remuneration Committees. Their terms of reference can
be found in the Investor Relations section of our website.
In addition to the Board Committees, the Disclosure
Committee supports the Group and the Board in the
identification, assessment and control of potentially sensitive
information, ensuring compliance with market reporting
obligations. The Disclosure Committee members include the
Chair, Chief Executive Officer, Chief Financial Officer, Senior
Independent Director and the Company Secretary.
Kainos Annual report 2023
64
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT CONTINUED
Board and Committee membership
The table below shows the Board and Committee responsibilities of the Directors who served during the year:
Board Audit Remuneration Nominations
Tom Burnet Chair Chair – Member Chair
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
Board and Committee meeting attendance
To ensure that Directors are fully briefed, a Board pack containing comprehensive Board and Committee papers are uploaded
to a secure Board intranet site, approximately one week prior to scheduled meetings.
The Board meets formally on a regular basis and schedules additional meetings if needed, to consider specific issues. During
the year, the Board held 12 scheduled meetings.
In addition, the Chair holds two scheduled meetings with the Non-Executive Directors without the Executive Directors present.
The Directors’ attendance at Board and Committee meetings is shown below:
Board
meetings
attended
Audit
Committee
meetings
attended
Remuneration
Committee
meetings
attended
Nominations
Committee
meetings
attended
Tom Burnet 12/12 – 5/5 4/4
Brendan Mooney 12/12 – – –
Richard McCann 12/12 – – –
Andy Malpass 12/12 3/3 – –
Katie Davis 12/12 3/3 5/5 4/4
Rosaleen Blair 12/12 3/3 5/5 4/4
Board independence
We consider the Board’s size and composition to be appropriate, considering the Directors’ combined experience and skills. In
making this assessment, we considered the independence criteria set out in Provision 10 of the Code.
We carried out due diligence on each Non-Executive Directors’ (NED) independence before they joined the Board and when we
invited incumbent NEDs to serve for another term. The Board confirms that Andy Malpass, Katie Davis, Rosaleen Blair and Tom
Burnet are independent in character and judgement. The Board therefore meets the Code requirement that at least half the
Board, excluding the Chair, should be NEDs whom the Board considers to be independent.
The Directors’ interests in the Company’s shares and share incentives are detailed in the Directors’ Remuneration Report.
Director election and re-election
At the 2023 AGM, all current Directors will retire and stand for re-election.
Conflicts of interest
As a standing item at the beginning of each Board meeting, the Directors are reminded of their obligations to identify, declare
and manage actual or potential conflicts of interest. In addition, the Register of Interests is updated to reflect new external
appointments and resignations.
The Articles of Association allow the Directors to consider and, if they deem fit, authorise conflicts of interest. The Articles of
Association set out the process for authorising conflicts of interests. Should a conflict occur, it would be recorded in the Board
minutes and on a register maintained for annual review by the Nominations Committee and the Board.
No conflicts arose in the year ended 31 March 2023.
65
Kainos Annual report 2023
COMPOSITION, SUCCESSION AND EVALUATION
Board and Executive composition, balance and diversity
A stable Board that contains the right balance of skills and experience is crucial to strong governance, so we take Board
appointments very seriously.
Our Board comprises an independent Non-Executive Chair, three further Independent Non-Executive Directors and two
Executive Directors. Further information can be found in our Directors’ biographies.
Two (50%) of our four Non-Executive Directors are women (2022: 50%). Including the Executive Directors, 33% of our Board are
women (2022: 33%). All Board members identify ‘White/European’ as their ethnic group.
Although we have not met the new Listing Rule requirement on diversity targets in the current year, the Board is fully
supportive of and is actively working towards compliance. The additional diversity requirements align with our D&I principles.
The Board is currently recruiting, as part of succession planning for those Non-Executive Directors who will step down in 2024,
having by then served on the Kainos Board for the recommended maximum nine-year tenure.
As part of the Board rebalancing exercise, in December 2022, we started a search for two new Non-Executive Directors. The
search is being conducted through our internal executive search function with the Nominations Committee leading the
selection process. The appointment of the new Non-Executive Directors is expected within the FY24 financial year, to facilitate
time for a comprehensive handover. This recruitment activity provides an opportunity for us to achieve compliance with the
new Listing Rule targets on gender, ethnicity and seniority of Board positions held.
To support the attraction of a more diverse Board, in the current recruitment round there has been a strong focus on building
equitable long lists of diverse candidates with relevant skills, experience and knowledge. With the diversity challenges within
the technology sector, it has been challenging to achieve equitable long lists of candidates for the new Non-Executive Director
appointments. For one of the roles, an initial long list consisting of 60% men and 40% women has been established with 10% of
the candidates declaring as being from an ethnic minority background. To achieve a fair and balanced selection process, short
listing and interview panels will consist of equal numbers of men and women with diverse skillsets and levels of experience.
The table below sets out our performance against the FCA Listing Rules requirements. Data is self-reported by the Board and
collected through VIBE for all other employees. Further information relating to VIBE is contained within the Environmental,
Social and Governance section of the Strategic Report.
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board
(CEO, CFO,
SID, Chair)
Number in
executive
management
Percentage
of executive
management
Men 4 67% 4 15 88%
Women 2 33% – 2 12%
Other – – – – –
Not specified – – – – –
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board
(CEO, CFO,
SID, Chair)
Number in
executive
management
Percentage
of executive
management
White British or other White
(including minority-white groups) 6 100% 4 15 88%
Mixed Multiple Ethnic Groups – – – – –
Asian/Asian British – – – – –
Black/African/Caribbean/Black British – – – – –
Other ethnic group including Arab – – – – –
Not specified/prefer not to say – – – 2 12%
Kainos Annual report 2023
66
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT CONTINUED
Board appointment process
The Nominations Committee oversees Board appointments.
Before a new Non-Executive Director is appointed, they
must confirm that they can allocate sufficient time to carry
out their duties and responsibilities effectively. There is a
minimum 20-day commitment, each year, which is set out in
the letter of appointment.
Each Non-Executive Director is appointed for an initial
12-month term, which we expect to extend to three years,
subject to a three-month notice period and annual re-
election by shareholders at the AGM. At the end of the three
years, the Board may invite a NED to continue for a further
period, if the Board is satisfied with their performance,
independence and time commitment.
When joining the Board, Non-Executive Directors receive a
thorough, formal and tailored induction process. The Senior
Independent Director and Chair regularly review the
Directors’ training and development requirements. Directors
receive ongoing updates to improve their skills and
knowledge, when needed.
All Directors’ service agreements and letters of appointment
can be requested from the Company Secretary and will
be available to shareholders to view at the 2023 Annual
General Meeting.
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Kainos Annual report 2023
Tom Burnet
Chair
19 May 2023
Nominations Committee
Nominations Committee
meetings attended
Tom Burnet, Chair 4/4
Katie Davis 4/4
Rosaleen Blair 4/4
Committee membership and meetings
I have chaired the Nominations Committee since
26 September 2019. During the year, the Nominations
Committee members were Katie Davis and Rosaleen Blair.
The Committee’s membership therefore complies with
Provision 29 of the Code’s requirements.
The Committee typically meets at least three times per year
and held four scheduled meetings during the year.
Responsibilities
The Committee regularly reviews and updates its terms of
reference, which are available on the Company’s website.
The Committee’s main responsibilities are to advise the Board
and make recommendations on:
• the Board’s size, structure and composition;
• succession planning for Board members and the Executive
Management Team; and
• the appointment of new Directors and reappointment of
existing Directors.
As Chair of the Nominations Committee, I am
pleased to present the Committee’s Report for
the year ended 31 March 2023.
The Nominations Committee plays a vital role
in supporting the Board in discharging its
succession planning responsibilities and ensuring
that the Board has the skills and experience to
support the Company’s long-term success and
delivery on the strategy.
This report outlines how the Committee
discharged the responsibilities delegated to it by
the Board over the course of the year and the key
issues it has considered during FY23.
I will be happy to answer any questions about the
work of the Committee at the forthcoming AGM
on 21 September 2023.
NOMINATIONS COMMITTEE REPORT
Kainos Annual report 2023
68
CORPORATE GOVERNANCE
NOMINATIONS COMMITTEE REPORT CONTINUED
Matters considered during the year
During the year ended 31 March 2023, the areas of focus and
achievement for the Nominations Committee were:
Board composition
The Nominations Committee regularly reviews the Board’s
composition. This year the Committee focused on the planned
rotation of Non-Executive Directors to ensure the Board
continues to meet the Code’s independence criteria, that
there is continuity at Board level and there is improved Board
diversity.
The Nominations Committee has been coordinating the
recruitment of two new Non-Executive Directors. It is our
strong belief that diversity creates a more inclusive corporate
culture, better equips companies to navigate challenges and
supports long-term strategic needs. The Board views diversity
through a broad lens, to include gender, ethnicity, nationality,
skills, social mobility and experience.
Whilst achieving diversity in the technology sector presents
challenges, due to the profile of the available talent pool, the
Board is actively exploring ways to bolster diversity,
concentrating on ethnicity, gender and diversity of
experience, with a focus on bringing additional skills to the
Board to support the Company’s strategic objectives.
For all future Board appointments (and in all succession
planning at Board and management levels), the Board will
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, and 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.
Succession planning
The Nominations Committee leads succession planning for
Board and Executive level members, taking into account the
evolving skills and experience the Board needs, and our desire
to promote diversity on the Board.
The Nominations Committee discusses and reviews
succession planning at each meeting, with a focus on
diversity and good practice, talent retention, talent pipeline,
training and development. The Nominations Committee
recognises the importance of succession planning and its role
in maintaining the quality of management and reducing
instability following unforeseen events, such as the departure
of a key individual.
All Executive Team roles and other roles deemed critical have
a formal succession plan. These plans contain an immediate
succession option, if we need to ensure business continuity in
an emergency, as well as longer-term succession options.
Development plans are put into place for potential
successors, to address any developmental gaps and to ensure
they are ready for the role. The Nominations Committee
receives reports on progress with the development plans at
each meeting.
This approach has been replicated for senior management
roles – meaning critical senior management roles have
interim and longer-term successors identified with supporting
development plans in place to ensure successors readiness
for the role when required.
To establish a robust talent pipeline, Leadership programmes
are in place to support and accelerate future leader
development at three key career stages:
• Developing Leaders programme: targeting employees who are
early in their career and already displaying leadership
potential.
• Emerging Leaders programme: aimed at mid-management
employees who are developing leadership ability.
• Inspiring Leaders programme: for senior management who
are recognised to be future executives within the business.
This year, the Nominations Committee received updates on
all these development programmes, with a focus on the
Kainos Inspiring Leaders Programme, its learning objectives
and achievements. Development of future leaders is essential
to succession planning and the Kainos Inspiring Leaders
Programme was judged as “best in class” with nine senior
managers graduating with a post graduate certificate in
Executive Leadership awarded by Ulster University.
In total 69 employees graduated from our leadership
programmes this year.
The Nominations Committee also received presentations
from participants from the Earn As You Learn® apprenticeship
scheme. The Nominations Committee was hugely impressed
by the talent that Kainos attracts through this scheme and
the impact and advanced learning demonstrated through the
blended “on the job” and part-time university approach.
The Nominations Committee also plans for rotation of
Non-Executive Directors, to ensure the Board retains a
balance of Non-Executive Directors with knowledge of Kainos,
while adding new skills and experience and maintaining
independence.
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Kainos Annual report 2023
Board evaluation
During the year, we undertook an internal evaluation of the
Board’s performance, 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 “excellent” or “good”.
The Nominations Committee discussed the survey results at
the January 2023 meeting and the Company Secretary
presented the results to the Board, giving the Directors the
opportunity to discuss the outcome and identify priorities for
2023.
The survey concluded that the Board is operating effectively
and that each Director continues to perform effectively and
demonstrates commitment to their roles. As we seek to meet
the targets on gender diversity set by the FCA Listing Rules
and the FTSE Women Leaders Review and the ethnicity
targets set by the Parker Review, the survey acknowledged
the importance of the Nominations Committee-led Board
rebalancing exercise, currently underway. The focus of the
rebalancing exercise is to leverage all of the advantages that
a more diverse Board will bring and to ensure that the Board
has all of the skills needed to effectively execute on the
strategy.
The Non-Executive Directors also evaluated the Chair’s
performance. The SID, Andy Malpass, confirmed that the
Chair continues to perform effectively, as supported by the
evaluation results.
The next formal Board evaluation is scheduled for December
2023 and will be externally facilitated.
Kainos Annual report 2023
70
CORPORATE GOVERNANCE
AUDIT, RISK AND INTERNAL CONTROL
AUDIT COMMITTEE REPORT
Andy Malpass
Chair of the Audit Committee
19 May 2023
Audit Committee
Audit Committee
meetings attended
Andy Malpass, Chair 3/3
Katie Davis 3/3
Rosaleen Blair 3/3
Composition
The Code (Provision 24) requires that at least one member of
the Committee has recent and relevant financial experience.
The Disclosure Guidance and Transparency Rules (DTRs)
require that at least one member has competence in
accounting and/or auditing. I have chaired the Audit
Committee since June 2015 and my previous experience
includes serving as Finance Director of Fidessa Group plc for
over 20 years until October 2015, and from June 2018, serving
as a Non-Executive Director and Chair of the Audit
Committee of accesso Technology Group plc. The Board is
satisfied that I meet the requirements of the Code in this
regard.
During the year, the other Audit Committee members were
Katie Davis and Rosaleen Blair. All Audit Committee members
are Independent Non-Executive Directors. The range and
depth of our financial and commercial experience enables us
to deal effectively with the matters we are required to address
and to challenge management when necessary. Further
details of the Committee members’ experience is located in
the Directors’ biographies. The Board is satisfied that the
Committee has the necessary competence and broad
experience relevant to the sector in which Kainos operates.
The Company Secretary is secretary to the Audit Committee.
As Chair of the Audit Committee, I am pleased
to present the Committee’s Report for the year
ended 31 March 2023.
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.
This report outlines how the Committee
discharged the responsibilities delegated to it by
the Board over the course of the year and the key
issues we have considered during FY23.
This report should be read in conjunction with the
Independent Auditor’s Report and the financial
statements of Kainos Group plc.
I look forward to attending our forthcoming
AGM on 21 September 2023 and will be happy
to answer any questions regarding the work
of the Committee.
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Kainos Annual report 2023
Responsibilities
The Audit Committee regularly reviews and updates its terms
of reference, which are available at www.kainos.com/investor-
relations.
The Audit Committee’s main responsibilities include:
• monitoring the integrity of the financial statements,
including the annual and interim reports, full-year results
announcements, and any other formal announcements
relating to the Group’s financial performance;
• advising the Board that the Annual Report is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy;
• challenging the appropriateness of accounting policies and
practices, and ensuring consistent treatment year to year;
• monitoring and reviewing the adequacy and effectiveness
of our internal financial controls and our internal control
and risk management systems;
• making recommendations to the Board on the appointment
and remuneration of the external auditor; and
• reviewing and monitoring the external auditor’s
performance, expertise, independence and objectivity,
along with the scope and effectiveness of the audit process.
Evaluation
The Committee’s performance was internally evaluated
during the year. The evaluation process sought views from all
Directors and the Company Secretary, through a
comprehensive questionnaire covering:
• the Committee’s annual cycle of work and scheduled
agenda items;
• the Committee’s review and assessment of the adequacy of
the work carried out by the external auditor;
• the Committee’s monitoring of the integrity of the
Company’s financial reporting;
• the effectiveness of the Committee’s review of the internal
controls and risk management systems;
• the effectiveness of the Committee’s reporting to the Board;
and
• the Committee’s performance and potential areas of
improvement.
The evaluation concluded that the Committee was
performing effectively.
Audit Committee meetings and
key activities during 2022/23
The Committee held three meetings during the year and each
member of the Committee attended all three meetings. Only
the Committee’s members have the right to attend its
meetings. However, the Committee will invite Executive
Directors, members of the finance team, senior
representatives of the external auditor and other senior
management to attend as required. If the presence of any
attendee is inappropriate or might compromise discussion,
then the Committee will ask them to recuse themselves from
that part of the meeting.
The Committee has a broad agenda, which focuses on the
Group’s assurance, risk and audit processes.
The Committee’s principal activities during the financial year
were as follows:
May 2022
• Review of the external auditor’s report to the Audit
Committee for the year ended 31 March 2022.
• Review of any significant judgements and issues in relation
to the financial statements.
• Review and approval of the Group’s going concern and
viability statements. In assessing viability, the Committee
considered the Group’s position as presented over a three-
year period as well as a number of scenarios modelled by
management.
• Review and recommendation to the Board to approve the
Final Results Announcement and the 2022 Annual Report,
concluding it was fair, balanced, and understandable.
• Review and conclude on the effectiveness of our external
auditor.
• Review of Information security report and data privacy
update provided by management.
• Review of Group insurance position including various
options for the procurement of cyber and professional
indemnity insurance.
• Review of the Group Risk Register.
November 2022
• Review of the Interim Report, including the going concern
statement and key disclosures, and recommendation of its
approval to the Board.
• Approval of KPMG’s audit fees.
• Review of auditor performance.
• Review of the Group’s Enterprise Risk Register.
• Review of Kainos Information Security Programme and key
objectives for FY23.
• Review of progress made in the area of cyber and data risk
assessment.
• Review of Digital Services Cyber and Data Privacy Update
presented by management.
February 2023
• Review of KPMG’s audit plan and strategy for the year
ended 31 March 2023.
• Review of internal audit function and requirements.
• Review of Group treasury function.
• Review of Group legal and compliance matters.
Kainos Annual report 2023
72
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT CONTINUED
External audit
The Committee has primary responsibility for overseeing the
relationship with, and performance of, the external auditor.
This includes making the recommendation on the
appointment, reappointment or removal of the Group’s
external auditor.
During FY22 we ran a competitive audit tender process,
resulting in KPMG’s appointment at the 2021 AGM
(September 2021).
The Company confirms that it complied 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 2023.
Auditor independence and objectivity
The Audit Committee has received written confirmation from
KPMG that it considered itself to be independent. The current
audit partner is John Poole, who has been in the role since
KPMG’s appointment. Audit partners for listed companies are
ordinarily rotated every five years.
There is a formal policy in place relating to the provision of
non-audit services by the external auditor. KPMG has not
provided any non-audit services since its appointment as
external auditor, other than the review of the interim financial
statements for the period ended 30 September 2022. The
Group has engaged other independent firms for tax
consulting work and other assignments, to ensure KPMG’s
independence and objectivity is not compromised. Fees paid
to KPMG for auditing 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. During the year the Audit
Committee specifically considered the following:
• the audit plan, including identified significant risks,
presented at the February 2023 meeting;
• the robustness and perceptiveness of KPMG in its handling
of key accounting and audit judgements;
• the relevant experience and expertise demonstrated by the
audit team in its direct communication with, and support to,
the Committee;
• engagement with our finance team in planning the audit
and its execution; and
• the content, quality of insight and added value of formal
reports presented to the Audit Committee prior to
meetings.
The Committee considers the external audit performance
effective.
Significant issues related to the financial statements
In May 2023 the Committee reviewed the 2023 Annual Report
including the financial statements, the Full Year Results
Announcement for the year ended 31 March 2023 and reports
from the external auditor on its 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 assessing 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 significant judgements and key sources of estimation
uncertainty in the financial statements;
• the external audit scope and programme, along with the
quality and effectiveness of external audit processes;
• 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 preparing the financial statements and
whether the period covered by the viability statement was
appropriate;
• reviewing the processes and systems to identify and
mitigate financial and non-financial risks and considering
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, for staff to confidentially raise concerns about
possible improprieties.
Key assumptions, judgements and estimates
We identified the matters below as being significant in the
context of the FY23 financial statements. We consider these
areas to be significant taking into account the level of
materiality and degree of judgement exercised by
management. We discussed the issues in detail to ensure that
the approaches taken were appropriate. This included
reviewing presentations and reports from both management
and the external auditor.
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Kainos Annual report 2023
Area Committee review
Revenue
recognition
• The Committee continues to oversee management’s application of the revenue recognition policy.
The Group has a clear revenue recognition policy as described in note 3 of the consolidated financial
statements, which is reviewed at least annually. During the year there have been no changes to the
Group’s revenue recognition policy.
• We reviewed and challenged judgements, assumptions and estimates made by management with
respect to the level of contract or fixed price provisioning for rectification and irrecoverable accrued
income.
• We received and considered the updates from KPMG on the findings from their procedures over
revenue recognition during the year.
• We are satisfied that the Group’s processes and internal controls are appropriate and revenue
recognition is in line with IFRS15 ‘Revenue from contracts with customers’.
Development
costs
• We received updates from management on accounting for development costs.
• In conjunction with product leaders within the business, management update an operational
document which details development expenditure by product/module incurred during the period and
an assessment of this expenditure against the capitalisation criteria as set out in IAS38 ‘Intangible
Assets’.
• We are satisfied that accounting for development costs is in line with accounting standards.
Tax strategy • We recognise the tax complexity and risk related to the Group’s multinational operations and the
areas of uncertainty that arise.
• We considered:
– the appropriateness of deferred tax assets and tax provisions;
– an update from management on accounting for RDEC, and its impact on the reported results;
– the application of the Group’s transfer pricing policy and its impact on the reported results.
• We are satisfied the treatment adopted is fair and reasonable in all circumstances.
• The Group’s UK tax strategy is available on the Group’s website at www.kainos.com/information/uk-
tax-strategy.
Going concern
and viability
• We reviewed management’s process for assessing the Group’s longer-term viability, including the
determination of the period over which viability should be assessed, the appropriateness of the
scenarios identified in light of the Group’s principal risks and uncertainties and the reasonableness
of key assumptions used by management in calculating the financial impact of a viability scenario
arising.
• The Committee was satisfied with management’s work and supported the conclusions reached in
respect of the Company’s going concern and longer-term viability.
There were no material changes to significant accounting policies during the year ended 31 March 2023.
Kainos Annual report 2023
74
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT CONTINUED
Risk management and internal control
The Board is ultimately responsible for the Group’s system of
internal controls and risk management and for reviewing their
effectiveness. The system of internal controls is designed to
manage risk, rather than eliminate it, and can provide only
reasonable and not absolute assurance against material
misstatement or loss. This includes the risk of failure to
achieve business objectives. The concept of reasonable
assurance recognises that the cost of control procedures
should not exceed the expected benefits. Information on
principal and emerging risks are set out in the Strategic
Report.
The Board confirms that Kainos has established systems,
procedures and controls for identifying, evaluating and
managing the principal and emerging risks faced by us, and
that they have been in place for the period under review and
up to the date of approval of the Annual Report. The Board
regularly reviews the effectiveness of those systems,
procedures and controls.
As required by the Code, the Audit Committee has reviewed
the internal controls and risk management systems, including
those relating to financial reporting, information security,
business continuity, management of employees, operational
and compliance matters. The 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.
The key elements of Kainos’ processes for providing effective
internal control and risk management systems include:
• Regular Board meetings to consider matters reserved for
the Directors’ attention.
• Regular management meetings to monitor divisional
performance. Management is responsible for identifying
and evaluating significant risks in their area of business,
and for designing and operating of suitable internal
controls.
• Maintenance of a Group Risk Register, to identify and track
the risks facing the business. The key risks are summarised
for the Audit Committee’s review and are operationally
owned and managed by the Group.
• Documentation of key policies and procedures.
• A comprehensive annual budget process, for review and
approval by the Board, with updated forecasts regularly
prepared throughout the year. 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 have a separate internal audit function.
Instead, we undertake internal audit activities through
subject specialists across the business and central services
teams.
These activities assist the Board and senior management
with protecting the Group’s assets, reputation and
sustainability. The key aims are to:
• ensure all significant risks are identified and appropriately
reported;
• assess risk controls and mitigations; and
• provide challenge to improve governance, risk
management and internal controls.
Areas covered by internal audit activities include:
• Information security.
• Data privacy and governance.
• Corporate governance and legal compliance.
• Financial compliance.
• Commercial review.
• Project delivery assurance.
• Financial planning and analysis.
• Risk reporting.
To support these activities, Kainos has documented:
1. the principles of how internal audit activities operate;
2. the areas with internal control systems in place, to identify
and mitigate risks and issues impacting the business; and
3. the owner for each internal audit area.
The Committee reviews this documentation annually.
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Kainos Annual report 2023
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 subject matter
experts in each field.
• Focus and activities are based on the Group’s weighted risk
profile.
• Risk assessment is informed by stakeholder management.
• Reporting to the Audit Committee on Group-level issues
and risks twice a year.
• Reporting to the Audit Committee on various focus areas at
regular intervals.
• Ad hoc reporting and review of emerging or significant
risks as required to the Group CFO, relevant business
stakeholders and the Audit Committee.
• Review of the principles and operation of internal audit
activities at least once a year, to ensure these remain
appropriate.
Examples of our internal audit activities
Some examples of our activities are detailed below.
Information security
The Information Security Programme is regularly reviewed by
the Kainos Information Security Steering Group, which include
technology, cyber security and data privacy experts from our
business divisions and central services, who:
• regularly review information security and data privacy
controls and processes;
• Monitor information security programme metrics and
compliance;
• maintain a detailed register of current and emerging risks
relating to cyber and information security;
• review and approve the information security programme
roadmap; and
• manage the third-party information security certification
and audit programme.
Data privacy
The Kainos Data Privacy Steering Group meet regularly to
review the technical and operational measures in relation to
handling, storage and processing of Kainos and our
customers information. The steering group reviews the
effectiveness of data protection controls, alignment with data
protection policies, as well as to identify and mitigate
emerging risk in the area.
The Group continues to identify cyber and information
security as a major risk area, as described within the Risk
factors and uncertainties section of the Strategic Report.
Accordingly, the Information Security Steering Group
regularly reports to the Executive Team and the Audit
Committee on the risks, controls and processes in this area.
Committee review of internal audit
In February 2023, the Committee reviewed the Group’s
internal control framework and procedures and considered
the merits of establishing a separate internal audit function.
The Committee’s view 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 that a separate audit function would introduce
overlap inefficiencies 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 Committee will keep the requirement for a separate
internal audit function under review.
Kainos Annual report 2023
76
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Statement from the Chair of the
Remuneration Committee
Katie Davis
Chair
19 May 2023
Remuneration Committee
Remuneration Committee
meetings attended
Katie Davis, Chair 5/5
Tom Burnet 5/5
Rosaleen Blair 5/5
The Remuneration Committee is comprised entirely of
independent Non-Executive Directors.
In addition to myself as Chair, the Committee comprises Tom
Burnet, who has been a member of the Committee since July
2015, and Rosaleen Blair, who joined the Committee in
January 2021. Further information can be found in the
Directors’ biographies section.
There were five meetings during the year, with all Committee
members attending all meetings.
Key activities
• The Remuneration Committee oversaw the implementation
of the revised Remuneration Policy approved by
shareholders at the Annual General Meeting (AGM) in
September 2022.
• We discussed Executive and Non-Executive Director
reward to ensure that the structure and quantum remain
appropriate to attract, motivate and retain the skills
required to lead the business.
• We further engaged with our workforce on remuneration
philosophy, strategy and policy through the Culture and
Development Group. In addition, employee representatives
attended Remuneration Committee meetings to participate
in strategic remuneration discussions.
• We continued to oversee remuneration practice across
Kainos, including the implementation of a US share scheme,
discussions on reward philosophy, gender and ethnicity pay
equity, global benefits and bonus and critical market salary
adjustments.
As Chair of the Remuneration Committee, I am
pleased to introduce our Directors’ Remuneration
Report for the year ended 31 March 2023.
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Kainos Annual report 2023
2023
£
2022
£
Revenue £374.8m £302.6m
Adjusted pre-tax profit £67.6m £58.8m
Bookings £427.8m £349.8m
Total dividend per share 23.9p 22.2p
In June 2022, the Group made performance share awards to the CEO and CFO of 6,753 and 7,493 share options respectively.
In July 2019, we granted long-term incentive awards to the CEO and CFO. These awards vested in full during the year with the
CEO receiving 13,140 share options and the CFO receiving 14,580 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.
Strategic context
Our people are critical to our business, and we continue to
attract and retain high-quality talent, with our workforce
totalling 2,990 people across 22 countries in Europe and the
Americas.
As the demand for our services increases, so, too, has the
demand for skilled people in our Digital Services, Workday
Services and Workday Product divisions. Demand for digital
skills continues to outweigh supply, making it challenging to
attract and retain individuals with the skills we need to deliver
to our strategy. Although staff retention has improved from
86% to 88% over the past 12 months, we recognise the
importance of the right reward structure – supported by
strong staff engagement – in helping us to attract, motivate
and retain the talented individuals who make us successful.
Continued geographic expansion, particularly in markets
which are new to us such as the Americas, also brings
challenges. To ensure clarity and simplicity across
geographies, we have introduced a formal Reward Philosophy
and Strategy. This ensures that there is transparency in our
approach, alongside the flexibility to provide reward
structures that meet local needs in different parts of the
world to address attraction and retention challenges.
For example, we defined criteria for establishing share
schemes in global locations, and, as a result, implemented a
share scheme in the US. This replaces the previous cash
equivalent scheme and is a key benefit to support us in
attracting, engaging and retaining our US colleagues. We also
explored alternative hiring options in Poland to enhance our
attraction strategy. B2B (Business-to-Business) contracts are
an agreement between a company and an individual that
provides services to the company on a project or assignment
basis. They have become a popular employment model in
Poland for tech talent due to their flexibility, cost-
effectiveness, and appeal to professionals who value
independence and control over their work. The Polish market
has become increasingly competitive and to compete for
these skills and access a wider talent pool, we will be
launching this offering in FY24.
As part of our Annual Salary Review in 2022, we proactively
looked for pay equity anomalies and undertook targeted
interventions to correct where appropriate. We are increasing
the scope of this exercise in 2023 to include tracking year on
year progress in closing any identified pay gaps.
Executive outcomes and reward
The Strategic Report outlines another strong performance by
Kainos during the year.
Executive Directors’ remuneration has been determined in
line with the revised policy approved by shareholders at the
2022 Annual General Meeting (AGM) on 28 September 2022.
The Executive Directors’ 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 102% pay-out against these targets, with
the key measures outlined below.
Kainos Annual report 2023
78
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Alignment with UK Corporate Governance Code
The Remuneration Policy which was approved in September
2022 is aligned with the UK Corporate Governance Code
2018, as outlined below.
Clarity
• This report sets out the arrangements for Executive
Directors in a clear and transparent way.
• A formal Reward Philosophy and Strategy has been agreed
and will be cascaded across the organisation to ensure
greater transparency.
• The Committee’s workings and the Remuneration Policy
have been discussed with our Culture and Development
Group, which is our formal workforce advisory panel.
• Shareholders can ask questions and comment on
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 our strategic priorities.
Risk
• We have set variable remuneration targets at levels
which reward high performance, but do not encourage
inappropriate business risk.
• Part of any bonus earned is deferred and a holding
period applies 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.
• We have set target and threshold performance levels
for the annual bonus, and minimum, mid and maximum
performance levels for LTIP financial 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.
• The Committee regularly reviews performance measures
and the underlying targets to ensure they are directly
aligned to our strategic priorities.
Alignment to culture
• The new ‘Responsible Company’ LTIP performance
condition reflects areas that are important 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 challenges that we have seen in the
recruitment market are likely to persist. Financial markets
continue to be uncertain, and fiscal prudency is critical to our
business.
The Committee’s priorities over the next year include:
• continue to ensure the smooth implementation of our
reward philosophy and strategy and Remuneration Policy;
• continue to review total reward (including salaries, share
programmes, bonus and benefits) within the context of
our overall Employee Value Proposition to ensure that we
continue to attract, motivate and retain talent everywhere
we operate;
• continue to engage with our workforce on the priorities
which matter to them, including reward; and
• continue to take action to close the gender pay gap and
any ethnicity pay gap.
We believe that our refreshed reward philosophy and strategy
as implemented through our Remuneration Policy will help us
to deliver these priorities and will strongly support the
measured growth that we are hoping to achieve in the year
ahead.
Directors’ Remuneration Policy
The policy set out below is the new Directors’ Remuneration
Policy which was approved at the 2022 AGM held on
28 September 2022 and is effective for three years from
that date.
In setting this policy, the Committee has considered 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
motivates its Executive Directors. The Remuneration
Committee believes that the Executive Directors should be
rewarded fairly and competitively for their performance and
that this should be at a comparable level to directors in
similar companies.
The Committee’s philosophy for executive reward is:
• to set Executive Director packages at an attractive level
to retain and motivate leaders, with a significant portion
based on performance;
• that salaries will remain below median levels, compared to
peer companies;
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Kainos Annual report 2023
• 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. Furthermore, there is an
additional two-year holding period prior to exercise. 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 our strategy and 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 sets the Executive Directors’
remuneration, gives guidance on the remuneration of other
members of the senior management team and supervises the
workings of all of the Group’s share incentive plans.
The following tables set out the elements of the remuneration
packages offered to Executive Directors.
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 and knowledge;
• business and individual performance;
• achievement of objectives;
• comparative salaries and periodic reviews;
• the Company’s financial position; and
• salary increases for Kainos’ employees.
Potential remuneration Percentage increases will normally be in line with other employees in the same location.
Higher increases may be awarded 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 The maximum Company contribution for Executive Directors is 5% in line with other employees in
the same location.
Performance metrics None.
Kainos Annual report 2023
80
CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Bonus
Purpose To reward and incentivise performance within a financial year, focus Executive Directors on key
objectives and support positive team behaviour, with adequate reward for good performance and
excellent reward for exceptional performance.
Operation Performance is measured on an annual basis for each financial year. The Committee establishes
and weights the criteria at the beginning of each year, based on Company financial targets, and
determines threshold and target levels of performance 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,
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 Remuneration Committee’s discretion, 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’ if core targets are not
achieved or a material negative event occurs.
Potential remuneration The maximum annual bonus opportunity under the policy is 150% of the Executive’s salary.
Performance metrics Annual bonus is discretionary. The Committee chooses and weights the criteria and sets targets
each year, in line 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 long-term performance and 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 following the date of award. For Executive Directors, there is an additional two-year holding
period prior to exercise. Awards will vest and be exercisable subject to continued employment and
meeting 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 Committee’s discretion
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 Group’s
long-term focus, so measures and targets may be different from year to year.
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Kainos Annual report 2023
Non-Executive Director payments
Fees
Purpose To attract and retain Non-Executive Directors with appropriate experience and skills.
Operation The Chair and Non-Executive Directors are paid fees, as detailed in this table. The fees reflect their
time commitment and responsibilities, and the fees paid in other companies of comparable size
and complexity.
The Chair’s fee is approved by the Board, on the Remuneration Committee’s recommendation.
Fees for the Non-Executive Directors are approved by the Board, on the recommendation of the
Chair and Executive Directors.
Additional fees are payable for additional responsibilities.
Potential remuneration The Chair’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 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 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 2023
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CORPORATE GOVERNANCE
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 and 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,
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, Ireland & US Share Schemes
Purpose To motivate, facilitate share ownership and align employees with shareholders.
Operation The Group has implemented share schemes for employees in Poland, the Republic of Ireland and
the US 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 eligible to participate in these plans, at similar levels to
those 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 The Committee does not intend 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.
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 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.
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Kainos Annual report 2023
Illustration of application of Remuneration Policy
The charts below provide estimates of the potential reward opportunities for each Executive Director in FY24, and the split
between the different elements of remuneration under three different scenarios: ‘minimum’, ‘in line with expectation’ and
‘maximum’.
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% 50% 36%
33%
18%
52%
12%
100% 48% 36%
36%
17%
51%
13%
In developing the scenarios, the Committee made the following assumptions:
Minimum The fixed amount consists of base salary, benefits and pension.
Base salary is the annual salary as at 31 March 2023.
Benefits and pensions are measured using the single total figure for remuneration table for 2023.
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 granted in FY21, vesting in FY24.
Maximum Maximum pay-out of annual variable bonus is 150% of salary for both CEO and CFO.
100% vesting of long-term incentive awards, granted in FY21, vesting in FY24.
Long-term incentives consist of share awards only and are measured at face value on date of grant, with no assumptions
about the increase in share price or dividends.
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 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 pro-rated bonus for the proportion of the year that they worked.
The treatment of an Executive Director’s share-based incentives will be determined based on the plan rules. The default
treatment will be for outstanding unvested awards to lapse on leaving. For awards granted under the PSP, SIP or SAYE plans,
‘good leaver’ status may be applied in certain circumstances, and the awards may vest in full.
Kainos Annual report 2023
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CORPORATE GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
In respect of performance shares, awards of ‘good leavers’ will normally vest on the original vesting date, subject to achieving
any performance conditions, with the award being pro-rated to reflect the portion of the vesting period elapsed when they
leave. Under the plan rules, 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 Committee acting reasonably) and
pro-rated for time, unless the Remuneration Committee allows vesting to a greater extent.
There were no payments to past Directors for loss of office during the year ended 31 March 2023.
Remuneration Policy for new Directors
Non-Executive Directors will be appointed on terms substantially similar to the existing Non-Executive Directors and in
accordance with the Remuneration Policy at the time.
If a new Executive Director is appointed, or an existing Executive Director agrees a new service contract, the contract would be
subject to a notice period of no more than 12 months, with the Director entitled to receive salary, bonus and benefits and take
part in the current share plans. The remuneration package for the new Director would be set in accordance with the
Remuneration Policy at the time, while reflecting the individual’s experience and skill.
The new Director’s total remuneration would be consistent with comparable 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.
When recruiting Executive Directors externally, the Remuneration Committee may need to offer additional one-off cash and/or
share-based elements, when in the best interests of Kainos and its shareholders. Such payments would be limited to the
remuneration the individual lost when leaving their former employer to join Kainos and would broadly reflect the delivery
mechanism (for example, cash, shares or options), time horizons and whether performance requirements are attached to that
remuneration. Shareholders will be informed of such payments at the time of appointment.
For 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. Other ongoing remuneration obligations
existing prior to appointment would continue as appropriate, provided they are put to shareholders for approval at the earliest
opportunity.
For both external and internal appointments, the Remuneration Committee may agree that Kainos will meet reasonable
relocation expenses, in line with market practice.
Employees
Kainos offers total remuneration for employees that attracts, motivates and retains talented individuals.
Some employees may receive a bonus, which in many cases will be a percentage of salary, with elements determined by
personal performance and the Group’s financial performance.
For more senior employees, a higher proportion of remuneration is payable as a bonus.
The benefits available depend 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.
The Group’s policy is to offer all employees the chance to take part in share incentive plans. More senior employees may
receive discretionary share option awards.
When reviewing the Executive Directors’ remuneration, the Remuneration Committee considers the pay and benefits of
employees. In addition, the Committee consults employees through our Culture and Development Group. Representatives from
this group attend Remuneration Committee meetings periodically, to ensure that the Remuneration Policy aligns with our
culture and employee experience.
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Kainos Annual report 2023
Shareholders and statement of voting at AGM
At the 2022 AGM the Annual Report on Remuneration for the year ended 31 March 2022 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 withheld
101,189,629 97.2% 2,876,924 2.8% 104,066,553 272
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 developed this policy to ensure that it has sufficient flexibility to deal with unusual
situations. As outlined in the policy tables, the Remuneration Committee retains flexibility to determine the objectives,
weightings and target performance for the annual bonus at the start of each year. The Committee may also alter the
performance criteria during the year, reflecting circumstances and the Group’s performance, to ensure targets remain both
challenging and appropriate.
Similarly, the Committee has flexibility to determine the conditions, weightings and target performance for share awards at the
point awards are made. The Committee can also subsequently amend performance conditions, if events mean that the
conditions are no longer a fair measure of performance. The alternative performance condition will be equally challenging.
The Committee did not apply any such discretion during the year ended 31 March 2023.
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 written approval from
the Board. The Executive Director is entitled to retain the fees from such appointments.
No appointments were made during the year ended 31 March 2023.
Kainos Annual report 2023
86
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 Committee manages all aspects of the Executive Directors’ remuneration, gives guidance on the remuneration of other
members of the senior management team and supervises the workings of all our share incentive plans.
Membership and meetings
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 Committee members 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 five times during the year, with all members of the Committee in attendance.
Further detail is contained within the section ‘Directors’ Remuneration Report’.
During the year, the Remuneration Committee did not take any advice from external remuneration consultants.
Evaluation
As outlined in the ‘Board Evaluation’ section, we undertook an internal evaluation of the performance of the Board and all the
Committees. For the Remuneration Committee, the evaluation focused on:
• The quality of the Committee’s reporting to the Board.
• The Committee’s performance.
• The structure and management of Committee meetings.
• The work of the Committee.
The conclusion was that the Remuneration Committee was rated highly overall, achieving excellent or good scores in all
categories.
Remuneration details
The following tables set out the remuneration for each Director for the years ended 31 March 2023 and 31 March 2022.
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)
Brendan Mooney 2023 227 1 184 11 4 153 580 239 341
2022 225 2 198 20 4 196 645 247 398
Richard McCann 2023 260 1 184 13 4 168 630 274 356
2022 257 2 198 13 4 233 707 272 435
Paul Gannon
(4)
2023 – – – – – – – – –
2022 83 3 70 12 - 185 353 98 255
(1) Benefits is the taxable value of private health insurance received by Executive Directors. FY22 included travel allowance payments in April and May 2021. Travel
allowance payments ceased effective 1 June 2021.
(2) Pension amounts for Brendan Mooney and Richard McCann are payments in lieu of pension.
(3) Other relates to the award of SIP shares.
(4) The above table includes remuneration details for Paul Gannon up to the date of resignation as Executive Director on 23 September 2021.
(5) Effective 1 June 2021, annual base salaries for Brendan Mooney and Richard McCann are £227k and £260k respectively.
ANNUAL REPORT ON REMUNERATION
87
Kainos Annual report 2023
Single total figure of remuneration for Non-Executive Directors (audited)
Name Year Fees
All amounts in (£000s)
Andy Malpass 2023 68
2022 68
Chris Cowan
(1)
2023 –
2022 25
Tom Burnet 2023 100
2022 100
Katie Davis 2023 58
2022 58
Rosaleen Blair 2023 50
2022 50
(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 bonus (audited)
The following table details the eligible bonus payment for the Executive Directors.
Objective Weighting
Target
performance
(£ million)
Threshold
performance
(£ million)
Outcome
(£ million)
Eligible bonus pay-out
Brendan
Mooney
(£000s)
Richard
McCann
(£000s)
Revenue 30% 371 315 375 55 55
Adjusted pre-tax profit 40% 65 52 68 76 76
Bookings 30% 440 374 428 53 53
Totals 184 184
The bonuses payable to Brendan Mooney and Richard McCann are 81%, and 71% of salary respectively. Under the
Remuneration Policy, the maximum annual bonus opportunity is 150% of salary for the CEO and CFO.
As per the revised Remuneration policy (approved September 2022), one third of the annual bonus amount will be deferred
for a period of two years and then paid in cash or shares.
LTIP (audited)
The Committee granted performance-related share awards to the Executive Directors under the PSP on 28 June 2022 as
outlined in the table below. The awards are share options with a nominal exercise price of £0.005 per option and do not have
the right to dividend payments or equivalent until the options have been exercised.
Name Date of grant
No. of ordinary
shares under
option
Face value
(1)
(£000s)
Exercise price per
ordinary share First exercise date Lapsing date
Brendan Mooney June 2022 6,753 76 £0.005 June 2027 June 2032
Richard McCann June 2022 7,493 85 £0.005 June 2027 June 2032
(1) Face value is calculated using the closing share price on the date of grant (£11.30 per share).
Kainos Annual report 2023
88
CORPORATE GOVERNANCE
ANNUAL REPORT ON REMUNERATION CONTINUED
The 2022 PSP awards are subject to the following performance conditions:
Performance condition Weighting Minimum performance Mid performance Maximum performance
TSR performance
(FTSE techMARK index)
45% 30% vesting if Company
performance is at mean
average index price growth
Linear vesting between
minimum and maximum
performance
100% vesting if Company
performance is at or
above mean average
index price growth plus
4% points
EPS percentage growth 25% 30% vesting for
growth of 5%
Linear vesting between
minimum and maximum
performance
100% vesting if growth
is 13% or higher
Responsible company
(1)
30% N/A N/A N/A
(1) Responsible company reflects strategic priorities in the areas of diversity, workforce engagement, climate action and customer satisfaction. Includes; percentage
of women in senior management roles, staff engagement score, leading Kainos efforts on reducing emissions and achieving carbon net zero by 2025 and customer
satisfaction scores.
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 2022 SIP shares
Face value
(1)
(£000s) Vesting period
Brendan Mooney 240 4 3 years from the date of grant.
Richard McCann 240 4 3 years from the date of grant.
(1) Face value is calculated using average middle market closing price for the five days prior to grant date.
Richard McCann also participates in the Group’s 2022 SAYE scheme. The maximum number of options that can vest under this
scheme is 544 options. Based on the closing share price on the date of grant, the face value of these options is £6,027. The
exercise price per option is £9.92. Vesting is subject to a three-year service condition.
2019 PSP (audited)
On 8 July 2019, awards were granted under the Kainos PSP to Brendan Mooney and Richard McCann.
30% of the awards related to an EPS performance condition, for which the measurement period ended 31 March 2022.
The outcome (100% vesting) was reported in our prior year report.
The TSR and Best Companies performance measurement period ended on 7 July 2022, with the following outcome:
Award Measure Weighting Vesting scale
% of award
vesting
2019 TSR
(FTSE techMARK Index)
50% Minimum performance: 30% vesting at median performance.
Maximum performance: 100% vesting if in upper quartile.
Mid performance: Linear vesting between minimum and
maximum performance.
100%
2019 Best Companies 20% 100% vesting if score at end of the three-year period is at
least equal to the score at the start of the period.*
100%
* Best companies score was available at the start of the period and in October 2019 and November 2020. In 2020 the Company determined that a combination of
Glassdoor and Kainos Modern Workplace Survey measures provided a more relevant measure of employee engagement. All measured scores at the end of the
three-year period were at least equal to scores at the start.
89
Kainos Annual report 2023
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
(£000s)
Brendan Mooney 9,918 100% 9,918 – £11.64 115
Richard McCann 10,206 100% 10,206 – £11.64 119
2020 PSP (audited)
On 30 June 2020, awards were granted under the Kainos PSP to Brendan Mooney and Richard McCann. The performance
measurement period for the EPS performance condition ended on 31 March 2023, with the following outcome:
Award Measure Weighting Vesting scale
Performance
achieved
% of award
vesting
2020 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.
36% 100%
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
(£000s)
Brendan Mooney 3,290 100% 3,290 – £13.82 45
Richard McCann 3,651 100% 3,651 – £13.82 50
The 2020 PSP awards also included performance conditions relating to Company TSR and Employee Engagement for which
the measurement period ends on 29 June 2023. Achievement against these performance conditions will be reported in next
year’s Annual Report on Remuneration.
Payments to past directors
There were no payments made to past directors during the year.
Directors’ shareholdings (audited)
The interests in Kainos ordinary shares of the Directors in office at 31 March 2023, including their connected persons, were:
Shares Options
(1)
Name
Current
shareholding
SIP shares
(available to
withdraw)
SIP shares (not
available to
withdraw)
With
performance
measures
Without
performance
measures
Vested but not
exercised
Exercised
during the year
Brendan Mooney 14,205,987 4,481 718 127,992 580 104,296 –
Richard McCann 4,630,352 3,330 718 141,966 1,124 115,674 –
Andy Malpass 38,590 N/A N/A N/A N/A N/A N/A
Tom Burnet 28,253 N/A N/A N/A N/A N/A N/A
Rosaleen Blair N/A N/A N/A N/A N/A N/A N/A
Katie Davis 6, 400 N/A N/A N/A N/A N/A N/A
(1) Dividend equivalent payments are not made in respect of options held.
During the year:
• Katie Davis acquired 6,400 shares in the Company.
No other changes in the Directors’ interests took place between 31 March 2023 and 30 April 2023.
Kainos Annual report 2023
90
CORPORATE GOVERNANCE
ANNUAL REPORT ON REMUNERATION CONTINUED
Share ownership guideline for Executive Directors
The Remuneration Committee has guidelines for the value of the Executive Directors’ shareholdings in Kainos. A minimum
shareholding requirement of 200% of annual salary, over a four-year period, applies. In addition, Executive Directors are
required to retain shares post-employment 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.
Shareholding
requirement
(% of salary)
(1)
Shareholding
requirement met
Brendan Mooney 200% Yes
Richard McCann 200% Yes
(1) The shareholding requirement has been assessed in relation to annual base salaries of Executive Directors as at 31 March 2023 and a closing share price of £13.82
on 31 March 2023.
(2) The following shares count towards the required holding amount:
• Shares owned by the Executive Directors in their own name.
• SIP shares which are available to withdraw.
Unvested or unexercised awards under the Company’s share plans do not count towards the ownership target.
Performance graphs and comparator tables
The regulations require the presentation of a number of graphs and tables comparing 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 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 2023, 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
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
Mar 23
Jan 23
Oct 21
Apr 22
Jul 22
Oct 22
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
200.0
0.0
Rebased share price performance since IPO
91
Kainos Annual report 2023
CEO remuneration (eight-year analysis)
The table below sets out the CEO’s total remuneration over the last eight 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
(%)
2023 580 54 100
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
Percentage change in remuneration
The tables below show the percentage change in remuneration for each Director and all UK employees, for both the current
and prior periods. The Committee 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 2023 compared with remuneration in 2022
2023 Brendan Mooney Richard McCann Employees
Salary and fees
(1)
0.5% 1.3% 9.8%
All taxable benefits
(2)
(52.6%) (50.0%) 0.0%
Annual bonuses (6.9%) (6.9%) (0.5%)
TOTAL (10.1%) (10.9%) 5.6%
(1) Executive Directors’ salary calculated using the single total figure of remuneration.
(2) FY22 benefits included travel allowance payments in April and May 2021. Travel allowance payments ceased effective 1June 2021.
Percentage increase in remuneration in 2022 compared with remuneration in 2021
2022 Brendan Mooney Richard McCann Paul Gannon
(3)
Employees
Salary and fees
(1)
75.8% 84.9% (30.8%) 10.0%
All taxable benefits
(2)
(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 Directors’ salary calculated using the single total figure of remuneration. The increase is attributable to the Executive Directors electing to take no salary
between April and August 2020. For clarity, the annual base salaries for Brendan Mooney and Richard McCann, effective 1 June 2021, are £226,600 and £260,000
respectively. Annual base salaries effective prior to 1 June 2021 were £220,000 and £239,700 respectively.
(2) Executive Directors did not receive travel allowance between June 2021 and March 2022.
(3) Paul Gannon resigned from his role as Board Director on 23 September 2021.
Kainos Annual report 2023
92
CORPORATE GOVERNANCE
ANNUAL REPORT ON REMUNERATION CONTINUED
b) Non-Executive Directors
Percentage increas
e in remuneration in 2023 compared with remuneration in 2022
(1)
2023 Andy Malpass Tom Burnet Katie Davies Rosaleen Blair Employees
Salary and fees 0.0% 0.0% 0.0% 0.0% 9.8%
All taxable benefits – – – – 0.0%
Annual bonuses – – – – (0.5%)
TOTAL 0.0% 0.0% 0.0% 0.0% 5.6%
(1) Calculated using the single total figure of remuneration table.
Percentage increas
e in remuneration in 2022 compared with remuneration in 2021
(1)
2022 Andy Malpass Chris Cowan
(2)
Tom Burnet Katie Davis Rosaleen Blair
(3)
Employees
Salary and fees
(1)
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. 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.
Pay ratios
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
2023 A 15.3 : 1 9.3 : 1 6.4 : 1
2022 A 18.2 : 1 11.6 : 1 8.0 : 1
The Committee has adopted option A as its preferred method for calculating the pay ratio for the year ended 31 March 2023.
The Committee considered this is the most efficient and robust approach to gathering data for the year.
The salaries and wages of UK staff were used to calculate an equivalent single figure remuneration.
93
Kainos Annual report 2023
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 £38k £63k £90k
Relative importance of spend on pay
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.
2023
(£000s)
2022
(£000s)
Change
(£000s)
Change
%
Staff remuneration 232,033 168,395 63,638 38%
Profit before tax 54,338 45,993 8,345 18%
Corporation tax 12,693 10,225 2,468 24%
Effective tax rate 23% 22% n/a 1%
Dividends paid 28,434 27,419 1,015 4%
Employee engagement
Workforce engagement continues to be a priority to help our employees understand our current reward strategy for Executive
Directors, Executive Managers and other employees, and to provide input to our future reward strategy. Throughout the period,
we consulted with employee groups to develop our Reward Philosophy and Strategy, and we provided an overview of the work
of the Remuneration Committee to the Culture and Development Group as well as inviting members to attend Remuneration
Committee meetings and participate in discussions. We also seek anonymous feedback on a monthly basis from colleagues via
Peakon, our employee listening tool. Peakon enables the Group to see how its engagement levels compare with around 350
other global companies from the IT and software sector. Peakon measures engagement though a number of drivers including
questions on reward and the outputs are used to influence our overall Reward Strategy and roadmap. As input to our Annual
Salary Review, we created 3 x e-learning modules for managers, held drop-in discussion sessions so that they were better
informed and could take and communicate reward decisions.
Ensuring our Remuneration Policy for Executive Directors and Executive Managers is aligned with the employee experience
is a continuing priority for the Remuneration Committee. Both the Board and the Committee will continue to engage with the
workforce through the Kainos Culture and Development Group and divisional leadership teams.
AGM
The Directors’ Annual Report on Remuneration will be put to an advisory shareholder vote at the 2023 AGM.
Kainos Annual report 2023
94
CORPORATE GOVERNANCE
ANNUAL REPORT ON REMUNERATION CONTINUED
Directors’ remuneration for the year commencing 1 April 2023
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 Executive Directors’ benefits in the year commencing 1 April 2023.
Pension There will be no change to the Executive Directors’ pension contributions in the year commencing
1 April 2023.
Annual bonus Annual bonus for the year commencing 1 April 2023 will be determined by the policy disclosed in
this report. Executive Directors will defer one third of the annual bonus payable in June 2024 for
three years.
The targets for the annual bonus for FY24 are not disclosed in this report, as that information is
deemed commercially sensitive and may be interpreted to be a forecast. The targets will be
disclosed in the 2024 Annual Report.
Long-term incentives The Remuneration Committee intends to make further performance share awards in mid-2023.
These will be made in line with the Remuneration Policy. The Committee will determine the levels,
performance conditions, weighting and growth targets to be applied at the time of award and
disclose them in the 2024 Annual Report.
Non-Executive Director
remuneration
For the year commencing 1 April 2023 fees will remain in line with the structures in effect from
1 October 2019.
On behalf of the Board
Katie Davis
Chair of the Remuneration Committee
19 May 2023
95
Kainos Annual report 2023
DIRECTORS’ REPORT
The Directors present their report and the audited
financial statements for Kainos Group plc (company number
09579188) for the year ended 31 March 2023. These will be
laid before the shareholders at the Annual General Meeting
(AGM) to be held on 21 September 2023. The Strategic Report
and the Corporate Governance Report are incorporated by
reference into this Directors’ Report.
Forward looking statements
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.
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);
• details of research and development activities; and
• social, community and human rights issues (including
corporate social responsibility).
Directors
The Directors who held office during the year are detailed
within the Board and Committee membership section of the
Corporate Governance Report.
Financial performance and position
The financial results and position are shown in the
consolidated financial statements. A fuller explanation of the
results and financial position, including the dividend
recommended by the Directors, is provided in the Operational
and Financial Review sections of the Strategic Report and the
notes to the financial statements.
Political donations
No political donations were made during the year ended
31 March 2023 (£nil for year ended 31 March 2022).
Off-balance sheet arrangements
There are no off-balance sheet arrangements. Details of the
trusts relating to Kainos’ share incentive plans are set out in
note 23 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.
Information required by the Listing Rules
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 22 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.
Kainos Annual report 2023
96
CORPORATE GOVERNANCE
DIRECTORS’ REPORT CONTINUED
Authority to purchase own shares
Kainos holds a general authority to purchase up to
12,409,518 ordinary shares in the market. This represented
approximately 10% of Kainos’ issued share capital as at
24 August 2022, as approved by shareholders at the 2022
AGM. No purchase of shares has been made pursuant
to this authority. The Board does not currently intend to
use such an authority but considers it desirable to have the
ability to do so under appropriate circumstances. 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 to exercise this authority only if it believes
it will lead to an increase in earnings per share for the
remaining shareholders.
Appointment and replacement of Directors
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.
Directors’ indemnities
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.
Directors’ and officers’ liability insurance
Kainos has purchased and maintained throughout the year
Directors’ and Officers’ liability insurance in respect of itself
and its Directors and officers.
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.
Auditor
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
Group companies are subject to certain customer contracts,
which require them to notify the customer of a change of
control of the Group. In some instances, this may allow the
customer to terminate its contracts with the Group. The
Directors are not aware of, and do not anticipate, any
circumstances where, any customer would wish to trigger its
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 have not lapsed would generally vest in full.
Awards under the PSP rules would also vest, subject to the
satisfaction of any performance conditions at the time, but
these would be time pro-rated.
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 2023, the last
holding notified to the Company is shown below.
Investor
Ordinary
0.5p shares
% of issued
share capital
Eileen and Brendan Mooney 14,205,987 11.4%
QUBIS Ltd 12,221,217 9.8%
Liontrust Asset Management plc 7,551,696 6.1%
Paul Gannon 7,129,008 5.7%
abrdn (Standard Life) 5,925,653 4.8%
Baillie Gifford & Co 5,800,662 4.7%
Richard McCann 4,630,352 3.7%
Dr Brian Gannon 4,285,675 3.4%
Going concern
Our business activities and position in our markets 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 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.
97
Kainos Annual report 2023
Long-term viability
The full Viability Statement and the associated explanations
made in accordance with Provision 31 of the Code can be
found in the Strategic Report.
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;
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the 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.
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 comply 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 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 19 May 2023 and is signed on its behalf by:
Tom Burnet
Chair
19 May 2023
Kainos Annual report 2023
98
FINANCIAL STATEMENTS
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 (“the Group”) for the year ended 31 March
2023, 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 2023 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 two financial years ended 31 March
2023. 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
£2.9m (2022: £2.7m)
5% of Group adjusted
profit before tax
Coverage
94% (2022: 97%) of G
roup
profit before
tax
Key audit matters vs 2022
Recurring risks
Revenue recognition
relating to misstatement
of accrued and deferred
income
◄►
Recognition of research
and development credits
▼
Investment in
subsidiaries
◄►
99
Kainos Annual report 2023
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 and the audit committee 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.
100
Kainos Annual report 2023
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KAINOS GROUP PLC
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.
— 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:
£374.8 million
(2022: £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.
Revenue may be overstated in a
period due to an incentive to
achieve revenue forecasts to meet
investor expectations and in order
to achieve targets as part of
performance-based compensation
arrangements.
The delivery of licensing or services
revenue may occur over multiple
accounting periods such that the
accrued and/or deferred income
has the potential to be misstated at
the year end as a consequence of
fraudulent accounting.
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.
— We made enquiries of the directors’ and other management and
remained alert to the indicators of fraud during the course of the audit.
— 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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Kainos Annual report 2023
4. Key audit matters: our assessment of risks of material misstatement (continued)
The key audit matter How the matter was addressed in our audit
Investments in
subsidiaries
£6.5 million
(2022: £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
2023.
Our results
— The results of our testing were satisfactory and we found the carrying
amount of the investments in subsidiaries to be acceptable.
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Kainos Annual report 2023
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KAINOS GROUP PLC
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
£2.9m (2022: £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 £4.2m (2022: £7.2m),
of which it represents 5% (2022: 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 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
£1.4m (2022: £1.0m), determined with reference to a benchmark of
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.
The components within the scope of our work accounted for the
percentages illustrated below.
The remaining 3% of total Group revenue, 6% of Group profit
before tax and 4% of total Group assets is represented by 12
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 risks of material
misstatement within these.
Company net assets, of which it represents 2% (2022: 1.5%). In line
with our audit methodology, our procedures on individual account
balances and disclosures were performed to a lower threshold,
Adjusted group profit
before tax
Group materiality
£2.9m (2022: £2.7m)
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% (2022: 75%) of materiality for
the financial statements as a whole, which equates to £2.2m (2022:
2.0m) for the Group and £1.1m (2022: £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
£58.6m (2022: £53.2m)
Adjusted Group PBT
Group materiality
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 £146k (2022: £139k),
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the Group’s 25 (2022: 25) reporting components, we subjected 9
(2022: 9) to full scope audits for group purposes and 4 (2022: 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.
Group revenue
Group total assets
Group adjusted profit before tax
Full scope for Group
audit purposes 2023
Specified risk-focused audit
Residual
58.6
2.9
£2.9m (2022: £2.7m)
Whole financial
statements materiality
£2.2m (2022: £2.0m)
Whole financial
statements performance
materiality
£0.1m to £2.1m
Range of materiality at 13
components
(2022: £0.1m
to £2.2m at 12
components)
£146k (2022:
£139k)
Misstatements reported to
the audit committee
11
97
%
86
4
94
%
90
5
96
%
91
procedures
Kainos Annual report 2023
103
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 (Going concern section) and Strategic Report (Viability
statement);
— 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 (Going
concern section) and Strategic Report (Viability statement);
— 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 (Going concern section) and Strategic Report
(Viability statement).
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 (Directors’
responsibilities statement in respect of the Annual Report and
the financial statements 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 (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.
104
FINANCIAL STATEMENTS
Kainos Annual report 2023
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KAINOS GROUP PLC
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
19 May 2023
105
Kainos Annual report 2023
Continuing operations Note
2023
(£000s)
2022
(£000s)
REVENUE 5 374,807 302,632
Cost of sales 5 (197,652 ) (162,386 )
GROSS PROFIT 5 177,155 140,246
Operating expenses 6 (124,597 ) (93,625 )
Impairment gain/(loss) (including amounts recovered) on trade receivables and
accrued income 25 388 (606 )
OPERATING PROFIT 52,946 46,015
Finance income 1,463 52
Finance expense (71 ) (74 )
PROFIT BEFORE TAX 54,338 45,993
Income tax expense 8 (12,693 ) (10,225 )
PROFIT FOR THE YEAR 41,645 35,768
EARNINGS PER SHARE
Basic 10 33.6 p 29.1 p
Diluted 10 33.1 p 28.5 p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
2023
(£000s)
2022
(£000s)
PROFIT FOR THE YEAR 41,645 35,768
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Foreign operations – foreign currency translation differences 779 728
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 42,424 36,496
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2023
Kainos Annual report 2023
106
FINANCIAL STATEMENTS
Note
2023
(£000s)
2022
(£000s)
NON-CURRENT ASSETS
Goodwill 11 19,007 18,765
Other intangible assets 11 3,816 5,993
Investment property 13 5,160 –
Property, plant and equipment 12 9,509 14,867
Right-of-use assets 15 1,261 3,166
Investments in equity instruments 1,299 1,343
Deferred tax asset 17 3,103 4,282
CURRENT ASSETS
Trade and other receivables 16 38,970 38,358
Prepayments 16 3,656 4,377
Accrued income 16 38,808 39,462
Tax receivable 400 –
Cash and cash equivalents 18 108,302 76,609
Assets held for sale 12 310 –
TOTAL ASSETS 233,601 207,222
CURRENT LIABILITIES
Trade payables and accruals 20 (52,348 ) (49,199 )
Deferred income 20 (37,087 ) (30,966 )
Tax payable 20 – (1,959 )
Lease liabilities 19 (794 ) (1,093 )
Provisions 21 (341 ) (872 )
Other tax and social security 20 (12,068 ) (11,917 )
(102,638 ) (96,006 )
NON-CURRENT LIABILITIES
Provisions 21 (1,031 ) (1,258 )
Lease liabilities 19 (585 ) (2,268 )
(1,616 ) (3,526 )
TOTAL LIABILITIES (104,254 ) (99,532 )
NET ASSETS 129,347 107,690
EQUITY
Share capital 22 623 619
Share premium account 6,567 6,433
Capital reserve 3,548 3,548
Share-based payment reserve 23,394 15,171
Translation reserve 1,030 251
Retained earnings 94,185 81,668
TOTAL EQUITY 129,347 107,690
These financial statements were approved by the Board of Directors and authorised for issue on 19 May 2023. They were
signed on its behalf by:
Richard McCann
Director
19 May 2023
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2023
107
Kainos Annual report 2023
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 2021 614 5,737 662 9,083 (477 ) 71,989 87,608
Profit for the year – – – – – 35,768 35,768
Other comprehensive income – – – – 728 – 728
Total comprehensive income for the year – – – – 728 35,768 36,496
Equity-settled share-based payment – – – 6,088 – – 6,088
Current tax for equity-settled
share-based payments – – – – – 1,610 1,610
Deferred tax for equity-settled
share-based payments – – – – – (280 ) (280 )
Issue of share capital – share options exercised 5 2,296 – – – – 2,301
Issue of shares as purchase consideration – – 1,286 – – – 1,286
Transfer between reserves
(20)
Dividends – – – – – (27,419 ) (27,419 )
BALANCE AT 31 MARCH 2022 619 6,433 3,548 15,171 251 81,668 107,690
Profit for the year – – – – – 41,645 41,645
Other comprehensive income – – – – 779 – 779
Total comprehensive income for the year – – – – 779 41,645 42,424
Equity-settled share-based payment – – – 8,223 – – 8,223
Current tax for equity-settled
share-based payments – – – – – 237 237
Deferred tax for equity-settled
share-based payments – – – – – (931 ) (931 )
Issue of share capital – share options exercised 4 134 – – – – 138
Dividends – – – – – (28,434 ) (28,434 )
BALANCE AT 31 MARCH 2023 623 6,567 3,548 23,394
(21)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
(20) 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.
(21) £12.1 million relates to exercised or lapsed options or fully vested free share awards and is considered distributable.
Kainos Annual report 2023
108
FINANCIAL STATEMENTS
Note
2023
(£000s)
2022
(£000s)
CASH FLOWS FROM OPERATING ACTIVITIES
PROFIT FOR THE YEAR 41,645 35,768
Adjustments for:
Finance income (1,463 ) (52 )
Finance expense 71 74
Tax expense 8 12,693 10,225
Share-based payment expense 6,346 3,727
Depreciation of property, plant and equipment 12 2,249 1,538
Depreciation of right-of-use assets 15 1,163 1,654
Amortisation of intangible assets 11 2,642 1,890
Loss on disposal of property, plant and equipment – 8
Post-acquisition remuneration settled by shares 3,200 2,950
(Decrease)/increase in provisions 21 (758 ) 395
OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING CAPITAL 67,788 58,177
Increase in trade and other receivables (3,380 ) (22,996 )
Increase in trade and other payables 8,076 16,571
CASH GENERATED FROM OPERATING ACTIVITIES 72,484 51,752
Income taxes paid (10,585 ) (7,089 )
NET CASH FROM OPERATING ACTIVITIES 61,899 44,663
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 1,463 52
Purchases of property, plant and equipment 12 (2,499 ) (5,819 )
Acquisition of other investments – (74 )
Amounts withdrawn/(placed) on treasury deposit – 18,028
Acquisition of subsidiaries net of cash acquired 27 – (16,768 )
NET CASH USED IN INVESTING ACTIVITIES (1,036 ) (4,581 )
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 9 (28,434 ) (27,419 )
Interest paid (71 ) (74 )
Repayment of lease liabilities (1,075 ) (1,409 )
Proceeds on issue of shares 138 2,301
NET CASH USED IN FINANCING ACTIVITIES (29,442 ) (26,601 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 31,421 13,481
Cash and cash equivalents at beginning of year 18 76,609 62,896
Effect of exchange rate fluctuations on cash held 272 232
CASH AND CASH EQUIVALENTS AT END OF YEAR 108,302 76,609
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2023
109
Kainos Annual report 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Kainos Annual report 2023
110
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
111
Kainos Annual report 2023
3. Significant accounting policies cont.
Business combinations cont.
Kainos Annual report 2023
112
FINANCIAL STATEMENTS
3. Significant accounting policies cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
113
Kainos Annual report 2023
3. Significant accounting policies cont.
Kainos Annual report 2023
114
FINANCIAL STATEMENTS
3. Significant accounting policies cont.
Deferred tax cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
115
Kainos Annual report 2023
3. Significant accounting policies cont.
Kainos Annual report 2023
116
FINANCIAL STATEMENTS
3. Significant accounting policies cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
117
Kainos Annual report 2023
3. Significant accounting policies cont.
Kainos Annual report 2023
118
FINANCIAL STATEMENTS
4. Material accounting judgements and key sources of estimation uncertainty cont.
Product development expenditure cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
119
Kainos Annual report 2023
5. Segment reporting cont.
(22) 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 2023
120
FINANCIAL STATEMENTS
5. Segment reporting cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
121
Kainos Annual report 2023
5. Segment reporting cont.
Kainos Annual report 2023
122
FINANCIAL STATEMENTS
5. Segment reporting cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
123
Kainos Annual report 2023
Kainos Annual report 2023
124
FINANCIAL STATEMENTS
8. Tax expense cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
125
Kainos Annual report 2023
Kainos Annual report 2023
126
FINANCIAL STATEMENTS
10. Earnings per share cont.
Diluted cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
127
Kainos Annual report 2023
11. Intangible assets and goodwill cont.
Kainos Annual report 2023
128
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
129
Kainos Annual report 2023
Kainos Annual report 2023
130
FINANCIAL STATEMENTS
14. Subsidiaries cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
131
Kainos Annual report 2023
Kainos Annual report 2023
132
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
133
Kainos Annual report 2023
17. Deferred tax cont.
Kainos Annual report 2023
134
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
135
Kainos Annual report 2023
Kainos Annual report 2023
136
FINANCIAL STATEMENTS
23. Share-based payments cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
137
Kainos Annual report 2023
23. Share-based payments cont.
Fair values and awards outstanding cont.
Kainos Annual report 2023
138
FINANCIAL STATEMENTS
23. Share-based payments cont.
Fair values and awards outstanding cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
139
Kainos Annual report 2023
23. Share-based payments cont.
Kainos Annual report 2023
140
FINANCIAL STATEMENTS
23. Share-based payments cont.
Reconciliation of outstanding share options and share awards cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
141
Kainos Annual report 2023
Kainos Annual report 2023
142
FINANCIAL STATEMENTS
25. Financial instruments cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
143
Kainos Annual report 2023
25. Financial instruments cont.
Market risk cont.
Kainos Annual report 2023
144
FINANCIAL STATEMENTS
25. Financial instruments cont.
Credit risk management cont.
Trade receivables and accrued income cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
145
Kainos Annual report 2023
25. Financial instruments cont.
Credit risk management cont.
Kainos Annual report 2023
146
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
147
Kainos Annual report 2023
Kainos Annual report 2023
148
FINANCIAL STATEMENTS
27. Acquisitions cont.
Prior year acquisitions cont.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
149
Kainos Annual report 2023
27. Acquisitions cont.
Une Consulting cont.
Kainos Annual report 2023
150
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
27. Acquisitions cont.
Blackline Group Inc. cont.
151
Kainos Annual report 2023
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2023
Notes
2023
(£000s)
2022
(£000s)
NON-CURRENT ASSETS
Investments in subsidiaries 4 6,524 6,524
Receivables 5 8,621 10,251
15,145 16,775
CURRENT ASSETS
Receivables 5 10,799 8,321
Prepayments 524 398
Cash at bank and in hand 55,385 41,511
66,708 50,230
Payables: Amounts falling due within one year 6 (8,902) (1,319)
NET CURRENT ASSETS 57,806 48,911
TOTAL ASSETS LESS CURRENT LIABILITIES 72,951 65,686
NET ASSETS 72,951 65,686
CAPITAL AND RESERVES
Share capital 7 623 619
Share premium account 6,567 6,433
Share-based payments reserve 23,394 15,171
Capital reserve 8,820 8,820
Profit and loss account 33,547 34,643
SHAREHOLDERS’ FUNDS 72,951 65,686
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 £27.9 million (2022: £18.8 million).
The financial statements of Kainos Group plc (registered number 09579188) were approved by the Board of Directors and
authorised for issue on 19 May 2023. They were signed on its behalf by:
Richard McCann
Director
19 May 2023
Kainos Annual report 2023
152
FINANCIAL STATEMENTS
Share capital
(£000s)
Share
premium
account
(£000s)
Share-based
payments
(£000s)
Capital
reserve
(£000s)
Retained
earnings
(£000s)
Total equity
(£000s)
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
(23)
(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 8,820 34,643 65,686
Profit and total comprehensive income – – – – 27,942 27,942
Issue of share capital – share options exercised 4 134 – – – 138
Equity settled share-based payments – – 8,223 – – 8,223
Deferred tax for equity-settled share-based payments – – – – (604) (604)
Dividends – – – – (28,434) (28,434)
BALANCE AT 31 MARCH 2023 623 6,567 23,394
(24)
8,820 33,547 72,951
COMPANY STATEMENT OF CHANGES IN EQUITY
(23) 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.
(24) £12.1 million relates to exercised or lapsed options or fully vested free share awards and is considered distributable.
153
Kainos Annual report 2023
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.
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 2023
154
FINANCIAL STATEMENTS
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 £27.9 million (2022: £18.8 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, Brendan Mooney and Richard McCann
(2022: two).
2023
(£000s)
2022
(£000s)
Wages and salaries 865 884
Social security costs 125 89
Other pension costs 24 33
Share-based payments 139 129
1,153 1,135
Pension amounts for Brendan Mooney and Richard McCann are payments in lieu of pension.
Further information about share-based payments is provided in note 23 to the consolidated financial statements.
4. Investments in subsidiaries
(£000s)
Cost and carrying amount
AT 31 MARCH 2022 AND 31 MARCH 2023 6,524
Details of the Group’s subsidiaries at 31 March 2023 are included in note 14 of the consolidated financial statements.
5. Receivables
2023
(£000s)
2022
(£000s)
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
Amounts owed from Group undertakings 8,415 9,433
Deferred tax assets 206 818
8,621 10,251
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Amounts owed from Group undertakings 10,723 8,123
Current tax assets – 36
Other receivables 76 162
10,799 8,321
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
155
Kainos Annual report 2023
6. Payables: Amounts falling due within one year
2023
(£000s)
2022
(£000s)
Trade creditors and accruals 1,326 1,261
Bank overdraft 7,325 –
Amounts owed to Group undertakings 214 21
Other tax and social security 37 37
Current tax liabilities – –
8,902 1,319
Bank overdraft amount relates to Group cash pooling arrangements.
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 22 of the consolidated financial statements.
8. Distributable reserves
The Company’s distributable reserves as at 31 March 2023 total £45.6 million (2022: £44.9 million).
9. Commitments
As part of the Group’s insurance arrangements, the Company has an obligation at 31 March 2023 to transfer £2.5 million
in exchange for the share capital of a cell in a protected cell company. The payment was made in April 2023 and was funded
from existing cash at bank held by the Company.
Kainos Annual report 2023
156
FINANCIAL STATEMENTS
Definition of terms
We use the following definitions for our key metrics:
Active customer: a customer who has paid us to deliver a
product or service within the current financial year.
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.
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.
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.
Constant currency (ccy): Excludes the effect of foreign
currency exchange rate fluctuations on year-on-year
performance by translating the relevant prior year figure
at current year average exchange rates.
Contracted backlog: the value of contracted revenue that
has yet to be recognised.
Compound annual growth rate (CAGR): annual growth rate
over a specified period of time.
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 current and comparative
reporting periods.
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 ongoing 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.
Kainos Group plc
Registered Office
2nd Floor
21 Farringdon Road
London
EC1M 3HA
Business Address
Kainos House
4-6 Upper Crescent
Belfast
BT7 1NT
Northern Ireland
Email: investorrelations@kainos.com
Registrar
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Email: enquiries@linkgroup.co.uk
DEFINITION OF TERMS
COMPANY INFORMATION
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Kainos Annual Report 2023