2024 ANNUAL REPORT
TRUE PARTNERS
CHANGE THE WORLD
TOGETHER
Kainos Group plc is a UK-headquartered provider of sophisticated
IT services to major public sector, commercial and healthcare
customers. Our expertise spans three divisions: Digital Services,
Workday Services and Workday Products.
We are listed on the London Stock
Exchange (LSE: KNOS) and you can
discover more about us at
www.kainos.com.
CONTENTS
Strategic report
01 Financial highlights
02 Operational highlights
08 Kainos at a glance
10 Chief Executive Officer’s statement
12 Our markets
14 Our business model
17 Our strategy
20 Operational review
28 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
Corporate governance
60 Directors’ biographies
62 Corporate Governance Report
67 Nominations Committee Report
70 Audit Committee Report
76 Director's Remuneration Report
84 Annual Report on Remuneration
93 Directors Report
Financial statements
96 Independent Auditor’s Report to the
members of Kainos Group plc
103 Consolidated income statement
103 Consolidated statement of
comprehensive income
104 Consolidated statement of
financial position
105 Consolidated statement of
changes in equity
106 Consolidated statement of
cash flows
107 Notes to the consolidated
financial statements
150 Company statement of
financial position
151 Company statement of changes
in equity
152 Notes to the Company financial
statements
155 Definition of terms
156 Company information
1
Kainos Annual report 2024
Strategic Report
2024 2023 Change
Revenue £382.4m £374.8m +2%
Statutory profit before tax £64.8m £54.3m +19%
Adjusted pre-tax profit £77.2m £67.6m +14%
Cash
(1)
£126.0m £108.3m +16%
Bookings £424.5m £427.8m -1%
Product Annual Recurring Revenue (ARR) £60.5m £47.9m +26%
Contracted backlog £357.1m £322.9m +11%
Diluted earnings per share 38.6p 33.1p +17%
Adjusted diluted earnings per share 46.5p 42.5p +9%
Total dividend per share 27.3p 23.9p +14%
FINANCIAL HIGHLIGHTS
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.
(1) Includes £4.4 million of treasury deposits which do not meet the
definition of cash and cash equivalents.
Kainos Annual report 2024
Strategic Report
2
OPERATIONAL
HIGHLIGHTS
We have recorded our 14th consecutive
year of growth across a wide range
of key metrics, with our business
performance demonstrating disciplined
execution against a backdrop of macro-
economic uncertainty.
Revenue increased by 2% (6% organic, 3% ccy)
to £382.4 million (2023: £374.8 million).
Strong adjusted pre-tax profit growth of 14% (17% ccy)
to £77.2 million (2023: £67.6 million), representing an
adjusted profit margin of 20% (2023: 18%).
Overall bookings were £424.5 million
(2023: £427.8 million).
Strong contracted backlog growth of 11%
to £357.1 million (2023: £322.9 million).
Strong year-end cash
(1)
of £126.0 million
(2023: £108.3 million); with cash conversion at 98%
(2023: 104%).
14
th
consecutive
year of growth!
(1) Includes £4.4 million of treasury deposits which do not meet the definition of
cash and cash equivalents.
3
Kainos Annual report 2024
Strategic Report
Our Workday-related products
delivered very strong growth and we
remain on track to achieve our target
of £100 million ARR by 2026.
Revenue growth was 28% (23% organic, 33% ccy),
with revenues now £57.3 million (2023: £44.7 million),
with the ARR increasing by 26% to £60.5 million
(2023: £47.9 million).
Available since October 2023, our new Employee
Document Management product is our most
successful product launch, with 26 clients already
contracted.
We continued to invest in our products, increasing
research & development expenditure by 48%,
to £13.5 million (2023: £9.1 million), which was expensed
in the year, and sales & marketing spend increased
16% to £12.5 million (2023: £10.8 million).
In Digital Services, we continue to deliver
major digital transformation projects,
with a solid performance in public sector
offset by reductions in healthcare and
commercial sectors.
Overall, Digital Services revenue decreased by 5% to
£213.1 million (2023: £224.4 million).
A solid performance within public sector generated
revenue growth of 1% to £138.2 million (2023: £137.0
million).
Year-on-year healthcare sector revenues decreased
by 11% to £44.2 million (2023: £49.7 million), although
the previous year included significant pandemic-
related revenue. Excluding these revenues, our core
healthcare business levels increased by 23%.
Commercial sector revenues were impacted by
reduced customer expenditure and decreased 19%
to £30.8 million (2023: £37.8 million). The majority of
the impact resulted from project deferrals and scope
reductions together with some project cancellations.
+28%
increase in revenue
£138.2 million
solid performance within public sector
Kainos Annual report 2024
Strategic Report
4
The commitment and engagement of
our colleagues underpins our business
performance as we continue to grow a
global, talented team.
We have 2,995 people (2023: 2,990) based across 23
countries. We have continued to reduce the number
of contract staff (2024: 42 contractors; 2023: 209)
in favour of long-term investment in permanent
employees, an increase of 172 people over the year.
Our employee retention improved to 93% (2023: 88%)
and engagement levels remained high, measuring 78%
on our internal surveys, and we were again awarded
‘50 Best Places To Work in the UK’ by Glassdoor.
We continue to extend our footprint
as a global business, with 39% of our
revenues now generated internationally.
Strong international growth, with revenues up 13% to
£149.8 million (2023: £132.0 million).
Excellent customer service drives
customer satisfaction, retention and
revenue growth.
Existing customer revenue increased by 2% to £345.8
million (2023: £337.6 million) which represents a Net
Revenue Retention of 102%.
Our customers assessed our services as ‘excellent’
with a Net Promoter Score of 58
(2)
.
Customer numbers increased to 930 (2023: 821), an
increase of 13%.
+13%
increase in customer numbers
39%
revenues now generated internationally
78%
engagement levels remained high
OPERATIONAL HIGHLIGHTS
CONTINUED
(2) We use the established industry measure, Net Promoter Score, to measure customer satisfaction. Bain & Co, the creators of the metric, held that a score above 0 is
good; 20+ is favourable; 50+ is excellent and 80+ is world class.
5
Kainos Annual report 2024
Strategic Report
We continue to be the leading pan-
European Workday consulting specialist
and are a Phase 1 partner in both the US
and Canadian markets.
We recorded good revenue growth of 6% (9% ccy)
to £112.0 million (2023: £105.7 million), of which the
majority (76%) is generated from international
customers
(3)
.
6%
We recorded
good revenue
growth
(3) As noted in the Interim Report, we decided to stop providing the standalone procurement services associated with our 2022 acquisition of Blackline Group. Further
detail, including associated expenses recognised in the period, is contained within the Workday Services review.
Kainos Annual report 2024
Strategic Report
6
We retained our carbon neutral status
and remain on track to be carbon net
zero by 2025.
Based upon our draft carbon footprint figures (provided
May 2024) we have achieved our SBTi near-term carbon
reduction targets two years ahead of schedule – reducing
since 2020 Scope 1 and Scope 2 emissions by 70%, and
Scope 3 by 45% per unit of value added.
On track
to be carbon net
zero by 2025
OPERATIONAL HIGHLIGHTS
CONTINUED
7
Kainos Annual report 2024
Strategic Report
We are maintaining a positive outlook
as our key business segments are
positioned for further growth in the near
and medium term.
Notwithstanding the global economic uncertainty, we believe
that our largest business areas, Workday Products, Workday
Services, and the public sector segment of Digital Services
(together, 80% of revenue) will continue to deliver growth, in
both the near term and medium term.
In the year ahead we expect a return to growth for our
healthcare business. This will be offset in the near term by
further modest reductions in revenues from our commercial
sector customers within Digital Services, but we expect a
return to growth for our commercial sector customers in the
medium term.
As demonstrated in these results, we remain well-positioned
to deliver strong margin and cash generation growth
through the year as we continue to benefit from our
disciplined operational execution.
We have a growing sense of excitement about some of our
smaller, high-growth activities, of which Workday Extend,
Automation and Low Code, international growth in Digital
Services and, obviously, Data & AI are showing significant
promise.
We are making rapid progress on our
announced £10 million investment in
Generative AI to further enhance our
leadership in Artificial Intelligence.
We continue to see an increase in demand for broad AI
expertise and have delivered projects for Companies House,
Defra, Royal London Asset Management and Worldline.
Generative AI remains largely experimental for our clients,
often delayed by the challenges of low data quality for their
more complex, organisation-specific use cases.
Over 500 colleagues are now trained in the use of Generative
AI and over 30% of our projects are using co-pilots to assist
in accelerating our development pace.
80%
of revenue will continue to deliver growth
+500
colleagues trained in Generative AI
Kainos Annual report 2024
8
Strategic Report
We are a UK-headquartered provider of
sophisticated IT services to major public
sector, commercial and healthcare
customers. Our expertise is organised
across three divisions: Digital Services,
Workday Services, and Workday
Products.
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
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, our innovative
and transformative solutions are secure, accessible, cost-
effective, and take a user-first approach. We leverage the
benefits of 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 users, 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 150 clients, including existing
clients such Irish Life Assurance plc, the Government of
Ontario and HM Passport Office, and new clients including
the Crown Prosecution Service, Royal London Asset
Management and Arqiva.
Workday Services
In our Workday Services division we provide a comprehensive
range of services to support customers in their adoption and
utilisation of Workday’s software suite. Our expertise spans
consulting, project management, integration and post-
deployment services.
Kainos first engaged with Workday in 2009 and, appointed
as a partner in 2011, we are one of the most experienced
participants in Workday’s partner ecosystem. We remain the
only specialist Workday partner headquartered in the UK,
but our reach has grown to be global, with over 75% of our
projects being undertaken for clients in Central Europe and
North America.
With over 300 international clients, we are proud to work
with customers such as Kion Group (Germany), Wealthsimple
(Canada), Novozymes (Denmark), Kone (Finland), ASOS plc
(UK), Takeaway.com (Netherlands) and Match.com (USA).
2,995
Number of staff
and contractors
(2023: 2,990)
2,953
Number of
employed staff
(2023: 2,781)
93%
Employee
retention
(2023: 88%)
UK & Ireland
Central Europe
Americas
Rest of World
13%
68%
15%
People by region
4%
Digital Services
Workday Services
Workday Products
Central Services
17%
51%
25%
People by division
7%
Our People
Our operating divisions
9
Kainos Annual report 2024
Strategic Report
Digital Services
56% of Group total
5-year growth: 15% CAGR
Workday Services
29% of Group total
5-year growth: 32% CAGR
Workday Products
15% of Group total
5-year growth: 32% CAGR
£57.3m
£213.1m
£112.0m
Revenue by operating
division FY24
14 OFFICES
Antwerp, Atlanta, Belfast, Birmingham, Buenos
Aires, Copenhagen, Derry, Dublin, Gdańsk, Helsinki,
Indianapolis, London, Paris, and Toronto.
Commercial sector
(2023: 50%)
Public sector
(2023: 37%)
Healthcare
(2023: 13%)
12%
52%
36%
Customer by sector
(revenue)
UK & Ireland
(2023: 65%)
North America
(2023: 25%)
Central Europe
(2023: 9%)
Rest of World
(2023: 1%)
11%
61%
28%
Customer by region
<1%
930
Active
customers
(2023: 821)
58
Net Promoter
Score
(2023: alternative
measure used)
90%
Revenue
from existing
customers
(2023: 90%)
Our Customers
Workday Products
We have developed four proprietary software tools, Smart
Test, Smart Audit and Smart Shield (collectively, our Smart
Suite) and Employee Document Management (EDM).
Smart Test allows Workday customers to automatically test
and verify their unique Workday configuration. Smart Audit
is our compliance-monitoring tool that allows customers
to maintain operational controls over their Workday
environments. Smart Shield is a data-masking tool that can
easily and seamlessly mask sensitive data without impacting
the Workday user experience. EDM improves the experience
of generating and storing employee-related documents
in Workday while supporting an organisation’s global
compliance requirements.
These tools are implemented as cloud-based Software as
a Service (SaaS) solutions and customers utilise them on a
subscription basis.
Reflecting our longevity in the Workday ecosystem, we
released Smart Test in 2014, but have been increasing the
pace of our product launches, with Smart Audit in 2021,
Smart Shield in 2022 and EDM in 2023.
Over 450 customers use at least one of our products,
including AT&T (USA), State of Oregon (USA), Booking.com
(Netherlands), Whole Foods (USA) and Netflix (USA).
Kainos Annual report 2024
Strategic Report
10
Being agile in supporting our
customers
We work closely with over 900
customers, most of them global
organisations. For many of our
customers, it has been another
challenging year, often operating in
uncertain and changeable markets
conditions.
As their partners, it is our role to
support them as they deal with
these changing circumstances. For
many customers it has been about
maintaining investment in critical
transformation programmes; for some
it has resulted in reductions in their
technology expenditure as they deal
with more volatile business conditions.
Changes for our customers can
sometimes require us to be agile in
how we manage our own business.
In reviewing the year, we believe that
we have maintained the appropriate
balance between growth, profitability,
international expansion and investing
for the future.
To achieve that balance has
required us to be disciplined in our
execution throughout the year and
we believe that we have delivered a
robust financial performance while
maintaining high customer satisfaction
and employee engagement levels.
A disciplined business performance
Overall, our revenues have grown to
£382.4 million, a 2% increase, and our
adjusted pre-tax profit grew 14% to
£77.2 million. This strong profit increase
in a more subdued growth environment
is a demonstration of our business
discipline.
This robust performance has been
achieved while also investing in the
future – our international business
grew 13% to £149.8 million and we
increased our investments in AI and
in our product development, in total
increasing 48% to £13.5 million.
Our biggest investment remains in our
people, in developing the careers of
our existing team members as well as
attracting new recruits. While our staff
complement, of 2,995 people, remained
constant over the year, we reduced
the number of contractors in favour
of long-term investment in permanent
employees, an increase of 172 people
over the year.
Digital Services
Our Digital Services division recorded
a reduction in revenue of 5% to £213.1
million. This was a combination
of a solid performance in public
sector, offset by post-pandemic
related reductions in healthcare and
significantly lower business levels in
commercial sector where our banking,
insurance and payments customers
reduced expenditure.
The demand for digital transformation
in the UK remains high, despite some
short-term, sector-specific challenges.
This demand is driven by the need
to replace ageing, inefficient legacy
systems or by organisations striving for
greater agility, to allow them to react
more quickly to business changes,
whether addressing challenges or
securing new opportunities.
In the last year we have continued
to make excellent progress in
expanding our digital services activity
internationally. Our engagements in
Central Europe and North America
are now delivering revenues of £12.3
million, an increase of 28%. Whilst still
a modest amount of our overall Digital
Services revenues, it is exciting to see
the speed of progress.
Workday Services
As a Phase 1 Prime partner to Workday
in Europe and North America, our
Workday Services team continues to
build a truly international business.
Our Workday Services revenues have
increased by 6% to £112.0 million and
over three-quarters of these revenues
are derived from customers based
outside the UK, including forward-
thinking organisations such as Kone
(Finland), Kion Group (Germany),
Match.com (USA) and Takeaway.com
(Netherlands).
We have launched Spark & Grow which
utilises Generative AI technologies to
simplify, automate and streamline the
implementation process of a Workday
deployment. Through Spark & Grow, we
are able to achieve an 80% reduction
in deployment effort and timelines,
allowing smaller organisations access
to Workday’s HR and Finance systems.
Workday Products
Over the course of the year our
Workday Product revenues grew 28% to
£57.3 million, with the Annual Recurring
Revenue (ARR) similarly increasing to
£60.5 million. This strong performance
underscores our confidence in
achieving our target of £100 million
ARR by 2026.
While the growth this year was,
again, powered by our Smart product
portfolio, we are excited about our
customers’ positive response to the
launch of latest product, Employee
Document Management (EDM).
Available since October 2023, EDM
utilises Workday’s Extend technology
and improves the experience of
generating and storing documents
inside Workday, while supporting an
organisation’s global compliance
requirements.
With this success, it is no surprise that
we are continuing with our investment
in all our Workday Products. Over the
past year we increased our investment
in product development by 48%,
to £13.5 million, and in our sales &
marketing, which increased by 16% to
£12.5 million.
We have recorded our 14th consecutive year of growth across a wide range of key
metrics, with our business performance demonstrating disciplined execution against
a backdrop of macro-economic uncertainty.
CHIEF EXECUTIVE
OFFICER’S STATEMENT
11
Kainos Annual report 2024
Strategic Report
Being a responsible business
Our climate journey, despite being
essential, has not been easy. Our
ambitious goal to be carbon net zero
by 2025 has placed us in the vanguard
of changeable policy, regulation,
measurement and best practice.
It is therefore with a sense of
achievement that our draft carbon
footprint figures indicate that we
achieved our SBTi near-term reduction
targets during the year, significantly
ahead of our 2025 timetable
(
)
. We are
grateful to those in Kainos who led on
this initiative, and for the widespread
support provided by many of our
colleagues.
While we have a wide range of
diversity initiatives across Kainos we
are focused on improving the gender
imbalance that exists across the
industry, where just 22% of roles are
undertaken by women. During the year,
the proportion of women in Kainos
increased from 34% to 35%, and we
recognise that a sustained effort is
required to make further progress.
Changing the diversity of our industry
is about inspiring the next generation
of digital talent from a broad range
of backgrounds. In the last year over
2,200 young people participated in
our outreach programmes, where we
had targeted programmes aimed
at improving gender diversity and
social mobility for young people, for
students with special educational
needs and financial support for young
people from backgrounds that are
traditionally under-represented at
university.
Board changes
In September 2023 at our AGM, we
completed the planned, four-year
succession process, with Brendan
Mooney stepping down as CEO, at
which point I assumed the CEO role.
At our AGM in September 2024,
and after serving as Non-Executive
Directors for nine years, our
Chairperson Tom Burnet and our
Senior Independent Director Andy
Malpass will complete their term on the
Kainos Board of Directors.
I would like to extend the thanks of the
entire Kainos community to Tom, Andy
and Brendan for their commitment and
contribution throughout their time as
Directors.
Our existing Non-Executive Directors
Rosaleen Blair and James Kidd will,
respectively, assume the roles of
Chairperson and Senior Independent
Director at our September AGM.
Maintaining a confident outlook
In an uncertain economic climate,
it is understandable that the growth
opportunities in our markets may
have reduced prominence. However,
this lower profile does not diminish
the scale of the opportunities that
exist – digital transformation is a key
foundation for organisations as they
seek to reduce their costs and increase
their agility.
This has been, and will continue to be,
a long-term trend as organisations
redirect their spending from inefficient
legacy systems to agile, modern
systems. This momentum will be
accelerated by the deployment of
AI-enabled systems where high data
quality is a pre-requisite.
The execution of our strategy has
placed us in leading positions within
our core markets, which allows us to
look confidently to the future.
That confidence is underpinned by
the strength of our relationships with
our customers and the talents of our
colleagues.
Our customers continue to value the
work that we do for them and how we
work together. In the past year, and
despite the economic climate, our
existing customers did more business
with us than in the year before, and at
the same time our customers record
their satisfaction levels as ‘excellent’.
We have always been proud of the
expertise, energy and enthusiasm of
our colleagues and the exceptional
work that they deliver to our
customers. In the past year their ability
to be disciplined in how we operate
our own business has been equally
impressive.
We recognise that while large and
growing, our markets are never static.
In anticipation, we have been investing,
appropriately, in the future – from our
fast-growing Workday Products, to
enhancing our Workday consulting
services through the use of our own
AI co-pilots, to establishing strong
services revenue streams in Workday
Extend, AI, low-code, automation and
data. These initiatives have already
made an impact and will continue to
be important in our future.
While it is sensible to be confident
about our markets, our customers
and our abilities, it is equally sensible
to recognise that the economic
environment for our customers
remains uncertain, with no promise of
immediate improvement. Alongside our
confidence, we need to maintain our
already-proven disciplined approach
to operating our own business.
Thank you
I would like to extend my thanks to our
customers and colleagues.
We are grateful for the trust and
confidence that our customers
continue to place in Kainos, and
thankful for the support and
commitment that our colleagues have
demonstrated throughout the year.
Russell Sloan
Chief Executive Officer
(4) Our carbon emissions have already been verified by an external third party and we are in communication
with SBTi regarding confirmation of these emissions figures.
Kainos Annual report 2024
Strategic Report
12
OUR
MARKETS
Alongside the long-term trends detailed in the following
sections, the post-pandemic shift to remote and hybrid
working patterns has exposed the functional and security
limitations of legacy systems in this distributed environment
and this is driving a continued shift to cloud-based solutions.
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
(5)
.
Digitisation is also likely to reduce the risk of failed
transactions, and therefore the business cost of having to
repeat the same process multiple times.
The government’s thinking on IT outsourcing has changed
significantly – 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
rising from £456 million (2015) to £2.8 billion
(6)
(2024).
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 scale and
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.
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.
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 2024
showing revenue growth of 17% to $7.3 billion
(7)
. This compares
with growth in the overall Enterprise Resource Planning (ERP)
market which is estimated at 6.2% per annum
(8)
.
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 62 partners to deploy its software across
its customer base. Workday now has over 10,000 customers,
including more than 5,000 core HR and finance customers.
TREND
1
TREND
2
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.
(5) Government Digital Strategy: December 2013.
(6) TechMarketView Digital Evolution Mode, updated to include spending to March 2024.
(7) Workday Annual Results: 2024 Results.
(8) Fortune Business Insights.
13
Kainos Annual report 2024
Strategic Report
We have an outstanding relationship with Workday, which
provides the foundation for our business growth. The
important drivers of growth for us in our Workday Services
division include:
• the implementation of Workday for customers who are new
to Workday;
• 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, currently
our Smart Suite (Test, Audit and Shield) and Employee
Document Management; and
• utilising Workday Extend, 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 two-
thirds of current Workday customers are located. We also
continue to increase market share with existing Workday
customers, while growing our portfolio of Workday products.
Emerging technologies
creating new opportunities
Technological advances continue to open new possibilities
in our markets. For example, artificial intelligence (including
Generative AI), 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, quantum
computing and the ethical use of data and AI. Ideas from this
research will likely form the next cohort of candidates for our
innovation process.
TREND
3
Our 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.
Digital Services
£3,096m
Addressable market
(9)
(2023: £2,706 million)
Example competitors:
Deloitte, Capgemini,
BJSS, Atos, Equal Experts,
NTT Data.
Workday Services
£1,100m
Addressable market
(10)
(2023: £1,100 million)
Example competitors:
Alight, Cognizant, CrossVue.
Workday Products
£650m
Smart suite addressable
market
(11)
(2023: £625 million)
£415m
EDM addressable market
(12)
(2023: no research)
Example competitors:
Worksoft, Turnkey, Opkey.
(9) The size of the digital solutions market in Central (£1,794 million), Health (£351 million), Defence (£807 million)
and Police (£144 million) sectors for FY24 according to TechMarketView’s Digital Evolution Model.
(10) This is an estimate of the services market where Kainos is a Phase 1 partner.
(11) Estimated global Workday automated testing market.
(12) Estimated global Workday document management market, this is the first iteration of research.
Kainos Annual report 2024
Strategic Report
14
Our Digital Services engagements are
often large and complex and represent
critical projects for our customers.
Projects in the Driver and Vehicle
Standards Agency, HM Passport Office
and HM Courts & Tribunals Service 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 23 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 and improve
their Workday systems.
s
o
w
e
c
a
n
h
e
l
p
e
v
e
n
m
o
r
e
W
e
r
e
i
n
v
e
s
t
f
o
r
f
u
r
t
h
e
r
g
r
o
w
t
h
,
I
N
V
E
S
T
M
E
N
T
F
O
R
G
R
O
W
T
H
c
u
s
t
o
m
e
r
s
t
o
s
u
c
c
e
e
d
5
4
F
I
N
A
N
C
I
A
L
A
N
D
N
O
N
-
F
I
N
A
N
C
I
A
L
V
A
L
U
E
C
R
E
A
T
I
O
N
W
e
d
e
l
i
v
e
r
h
i
g
h
-
q
u
a
l
i
t
y
a
n
d
r
e
l
i
a
b
l
e
s
o
l
u
t
i
o
n
s
,
w
h
i
c
h
a
i
m
t
o
c
r
e
a
t
e
v
a
l
u
e
f
o
r
a
l
l
o
u
r
s
t
a
k
e
h
o
l
d
e
r
s
3
O
U
R
S
O
U
R
C
E
S
O
F
C
O
M
P
E
T
I
T
I
V
E
A
D
V
A
N
T
A
G
E
O
u
r
k
e
y
s
t
r
e
n
g
t
h
s
h
e
l
p
u
s
t
o
d
e
l
i
v
e
r
f
o
r
c
u
s
t
o
m
e
r
s
a
n
d
c
o
m
p
e
t
e
e
f
f
e
c
t
i
v
e
l
y
,
s
o
w
e
c
a
n
a
c
h
i
e
v
e
o
u
r
p
u
r
p
o
s
e
i
n
t
h
e
p
u
b
l
i
c
,
c
o
m
m
e
r
c
i
a
l
a
n
d
h
e
a
l
t
h
c
a
r
e
W
e
i
d
e
n
t
i
f
y
a
n
d
s
e
c
u
r
e
o
p
p
o
r
t
u
n
i
t
i
e
s
H
O
W
W
E
O
P
E
R
A
T
E
s
e
c
t
o
r
s
,
w
h
i
c
h
a
l
i
g
n
w
i
t
h
o
u
r
p
u
r
p
o
s
e
2
WHO WE ARE
We are a UK-headquartered
IT provider with expertise
across three divisions: Digital
Services, Workday Services,
and Workday Products
1
H
o
n
e
s
t
D
e
t
e
r
m
i
n
e
d
C
o
o
p
e
r
a
t
i
v
e
O
U
R
V
A
L
U
E
S
:
C
r
e
a
t
i
v
e
R
e
s
p
e
c
t
f
u
l
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
OUR
BUSINESS MODEL
What we do
We provide sophisticated IT services to major public sector,
commercial and healthcare customers.
15
Kainos Annual report 2024
Strategic Report
How we operate
Digital Services
We win new public sector and healthcare projects primarily
because of our successful track record and it is facilitated by
our position on major frameworks. During the year we were
present on 27 different frameworks including large multi-year
frameworks such as the £1.2 billion Ministry of Defence Digital
and IT Professional Services (DIPS) and the £4.2 billion HMRC
Digital and Legacy Application Services (DALAS).
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 62
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 also very high.
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 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, our Smart Suite (Test, Audit and Shield)
and Employee Document Management, and 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 our presence on a large number
of important government frameworks. In our Workday
Services division, we are the leading partner in Europe,
consistently receiving emphatic feedback on our high levels
of customer service.
Our customer relationships
We look for customers who want a partner who can add
value to their business, and who are more interested in the
long-term cost of ownership rather than the lowest possible
up-front price.
In the public and healthcare sectors, we tend to work
with the departments and agencies which have a large
portfolio of transformation projects. These projects are, in
turn, supported by significant budgets, since a multi-year
transformation project is typically up to £30 million in value,
while more complex projects can exceed £100 million. Our
Workday 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 our Net Promoter Score
of 58 being defined as ‘excellent’. 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
Kainos Annual report 2024
Strategic Report
16
across the world. At the same time, in Workday Services and
in Workday Products we have built high-growth international
businesses with combined revenues of more than £165
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 our Smart
Suite and Employee Document Management 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 way of interaction 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 9,500 young people,
including 2,200 young people in the past 12 months.
More details are contained within the Environmental, Social
and Governance (ESG) section of this report.
OUR BUSINESS MODEL
CONTINUED
17
Kainos Annual report 2024
Strategic Report
We are a growth-orientated business and while we are
always confident of growing our market share in subdued
markets, we naturally orientate towards higher growth,
dynamic markets. It is in these markets where the talents of
our people shine the brightest and opportunities for growth
are the strongest.
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.
People Progress in FY24 Priorities for FY25
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.
Our staff complement is now ,
colleagues (: ,). This includes
early careers colleagues.
Invested over , 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 %.
We were ranked in the ’ Best Places
to Work in the UK’ by Glassdoor.
As measured through Workday
Peakon, we have maintained high
levels of employee engagement
(%), and high ratings for diversity
and inclusion (D&I) (%) and
wellbeing (%).
Maintain our high levels of employee
retention (achieve over %).
Maintain or improve our scores for
employee engagement, D&I and
wellbeing.
Involved over , 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.
Financial KPI
Non-financial KPI
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.
OUR
STRATEGY
People
Customers
Markets
The three key pillars
of our strategy
1 2 3
Kainos Annual report 2024
Strategic Report
18
Markets Progress in FY24 Priorities for FY25
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
% to . million (: .
million).
Following the easing of pandemic-
related spending, healthcare
revenues decreased by % to
. million (: . million).
Grow our business in both sectors,
supporting existing clients and
projects, and adding new long-
term clients in line with our delivery
capacity.
Reflecting the wider macro-
economic environment, our
commercial sector revenues
reduced by 19% to £30.8 million
(2023: £37.8 million).
Continue to build reputation and
references in the sector to maintain
our accelerated growth as the UK
economy recovers.
International revenues from Central
Europe and North America increased
by % to . million (: .
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 6% to £112.0 million
(2023: £105.7 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 30+
customers where earlier phases of
the project were undertaken by a
different partner.
Continue to excel in customer service.
International revenues increased by
6% to £85.6 million (2023: £81.1
million).
Maintain growth trajectory in all
regions, particularly 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 customers now using one
or more of our products.
Revenues increased by % to
. million (: . million).
Increase the total number of
customers using our software.
Increase the adoption of multiple
products by each customer.
Maintained a high level of NRR,
driven by segment NPS of 68.
Maintain our high levels of customer
satisfaction.
We launched Employee Document
Management (October ).
Overall investment, spanning product
development and sales & marketing,
increased by % to . million
(: . million).
Ensure that customer adoption and
revenues reflect the very strong
increase in investment.
Develop and launch one new product.
OUR STRATEGY
CONTINUED
19
Kainos Annual report 2024
Strategic Report
Customers Progress in FY24 Priorities for FY25
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 level as
measured by Net Promoter Score was
(H : ), which is regarded as
‘excellent’.
Net revenue retention recorded as
102% (2023: 126%).
Maintain high levels of customer
satisfaction, resulting in high levels of
net revenue retention.
New opportunities Progress in FY24 Priorities for FY25
As noted in the previous section,
we invest strongly in our Workday
Products, both in extending our
existing products and developing
new products. In addition to these
activities, we also look to develop
new opportunities for the others
areas of Kainos.
Within Digital Services we have
launched a series of practices –
Cloud (launched ), Data and
Artificial Intelligence () and
Intelligent Automation ()
practices. These are now significant
high growth activities that are fully
embedded within Digital Services.
In Workday Services, we have
developed our Workday Extend
professional services and our
Application Catalogue (these are
described in more detail in the
Operational Review, Workday Extend)
and we have launched our Spark &
Grow service which accelerates the
deployment of Workday for smaller,
scaling companies (more details
in the Operational Review, Innovation
Case Study).
We have a structured innovation
process which helps us identify and
promote new ideas that have the
potential to become sizeable revenue
streams in the future.
In total, ideas were evaluated, with
eight moving to the next stage of
development.
Maintain idea generation and
evaluation activity levels.
Develop current next-stage ideas,
seeking to create at least one viable
business opportunity.
Financial KPI
Non-financial KPI
Kainos Annual report 2024
Strategic Report
20
Our overall performance
Our largest business areas, Workday Services, Workday
Products and public sector within Digital Services, together
80% of revenue, delivered excellent growth, even when
measured against a strong comparative period (combined
segment growth, 2024: 7%; 2023: 36%). Offsetting this growth,
within Digital Services, we experienced revenue reductions
in our commercial sector, as a result of the macro-economic
environment, and in our healthcare sector as there were no
pandemic-related projects in the year.
In total, revenue for the year grew by 2% (6% organic, 3% ccy)
to £382.4 million (2023: £374.8 million) with adjusted pre-tax
profit
(13)
increasing by 14% (17% ccy) to £77.2 million (2023:
£67.6 million).
Our sales are a combination of extensions to existing
contracts, new projects placed by existing customers and
winning new customers. Bookings in the year were 1% lower
at £424.5 million (2023: £427.8 million). Our contracted
backlog increased 11% to £357.1 million (2023: £322.9 million).
In line with our previous guidance, we have increased
investment in our software products, now representing
a total of £26.0 million, an increase of 31%. Research &
development investment increased to £13.5 million (2023:
£9.1 million) and our product-related sales & marketing
investment increased to £12.5 million (2023: £10.8 million).
As at 31 March 2024, we had a strong cash balance (including
treasury deposits) of £126.0 million (2023: £108.3 million),
representing 98% cash conversion (2023: 104%).
Our people
We are clear that our success is driven by the ability, energy
and expertise of the people in Kainos.
In the past 12 months, our headcount has remained stable at
2,995 people (2023: 2,990). We have continued to reduce the
number of contract staff in favour of long-term investment
in permanent employees and as a result contractors
represent 1% of our colleagues (2023: 7%). Correspondingly,
over the past year the number of permanent employees has
increased by 6%.
We are clear that our success is driven by the ability, energy and expertise of the
people in Kainos.
In October 2023, after securing
a contract to develop a modern
digital registration system for births,
marriages and deaths with the Home
Office, we utilised an Open Innovation
process to help uncover innovative
solutions. The activity involved
several hundred of our colleagues in a
structured process to help brainstorm
novel solutions for the challenges
that the Home Office were seeking to
overcome. This was highly successful,
identifying new ways to use cutting-
edge technologies to efficiently
support individual users.
OPERATIONAL
REVIEW
(13) The Financial review section includes reconciliations between adjusted
pre-tax profit and profit before tax numbers.
Services
innovation
and
incubation
21
Kainos Annual report 2024
Strategic Report
By region, UK & Ireland reduced to 2,043 people (-4%),
Central Europe increased to 463 people (+4%) and the
Americas has remained constant at 395 people. In Asia,
the number of people increased to 94 (+76 people) as we
welcomed our new colleagues from the RapidIT-Cloudbera
acquisition, which completed in June 2023.
Our employee engagement levels remain high. We now
utilise Workday Peakon to continuously assess employee
engagement and have achieved an engagement rating of
78%. For the second consecutive year, we were awarded ‘50
Best Places To Work For in the UK’ by Glassdoor, the online
career community.
In the past 12 months, 93% of our colleagues chose to
continue to develop their career at Kainos (2023: 88%). This
improved retention is partially because of our ongoing
engagement efforts, but we also recognise that there is
increased job-changing caution within the sector.
Our customers
We believe that by delivering consistently to our customers
we build long-term relationships. The strength of our
customer relationships is reflected in our consistently
high satisfaction scores. We have now migrated from our
proprietary customer satisfaction index to Net Promoter
Score (NPS), and in the last 12 months we achieved a NPS
score of 58 (a score above 50 is viewed as ‘excellent’).
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 (2023:
90%). We have also gained new customers during the year,
and we now work with 930 customers (2023: 821).
From a sector perspective we have a well-diversified
business, with 52% of our revenues from commercial clients
(2023: 50%), 36% from public sector organisations (2023: 37%),
and 12% from healthcare customers (2023: 13%).
Our international client base has also expanded and as
a result our international revenues have grown by 13% to
£149.8 million (2023: £132.0 million). Regionally, UK & Ireland
accounts for 61% of our business (2023: 65%), North America
for 28% (2023: 25%), Central Europe for 11% (2023: 9%), with the
rest of the world representing <1% (2023: 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.
In the last 12 months performance has varied across
sectors. Public sector clients maintained their investment
levels in digital transformation projects. In contrast, and as
anticipated, healthcare revenues declined, driven by post-
pandemic budget constraints and ongoing internal NHS
reorganisation. Within commercial sector we also recorded
decreased revenue as clients significantly reduced project
expenditure.
Kainos Annual report 2024
Strategic Report
22
As a result, Digital Services revenues declined by 5% to
£213.1 million (2023: £224.4 million). Bookings, at £228.1 million
(2023: £238.2 million), represented a reduction of 4%, while
contracted backlog increased by 11% to £156.6 million (2023:
£140.9 million).
Overall, public sector now represents 65% of divisional
revenues (2023: 61%), healthcare 21% (2023: 22%) and
commercial sector 14% (2023: 17%).
Public sector
Our public sector customers remain committed to their
digital transformation programmes, the importance of
which are underlined in the 2025 Roadmap published by the
Central Data & Digital Office
(14)
which aims to create a more
efficient digital government that provides better outcomes
for everyone. This continued digital adoption by government,
and our success in the market, has resulted in an increase in
our revenues by 1% to £138.2 million (2023: £137.0 million).
We continue to support our long-standing customers,
including the Ministry of Justice, the Department for
Environment, Food & Rural Affairs, the Driver and Vehicle
Standards Agency and HM Passport Office and are assisting
new customers such as the Crown Prosecution Service,
the Water Services Regulation Authority (OFWAT) and the
Open University as they progress their ambitious digital
programmes. We have been awarded places on new digital
services frameworks with the Ministry of Defence, HM
Revenue and Customs and the Financial Conduct Authority.
Commercial sector
In the UK, the commercial sector expenditure on IT is over
three times that of the public sector. While this represents
significant long-term opportunity, to increase our likelihood
of success, we have initially chosen to focus our activity on
financial services customers.
While our customers recognise the need to increase their
levels of investment in digital transformation, the uncertain
economic backdrop has resulted in a cautious approach to
embarking upon major transformation programmes and
limiting the scope of some in-flight projects.
Reflecting reduced activity levels, our commercial sector
revenue was 19% lower at £30.8 million (2023: £37.8 million).
Notwithstanding these short-term headwinds, we continue
to deliver digital services for our established customers,
including Irish Life Assurance plc, the United Nations
International Organization for Migration and Nexi Group, and
we are helping new customers including Royal London Asset
Management and Arqiva.
Healthcare sector
We have described in previous updates that our NHS
customers are experiencing post-pandemic budget
constraints, combined with the disruption of the merger of
the NHS England and NHS Digital organisations; this remains
the case.
Ambitious, scaling organisations
are often interested in deploying
Workday’s innovative HR and Finance
system but lack the internal capacity
and time to undertake the deployment.
This innovation project focused on
using cutting-edge AI and Generative
AI technologies to simplify, automate
and streamline the implementation
process of a Workday deployment.
We were able to achieve an impressive
80% reduction in effort and timelines,
allowing smaller organisations to
deploy Workday and quickly attain
value from their investment in
Workday’s HR and Finance systems.
A key element of this initiative,
which we called Spark & Grow, was
the establishment of a standalone
unit, functioning with the agility of
a start-up, yet backed by the robust
infrastructure of Kainos. This enabled
rapid prototyping and application of
AI technologies without the constraints
of traditional corporate structures.
In a novel approach, the project
employed AI to critique and refine
its own development processes, a
method we refer to as ‘AI for AI’. This
not only ensured that our methods
and strategies were free from human
biases but also significantly enhanced
decision-making efficiency.
Over a six-month period, the project
successfully launched several AI-
driven tools, including AI-Generated
Knowledge Bases, Sentiment
Analysis systems, and six other use
cases in Phase 1, which collectively
led to setting new benchmarks for
operational efficiency within the
market.
OPERATIONAL REVIEW
CONTINUED
(14) The report can be accessed via GOV.UK, or by using this https://www.gov.uk/government/publications/roadmap-for-digital-and-data-2022-to-2025/transforming-for-
a-digital-future-2022-to-2025-roadmap-for-digital-and-data
Spark & Grow
– using AI
to optimise
Workday
deployments
23
Kainos Annual report 2024
Strategic Report
While this may, in simple terms, explain the 11% reduction in
our healthcare revenues to £44.2 million (2023: £49.7 million),
it overlooks the strong performance in our core healthcare
business. In defining our core healthcare business, we remove
all revenues relating to supporting the NHS pandemic
response. Using this definition, core healthcare revenues in
the past 12 months have increased to £44.2 million (2023:
£35.8 million), representing an increase of 23%.
This year, our customers have included the Department
for Health and Social Care (DHSC), where we are leading
the delivery of the new digital Health Check, NHS Business
Services Authority (NHSBSA) and their digital projects
portfolio, and the Department for Health and Care Wales,
where we delivered their Patient App.
International expansion outside of UK and Ireland
With the UK as an early adopter of digital transformation,
the opportunity exists to replicate our home market success
in international jurisdictions. In Europe, our initial focus
is primarily on commercial customers in Germany and
Switzerland, with organisations such as Worldline, Nexi Group
and GEA. In North America, we are making progress across
public sector, commercial sector and the healthcare sector
with organisations that include the Province of Nova Scotia,
WPP and the Government of Ontario.
Our international revenues are reported in the figures in the
sectors listed above, but for clarity, international revenues
for the division have increased by 28% to £12.3 million (2023:
£9.6 million), representing 6% of total Digital Services revenue
(2023: 4%).
Workday Services performance
Revenue over the last 12 months recorded growth of 6% to
£112.0 million (2023: £105.7 million) however, as noted below,
excluding revenues associated with withdrawn services
linked to the Blackline acquisition, revenue growth was 10%.
Sales bookings decreased by 4% to £116.5 million (2023: £121.7
million) while our contracted backlog remained constant at
£73.0 million (2023: £72.8 million).
Having first engaged with Workday Inc. in 2011, we are now
one of their most experienced partners and one of only
62 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 from 2015 and into the North American
market from 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. A similar focus on customer success
in our North American market 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 Inc.
Regionally, our North American customers generated 49%
of total divisional revenue (2023: 53%), with our European
customers responsible for 50% of revenue (2023: 47%).
The number of accredited Workday consultants at Kainos is
798 (2023: 808).
Kainos Annual report 2024
Strategic Report
24
Workday Extend
Alongside the typical consulting activities involved in
deploying Workday’s SaaS platform, there is a growing
opportunity linked to Workday Extend, Workday’s Platform-
as-a-Service offering which became generally available 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 and
global leaders in Workday Extend, we have helped more than
80 organisations including Home Depot, AES Corporation
and Ferguson Enterprises to build Workday Extend
applications specific to their requirements or to deploy
one of our pre-built applications from our 45-application
catalogue.
In September 2023, to coincide with the release of significant
AWS-native AI capabilities accessible through Extend,
Workday announced the creation of their AI Marketplace.
This marketplace, expected to be available mid-2024, will
allow third-party developers to market Workday-approved,
pre-built applications to the 10,000+ Workday customer
community.
In addition to the paid-for consulting services activity,
engaging with clients on Workday Extend projects provides
us with insight into common challenges that clients
experience, and the potential to build products that are
embedded inside Workday.
Blackline Group
In January 2022 we announced the acquisition of Blackline
Group, a 50-person specialist business that focused on
both advisory services linked to Workday Strategic Sourcing
and standalone procurement consulting services.
On review of the standalone procurement consulting activity,
and in discussion with our colleagues and customers,
we decided to stop the provision of these services during
the financial year. This decision directly impacted 23 of our
colleagues based in the US and four customer contracts; the
services that are being withdrawn amounted to £5.5 million
of revenue in the year (2023: £8.6 million, 2025 forecast:
negligible).
As a result of this decision, we have recognised
an amortisation charge of £2.6 million relating to the
customer relationship intangible asset, a restructuring
cost of £0.4 million and all post-combination remuneration.
Workday Products performance
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.
Our Workday Products revenue increased 28% (23% organic,
33% ccy) to £57.3 million (2023: £44.7 million), driven by an
18% increase in bookings to £79.9 million (2023: 67.9 million).
The Annual Recurring Revenue was £60.5 million (2023:
£47.9 million), an increase of 26% and backlog increased
17% to £127.5 million (2023: £109.3 million).
In total, over 450 customers use one or more of our products.
OPERATIONAL REVIEW
CONTINUED
25
Kainos Annual report 2024
Strategic Report
Smart Suite
We have three products within the Smart Suite:
• Smart Test (launched in 2014) 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 and is used by over 400 global enterprise
customers, including Salesforce, Capital One and Whole
Foods.
• Smart Audit (2021) has been deployed to over 100 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.
• Smart Shield (2022) 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. Smart Shield is now used by over 75
customers, including Match.com and LKAB.
Employee Document Management (EDM)
In October 2023, our latest product, Employee Document
Management (EDM), became generally available. EDM
utilises Workday Extend technology and improves the
experience of generating and storing documents inside
Workday, while supporting an organisation’s global
compliance requirements.
This has been our most successful product launch, with 26
customers already contracted, of whom Hilti was the first
customer to go live.
RapidIT-Cloudbera acquisition
In June 2023 we completed the acquisition of RapidIT-
Cloudbera, the creators of Genie, a Workday-focused
automated testing product, headquartered in Atlanta, US,
and employing 101 staff in the US and India.
Since the completion of the acquisition, we have successfully
combined our testing and development teams, and have
added the unique Genie functionality to our Smart Test
platform. All customers who were using Genie have now been
successfully migrated to our combined platform.
Innovation, research and development
Successful businesses continue to challenge themselves.
We are keen to improve our existing offerings, develop new
business ideas and assess business and technology concepts
that are likely to impact us, or our clients, in the future.
Including our product investment, our research and
development expenditure for the year amounted to
£13.5 million (2023: £9.1 million), an increase of 48%, which
was fully expensed in the year.
Adding AI capability to our Smart
Suite has been a key focus for
our innovation efforts within our
development activity.
In March 2024, we reached a
significant milestone when we
released the latest version of Smart
Audit to our 100+ customers. The
AI-enabled functionality assists
in security access and permission
audits within Workday by identifying
potential errors or inconsistencies in
access rules, enabling more frequent
reviews and earlier detection of issues.
In addition, we have integrated AI
tooling in our other products. Notably,
we invested in a new Co-pilot feature
for Smart Test, which assesses
customers’ Workday configuration and
automatically builds test scenarios
targeting the highest risk areas.
These AI tools are designed to
enhance our users’ experience and aid
organisations in addressing complex
business challenges, much faster than
ever before.
AI-enabling
Smart Test
and Smart
Audit
Kainos Annual report 2024
Strategic Report
26
Product innovation and incubation
The past year has seen us incubate, develop and launch two
innovative products in our Workday Product division.
Launched in October 2023, Employee Document
Management (EDM) traces its roots to a conversation in 2020
with our customer Hilti about an unmet need in document
generation and storage. We validated this idea with several
other customers and started our internal process of creating
EDM. Based on a combination of AWS and Workday Extend
technologies, EDM offers a frictionless way for Workday
customers to create, manage, store and access employee
documents, such as contracts, offer letters, policies and
compensation statements, all inside Workday. Since launch,
26 organisations have become customers.
Workday’s core HR and Finance systems are typically
deployed by medium-sized, and larger, organisations.
For ambitious smaller organisations, the elapsed time to
implement Workday, coupled with the internal effort and
external consulting time, often mean that they choose
less comprehensive HR and finance solutions. Focusing on
reducing this ‘time to value’, our Workday Product Division
led the incubation and development of Spark & Grow, a
unique proposition based around automation which allows
smaller organisations to get live on Workday in four weeks.
Spark & Grow extends Workday’s addressable market and
featured in the most recent Workday, Inc. earnings call.
Services innovation and incubation
In our services division, innovation has been pivotal in
fostering growth and enhancing our engagements with both
new and long-standing clients.
In October 2023, after securing a contract to develop a
modern digital registration system for births, marriages and
deaths with the Home Office, we utilised an Open Innovation
process to help uncover innovative solutions. The activity
involved several hundred of our colleagues in a structured
process to help brainstorm novel solutions for the challenges
that the Home Office were seeking to overcome. This was
highly successful, identifying new ways to use cutting-edge
technologies to efficiently support individual users.
Moreover, our commitment to innovation has strengthened
our ongoing relationships with key clients. For example, DVSA
were considering the concept of allowing the driving theory
test to be undertaken from a home or remote setting, thereby
extending the accessibility of the service. They turned to
Kainos to create and deliver the concept of a secure, remote
theory test. Collaborating closely with the client, we engaged
academic experts, cutting-edge technology start-ups, and
end users to design and prove a unique solution that met the
needs of all stakeholders.
Across our services division, innovation remains a key
driver in adopting generative AI solutions within and
beyond Kainos. From instant jargon busting to summarising
hundreds of contracts in minutes, we have been at the
forefront of delivering effective generative AI-based services,
demonstrating our commitment to transformative growth
and client satisfaction.
OPERATIONAL REVIEW
CONTINUED
27
Kainos Annual report 2024
Strategic Report
Technical and market research
To support innovation activities and strategic decision-
making across Kainos, we have invested in a team dedicated
to technical and market research. The team’s activities
include providing foresight and research into emerging
technologies, interpreting developing trends and identifying
market insights.
The team is continuing research into: the advances of
machine learning and AI, such as federated learning and
synthetic data; advances in the development of green
software and sustainable approaches to innovation; uses of
artificial intelligence in automatic speech recognition and
object detection; and a range of other emerging concepts,
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
across our global footprint, from hyperscale partners such
as Microsoft and Amazon Web Services, through to start-ups
who are developing cutting-edge solutions to some of the
world’s most complex problems.
We also continue to work with academic research partners
and leading industry organisations, such as Ulster University
AI Research Centre, and University of Oxford’s Responsible
Technology Institute, as well as working with our strategic
partners on further-from market technology and research.
Founders
Our Founders Programme has been established to foster
and support intrapreneurship within Kainos. It serves as a
platform for providing guidance, advice, network access and
resources to Founders engaged in innovative projects within
the Company.
Founders in Kainos are visionary leaders who challenge the
status quo with innovative alternatives, excel in developing
strategies, and inspire trust through integrity. They possess
strong leadership, negotiation and communication skills,
and are adept at turning ideas into commercially viable
businesses.
Kainos continues to support Ulster
University’s Artificial Intelligence
Research Centre (AIRC). This
partnership between industry and
academia is dedicated to advancing
research, innovation and skills
development in AI in Northern
Ireland. Our shared goal is to inspire
the next generation to harness the
transformative power of AI for societal
improvement.
The pillars of our work include
knowledge sharing and strategic
research and our collaborative
sessions have covered a wide
variety of subjects including data
ethics, large language models and
probabilistic programming. These
sessions provide a platform for Kainos
staff to gain insight into emerging
technical concepts, share the practical
challenges that industry is facing and
identify opportunities to work together.
This past year, within our strategic
research focus, we have funded and
launched PhD research projects
in both ethical AI and explainable
AI where our goal is to provide the
knowledge and tools to ensure AI
solutions are created ethically, with
transparency, accountability and
explainability.
Working with
academia
Kainos Annual report 2024
Strategic Report
28
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
(15)
. During the
year we granted 645,217 shares under all our share schemes,
bringing the total allocated since 2015 to 11,788,253 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,
Russell Sloan.
• Social: CEO, Russell Sloan.
• Governance: Senior Independent Director, Andy Malpass.
Each Director regularly meets with the appropriate internal
teams to ascertain progress, set priorities and contribute to
the plans in each area.
Environmental: protecting and restoring our planet
In 2020, as part of our strategic planning process, we set
ourselves the ambitious goal of achieving carbon net zero
status by 2025, along with clear progress milestones to allow
us to chart our progress towards this target, including setting
near-term targets with SBTi.
We continue to invest in the market-leading platform,
Watershed, to reliably measure and report our emissions, and
engaged with CDP (formerly the Carbon Disclosure Project)
to provide an informed assessment of how we could improve
as a climate-focused organisation.
These steps, in conjunction with the purchase of carbon
offsets, allowed us to be carbon neutral in 2021, a status that
we have retained every year since.
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 a per unit of value added by 2026, using
2020
(16)
as our base year.
During May 2024 we have been provided with our draft
carbon footprint figures for the prior financial year. These
draft figures indicate that we achieved our SBTi near-term
reduction targets during the year, significantly ahead of our
timetable. During the next months we will work with SBTi and
external verifiers to confirm all related figures.
If the figures are verified as correct, we will have a sense of
achievement in realising our carbon reduction targets, and
to do so in advance of our own ambitious timetable.
It has not been a straightforward journey to this point – in
some cases we have had to move offices to avail of green
energy tariffs. The ambition of our plan, particularly the
timetable, also presented challenges. Selecting 2025 as
our carbon net zero target places us in the vanguard of
changeable policy, regulation, measurement and best
practice.
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).
OUR
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE (ESG)
COMMITMENTS
(15) 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 2024 of 966 pence, our FY24 allocation is
valued at £6.2 million.
(16) FY20 Base year emissions data: Scope 1: 87 tonnes COe, Scope 2: 409 tonnes
COe, Scope 3: (full) 9,828 tonnes COe, Scope 3 business travel only is 5,028
tonnes COe). Total Full emissions for FY20 is 10,324 tonnes COe. FY20 total
for Scope 1, 2 and Scope 3 business travel is 5,524 tonnes COe.
29
Kainos Annual report 2024
Strategic Report
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 (2023: zero).
Implementation of the TCFD framework
Our focus during the year was on 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 absolute Scope
1 and 2 GHG emissions by 70% on an absolute basis by FY26
and reduce Scope 3 GHG emissions by 45% per unit value
added within the same timeframe, using FY20 as our base
year.
We completed our climate change disclosure, for the
fourth 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
(17)
, alongside our
previous detailed disclosures. Assessment of our former CDP
submissions and related feedback has taken place and we
have amended our risk assessment processes to identify,
assess and respond to climate risks and opportunities.
Scenario analysis
During the year we deferred commissioning an external
exercise to undertake climate analytics using the latest
IPCC-derived climate and related Shared Socioeconomic
Pathways models. The output from this exercise could
provide additional evaluation of physical and transitional
risk of various climate scenarios, over the short, medium and
long term.
Climate risk for an organisation is typically defined across
four characteristics – physical (people, offices, supply
chain), transition (regulation, client demands), reputational
(market, customer and employee expectations) and liability
(professional liability). Using the IPCC Shared Socioeconomic
Pathways, this assessment is extended to include
consideration for the implications of regional cooperation, or
dysfunction.
Our assessment, detailed further in the Risk Factors and
Uncertainties section of this report, is that reputational risk
is our most significant consideration. Our mitigation for this
risk is to be proactive around our climate responsibilities,
which we have detailed earlier in this section, about our
current carbon neutral status, and our carbon net zero
ambitions.
With this context and considering both the expense and
effort required to support this external assessment we
view that it does not currently represent good value for
the investment required. We will continue to review this
assessment during the current financial year.
Governance Priorities for FY25
a) Describe the Board’s oversight of
climate-related risks and opportunities.
Our Board has determined 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 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.
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.
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.
The main information flow is on an annual basis and takes the form of a detailed
presentation, jointly delivered by the CEO plus the Executive Sponsor. The timing
is typically linked to a notable milestone – a CDP response, SBTi updates or other
significant events.
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.
(17) CDP responses.
Kainos Annual report 2024
Strategic Report
30
Strategy Priorities for FY25
a) Describe the climate-related risks
and opportunities that organisation
has identified over the short, medium
and long term.
We consider the following timeframes
applicable when considering climate
risk and the impact on our business.
• Short term: to 2025, our current
strategic plan
• Medium term: to 2030, the next
strategic plan
• Long term: to 2040.
Potential areas of risk
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. Regulatory changes, reporting requirements, operational practices, shifts
in client demand.
Reputational. We could experience reputational damage if we fail to meet our
climate targets; or the increased cost for carbon removal programmes may result in
additional business cost.
Liability. Arising from incorrect advice on sustainability-related areas, inability to
build complex digital transformation systems.
Potential areas of opportunity
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. We are well established in this market.
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 likelihood, moderate impact.
Physical. While some disruption could occur, we are a consulting organisation with
a distributed workforce, a cloud infrastructure and limited supply chain and should
be able to work remotely for extended periods of time. This assessment assumes
electricity and internet services continue reliably. (moderate risk, long-term).
Transition. As part of our drive to carbon net zero, we actively monitor and consider
the changes to the legislative and regulatory landscape. (low risk, medium-term).
Reputational. We consider ourselves to be proactive on climate topics. This resonates
with our colleagues, customers and various other stakeholders; at the same time,
we recognise that reputational damage can be created very quickly. (moderate risk,
given the unknown future cost and availability of carbon removals, medium-term).
Potential areas of opportunity
Given the reduction that well-designed digital services can have on the carbon
footprint of an organisation’s technology operations, we expect that this will add
to the demand for our services in the future. To aid organisations in making that
assessment, we launched the Carbon Calculator to help calculate the cost and
carbon reduction of moving services or data from on-premise settings to cloud
locations.
Much of our work is centred around enhancing our reputation as a climate-aware
organisation. This can vary from creating tools to help our customers understand
the carbon impact of running their projects (travel, commuting, re-work), through to
supporting several of our colleagues publishing the book: ‘Digital Sustainability: The
Need for Greener Software’.
c) Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-
related scenarios, including a 2°C
lower scenario.
As noted earlier in this section, we have deferred appointing an external organisation
to complete the scenario planning exercise. Our internal assessment is that our most
significant risk is that of reputational damage, and we have described our mitigation
of reducing our carbon impact, allowing us to be assessed initially as a carbon
neutral organisation, and then as a carbon net zero organisation by 2025.
While different levels of temperature variation will have an impact on factors such as
removal costs and government regulation, such impacts will fall outside our short-
term and medium-term scenarios; and long-term predictions of these impacts, in our
situation, through to 2040 will not be reliable.
As noted in the earlier section, we will continue to review this assessment.
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
31
Kainos Annual report 2024
Strategic Report
Risks Priorities for FY25
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 75 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 is the
responsibility of our Chief Information Officer.
Metrics and targets Priorities for FY25
a) Disclose the metrics used by the
organisation to assess climate-related
risks and opportunities in line with
its strategy and risk management
process.
As noted above, we believe that our key risk is reputational risk, with our mitigation
focused on achieving carbon neutral and then carbon net zero status. This focus is
reflected in our metrics, which all focus on our emissions.
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.
In May 2024 we received our draft carbon footprint figures. Based upon these figures
we have achieved our near-term SBTi targets. Our absolute Scope 1 and Scope 2 GHG
emissions are 148 tonnes COe for FY24, which is below our target of 149 tonnes COe
to be achieved by FY26. Our Scope 3 GHG emissions are also below the 45% reduction
target of per unit value added to be achieved in the same timeframe. During the next
months we will work with SBTi and external verifiers to confirm all related figures.
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 calculated by
Watershed and will be externally verified by carbonfit.
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.
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.
As noted above, in May we received our draft carbon footprint figures for FY24.
Subject to external validation, we have achieved our near-term SBTi targets for
Scopes 1, 2 and 3.
From our base year (FY20) we have reduced Scope 1 and 2 emissions by more than 70%.
Kainos Annual report 2024
Strategic Report
32
CDP (previously Carbon Disclosure Project)
During the year we made our fourth 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 ‘C’ rating (2023: ‘B’ rating) indicating
that we are transparent about climate issues and have
knowledge of impacts on, and of, climate issues.
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 86 tonnes of carbon dioxide
equivalent (COe), relating to oil-based central heating
in our premises (2023: 100 tonnes). This reduction, of 14%,
largely relates to the review of our office portfolio, including
relocation.
• Scope 2 describes emissions that result during the
generation of purchased energy. These emissions largely
relate to our offices. We generated 0.3 tonnes COe within
the UK and a further 61.7 tonnes worldwide (total: 62 tonnes
COe; 2023: 104 tonnes COe). This 40% reduction was
achieved by greater availability and use of green energy
contracts.
• Scope 3 emissions relating to business travel. In FY24,
our emissions in this category increased by 34% to 2,570
tonnes COe (2023: 1,911 tonnes).
• Scope 3 (full) emissions generated indirectly from business
activities. In FY24, 11,300 tonnes of COe were generated
(2023: 9,222 tonnes), inclusive of business travel, an increase
of 23%.
Compared to 2023, our total emissions increased by 21% to
11,448 tonnes COe (2023: 9,426 tonnes COe) largely linked to
an increase in business travel and the purchasing of third-
party goods and services including the refurbishment of our
offices.
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
environmental policies have been enhanced to support these
initiatives.
Our Scope 1, 2 and Scope 3 business travel emissions in FY20
were 5,524 tonnes COe; the same emissions for FY24 were
2,718 tonnes COe, a reduction of 51%.
Our total emissions (inclusive of scope 1 ,2 and full scope 3)
for last year represent an 11% increase from our base year of
2020, despite our staff numbers increasing by 88% over the
same time period.
Our FY20 Scope 1, 2 and full Scope 3 emissions were 10,324
tonnes COe. Our carbon intensity ratio (tonnes COe per-
employee) has reduced from 7.3 in FY20 to 3.8 in FY24. During
the year we offset our total emissions to maintain our carbon
neutral status, at a cost of £52,000 (2023: £82,000). We will
continue this practice, utilising a portfolio of high-quality,
certified offsets that blend local and international projects as
well as carbon removal and renewable energy 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.
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
Hybrid working
To us, hybrid working is about
combining remote and office
based working, giving our people
greater flexibility to work in the
location that best suits them,
taking into consideration the
needs of their role, their work,
their team members and the
customer.
33
Kainos Annual report 2024
Strategic Report
Global tonnes of CO
e
GHG emissions data for period 1 April 2023 to 31 March 2024:
UK Non-UK UK Non-UK
Combustion of fuels and operation of facility (Scope 1)
Emissions from purchase of electricity, heat, steam and cooling
purchased for own use (Scope 2)
. .
Business travel (Scope 3) , ,
Total emissions by location , ,
TOTAL EMISSIONS FOR YEAR , ,
Total emissions from activities for which the Company is responsible (Scope and )
kWh (thousand) ,
The following table expresses our annual emissions in relation to quantifiable factors associated with our activities.
Intensity ratios
tCO
2
e/£ million revenue . .
tCO
2
e/average number of employees . .
Collaborating with DEFRA Government Digital
Sustainability Alliance (GDSA)
We continue to support the UK Government Digital
Sustainability Alliance (GDSA) as a member, collaborating
with other DEFRA suppliers to fulfil digital sustainability
commitments. Since 2023 this has focused on advancing
the work of the Planetary Impact group to promote wider
sustainability beyond carbon emissions. This work was
showcased as part of the first GDSA Summit in March 2024
and aims to reduce the wider planetary impact of IT services
procured by the UK Government.
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 a 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 who are committed
to 100% reuse and recycle of equipment and a ‘zero landfill
policy’. We are in the fifth year of our arrangement with
our disposal partners and we continue to generate funds
for charitable causes from disposing of our old equipment.
These funds have been donated to our charity partners as
well as being used for our charity grants which support our
colleagues when fund-raising for their preferred, individual
charities.
We are currently assessing whether it is possible to extend
the ‘useful lifespan’ of our laptops from four years to five
years, further reducing future electronic waste.
Environmental awareness and climate action
Throughout the year we have undertaken activities to
increase our colleagues’ awareness of our impact on the
environment. These activities included the development
of educational webinars, a Continuous Professional
Development module on climate action, Global COP28
communications and supporting local environmental
charities though volunteering and raising of vital funds.
Our environmental policies have been enhanced to support
reduction initiatives such as waste reduction, energy
efficiency, Waste Electronic and Electrical Equipment (WEEE)
reuse and recycling in our offices.
Kainos Annual report 2024
Strategic Report
34
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, engagement levels,
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 used the Sunday Times ‘Best Companies
to Work For’ annual survey as a confidential way for our
colleagues to share this feedback, first appearing in the
Top 100 of companies back in 2012, a status we retained
until we switched to Workday Peakon last year. Peakon is
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 colleagues for feedback monthly. Based
on this feedback from our people, our level of employee
engagement remains high at 78%, as are our ratings for
diversity and inclusion at 83% and wellbeing measuring 77%.
We also continue to measure engagement through
Glassdoor, the online career community with over 55 million
monthly users that enables current and former employees
to provide feedback on companies. In March 2024, Kainos
had an approval rating of 84% which is well above the
average rating of 74% derived from 2.5 million companies on
Glassdoor; similarly, 87% of respondents would recommend
working at Kainos to a friend. In early 2024, we were once
again designated to be in the ’50 Best Places to Work in the
UK’ annual Employee Choice awards from Glassdoor, ranked
number 32.
We work hard to retain the talented people already in
Kainos. We are also very focused on recruiting new talented
colleagues. We continue to attract strong interest in key
recruitment markets, with tens of thousands of candidates
applying each year to join Kainos. During the year our
headcount remained constant at 2,995 people (2023: 2,990).
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 57 people joined because 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 93% of our
colleagues made the choice to stay and develop their career
at Kainos (2023: 88%).
Engagement Diversity & Inclusion
Wellbeing
Peakon scores:
0
20
40
60
80
100
78%
83%
77%
2024 2023
Glassdoor approval rating:
0
20
40
60
80
100
84%
86%
2024
2023
Staff retention:
0
20
40
60
80
100
93%
88%
2024 2023
Headcount: people
0
1,000
2,000
3,000
2,995
2,990
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
35
Kainos Annual report 2024
Strategic Report
We take great enjoyment in marking the significant work
anniversaries of our colleagues. During the year 56 people
celebrated their five-year anniversary, and a further nine
marking their 10, 15, 20, 25 or 30-year anniversary of joining
Kainos.
We believe that it is important to celebrate the achievements
of our colleagues and our recognition scheme allows any
person in Kainos to nominate an inspirational colleague. We
centre this scheme around our values – creativity, honesty,
cooperation, determination and being respectful. During the
year, 3,502 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 nine
years, our staff ideas portal has received 587 suggestions. Of
these, 128 have been implemented and 199 were not taken
forward. Currently, 34 are approved for implementation, 97
ideas are being more fully explored and 129 are awaiting
initial review.
2024
2023
Employee referrals: new people employed
0
50
100
150
200
57
153
2024 2023
Recognition awards: awards received
0
1,000
2,000
3,000
4,000
3,502 3,500+
Referral Scheme
This year 57 people joined because of
a referral from an existing employee.
Kainos Annual report 2024
Strategic Report
36
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 over 78,000 wellbeing
engagements across all our channels, including those on
our wellbeing portal, Microsoft Engage, 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 over 1,600 people
are actively using the platform, expressing high satisfaction
levels about the platform.
We launched our wellbeing app in 2021, which covers
physical and emotional wellbeing, including fitness, nutrition,
meditation techniques and wellbeing insights. To date, 696
people (2023: 553) actively use the app.
In addition to these self-directed activities, we have
trained 50 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.
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 increased to 7.9 days per
person (2023: 5.8 days), which is similar to the UK average of
7.8 days.
2024
2023
Using the mindset platform: people
0
500
1,000
1,500
2,000
1,651
1,492
2024 2023
Using the wellbeing app: people
0
200
400
600
800
696
553
2024 2023
Wellbeing champions: people
0
10
20
30
40
50
50
44
2024
2023
Accessing the employee assistance programme: people
0
50
100
150
200
168
164
2024 2023
Absence levels: days per person
0
2
4
6
8
7.9
5.8
2024 2023
Accessing private medical insurance: claims
0
200
400
600
800
740
417
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
37
Kainos Annual report 2024
Strategic Report
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 over 25 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 meet-ups at a team level. Kainos
pays for all expenses linked to these events.
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 14 global capabilities, covering disciplines such as cyber
security, experience design, engineering and reporting and
analytics. We have 965 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 29 self-study modules,
with over 900 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. Several hundred of our people managers have
completed this training since it launched in 2019, including
176 during the past year. We are working towards having this
training professionally accredited later this year.
Alongside the career planning and support, we invest heavily
in training and certifications for our people, with over 12,000
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.
2024
2023
Accessing permanent health insurance: people
0
2
4
6
6
3
2024 2023
Staff entertainment expenditure: £ million
0.0
0.5
1.0
1.5
2.0
2.5
2.2
2.0
2024
2023
Number of promotions: people
0
100
200
300
400
500
421
466
2024 2023
Annual appraisals completed:
0
25
50
75
100
100% 100%
2024 2023
Training expenditure: £ million
0.0
0.5
1.0
1.5
2.0
1.0
1.8
COMPETITIVECOMPETITIVECOMPETITIVE
Kainos Annual report 2024
Strategic Report
38
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
FY24 we granted 645,217 shares under all our share schemes,
bringing the total allocated to 11,788,253 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.
Diversity and inclusion
We have colleagues from 64 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), Embrace (disability) and Neurodiversity.
These groups work as support networks, educators and
voices for these communities and each group is sponsored
by a member of the Executive Team to ensure representation
at all senior decision-making forums.
Our data
We continue to use our Workday VIBE Index
TM
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 ensure that our planned D&I activities and the day-
to-day work of our network groups are focused on areas
that are important to our people. Therefore, we measure
each diversity characteristic for each colleague – over 82%
of all diversity characteristics for all our colleagues are
confidentially recorded (2023: different measure).
Over 2,880 people (over 95%) have now completed our
Inclusion, Equity, Diversity and Equality eLearning.
Shares allocated in 2024:
645,217
shares (£6.2 million at 31 March 2024 closing price
(18)
)
Shares allocated since 2015:
11,788,253
shares (£113.9 million at 31 March 2024 closing price
(18)
)
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
(18) KNOS closing share price on 31 March 2024 966 pence.
39
Kainos Annual report 2024
Strategic Report
2024
2023
Inspire (women): members
0
200
400
600
800
684
595
2024 2023
Xpression (LGBTQ+): members
0
125
250
375
500
412
408
2024 2023
Voice (ethnic diversity): members
0
100
200
300
400
340
327
Measures: members in Employee Network Groups (ENG):
2024
2023
Neurodiversity ENG: members
0
100
200
300
263
213
2024 2023
Embrace (disability): members
0
25
50
75
100
86
not yet formed
2024 2023
The amount of diversity data disclosed by employees:
0
25
50
75
100
82%
93%
Progress
This year our global D&I plan included campaigns to help
our people to talk, learn and unite around our differences.
Central to this is our Inclusion, Diversity, Equality and
Equity e-learning which is an essential e-learning module
for all Kainos staff. The module introduces diversity and
inclusion concepts like microaggressions, stereotyping
and prejudice as well as how our communication styles
and behaviours impact inclusion. People Managers
receive an additional module to help them understand
their role in creating an inclusive environment.
Driven by our Inspire Employee Network Group (women),
we have established a new male allies group. Involving
32 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.
Following the success of our Inclusive Leadership
programme in 2023, when the Executive Team
participated in the first programme, we have extended
the programme to our broader leadership team, with
two further cohorts completing the programme in 2024
and a further three groups scheduled in the year ahead.
We have worked with globally recognised inclusion and
diversity experts to design the programme content,
helping leaders recognise the key role they must play in
shaping a positive working environment. The programme
also seeks to embed inclusive leadership into the
decision-making of all attendees.
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. We are a proud Disability Confident
Level 2 employer and progress has been made on our
journey to Level 3 following the introduction of our
Reasonable Adjustments policy alongside accessibility
improvements to our talent acquisition processes.
Kainos Annual report 2024
Strategic Report
40
Gender balance
Gender diversity remains a challenge within the wider
industry, where 22% of roles in technology are undertaken
by women
(19)
and nationally, women hold 5% of executive
management roles
(20)
.
In considering Kainos employees, there are 1,002 women
(2023: 946), 1,842 men (2023: 1,792) and 19 colleagues that are
non-binary or transgender or have chosen not to disclose
this information (2023: 55). Viewed as proportions, 35% of our
workforce are women (2023: 34%), 64% are men (2023: 64%),
1% are non-binary, transgender or prefer not to disclose this
information (2023: 2%).
Note: At the time of writing, not all colleagues who joined
Kainos through the RapidIT-Cloudbera acquisition have been
added to our internal Workday systems, hence there is a
small difference in reported numbers. The employee data will
be migrated to our core systems in the current year.
There are 229 women at manager level or above (2023: 229)
and two women hold executive management roles (2023:
two). As proportions, women holding manager level and
above roles represent 32% (2023: 29%) with women holding
12% of executive management roles (2023: 12%).
On the Kainos Board, two of the five (40%) independent Non-
Executive Directors are women (2023: 50%) and after our
AGM in September 2024, when two Directors finish their term
on the Kainos Board, this will be two of three (66%). Including
the Executive Directors, 29% of our Board are women (2023:
33%), or 40% after the AGM. All Board members identify
‘White/European’ as their ethnic group.
We recognise that the under-representation of women in
Kainos and in the wider sector, means that our journey
towards gender parity will take several years. Our gender
parity plan identifies three key themes and associated
actions plans, outlined in the following sections.
a) Develop the talents and careers of women already in
Kainos
Working with industry leadership experts, the second
iteration of our six-month programme, Empowering Leaders,
was delivered. The programme focused on supporting the
continued development of the 16 women participants (14
women were on the first programme). In addition to the
personal development goals for those in the programme,
it established a community 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 are partnering with Women in Business to support women
develop networks and connections as well as specialist
learning to enable career advancement and personal
development.
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
colleagues. This year we had eight finalists and four winners
across several awards and categories, including Apprentice
of the Year, Outstanding Woman in Tech and Digital
Transformation Leader of the Year.
c) Encourage more women to consider and adopt digital
careers
The ‘Outreach’ section in this report provides more detail
of our activities including the gifting of digital bursaries to
undergraduate women studying at university, and women-
only events for young women considering a digital career.
We were delighted to engage 715 young women in our
virtual outreach programmes, where over 2,200 students
participated.
2024
2023
Gender identity:
0
20
40
60
80
100
64%
64%
2024
2023
Women at manager level and above:
0
25
50
75
100
32%
29%
2024 2023
Women at executive level:
0
25
50
75
100
12% 12%
35%
1%
2%
34%
women
men
non-binary, transgender or prefer not to disclose
this information
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
(19) BCS diversity report 2022: Women in IT.
(20) PwC research report: Women in Tech.
41
Kainos Annual report 2024
Strategic Report
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 9,600 young people in the
UK, Ireland, Poland and the Americas through our outreach
activities.
We have redeveloped our outreach programmes to be either
in-person or virtual. In total, in the past year over 2,200 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 work experience programme, 277
students attended our global, one-week CodeCamp event –
which we have now been delivering for a decade; 60 young
people attended our TechCamp in Toronto, Indianapolis and
Buenos Aires; 287 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 113 young people. This year we continued with our in-
person education conference where over 345 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 190 colleagues recorded over 500 days
of mentoring support for young people (2023: 170 mentors
and 507 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 68 young people and women attending university.
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. We have also
launched a new partnership with disability charity Leonard
Cheshire, joining their Change 100 programme, and we offer
paid internships for computing graduates living with
a disability.
In recognition that positive outcomes for young people
are most often shaped by teachers, through the year we
engaged with 230 educators in Northern Ireland and Poland,
helping them acquire skills in Artificial Intelligence and to
bring the latest technologies to their classrooms.
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 114 graduates (2023: 184) and 29
placement students (2023: 22). These roles were based across
our Belfast, Birmingham, Derry, Gdańsk, Indianapolis, 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,
102 young people have joined us through this programme
(2023: 84).
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%
2024 2023
Graduates and students employed: people
0
50
100
150
200
250
194
206
2024 2023
Charity donations: £
0
25,000
50,000
75,000
100,000
50,000
77,000
Virtual placements:
676
provided
EAYL apprenticeships:
102
places since programme launch in 2014
Digital inclusion bursaries:
68
young people since FY22 launch
Kainos Annual report 2024
Strategic Report
42
supporting local charities. During the year, we completed our
three-year partnership with Doctors without Borders and
commenced a new partnership with Cancer Research.
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 were £50,000 (2023: £77,000).
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 such as volunteering at animal
shelters, conservation and tree planting with the National
Trust, gift drives for children and numerous city, beach and
park litter pickups.
Governance: our stakeholders
Over the past 37 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 as, 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.
Workday Peakon
Peakon is 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.
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
43
Kainos Annual report 2024
Strategic Report
a) Our employees
The skills, motivation and engagement of the people working in Kainos are key to our success. As the previous sections
indicate, we place immense value on ensuring that our colleagues are engaged, rewarded and that we are focused on their
wellbeing.
We engage to understand how they view Kainos as an employer and where we can improve. 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 every month to measure sentiment
and capture confidential feedback 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 Engage) 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 78% in Peakon.
• The outputs from the Peakon survey are shared with the Board monthly 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 10,642 posts to Microsoft Viva Engage,
indicating a highly engaged workforce.
Kainos Annual report 2024
Strategic Report
44
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 930 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 an online survey to garner customer feedback which is captured as a Net Promoter Score
rating. 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 678 completed NPS surveys, with an NPS score of 58 (above 50 is rated as ‘excellent’).
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 the board received seven dedicated presentations from a wide variety
of staff focused on our customers.
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
Customer feedback
We received 678 completed NPS
surveys, with an NPS score of 58
(above 50 is rated as ‘excellent’).
45
Kainos Annual report 2024
Strategic Report
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, with the latter resulting in the publication of 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.
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 23 countries.
• We maintained high levels of graduate and school-leaver recruitment.
• We maintained high levels of charitable donations.
• We have maintained our carbon neutral status, first achieved in 2021, remain on schedule to
achieve net zero by 2025.
• Community initiatives are managed within the relevant Board committees and discussed with the
full Board.
Kainos Annual report 2024
46
Strategic Report
Our Belfast office is in the heart of
the Queen’s Quarter, which derives
its name from Queen’s University
Belfast. We have always been in the
Queen’s Quarter, from our very first
office in January 1987, through three
office moves to our current location,
Upper Crescent which we have called
home for almost 30 years.
As part of our growth planning in 2017,
we identified the need for modern
offices that better suited our changing
business – larger team sizes, improved
facilities, more layout flexibility, long-
term expansion space and the ability
for the entire Belfast team to be in a
single office.
Our engagement
in action
47
Kainos Annual report 2024
Strategic Report
Our preference was to rent, which required us to
work with a series of developers. After several failed
attempts, in late 2018 we had the opportunity to
purchase a site that we could develop ourselves. The
Board considered the various options and approved the
purchase, which was completed in February 2019.
We were well-advanced in our development plans for
the new office when the global pandemic started in
early 2020, which put our immediate plans on hold,
and in the longer term substantially changed our
requirements for our new office.
Our new plans will see us build a ‘Net Zero Ready’
building, targeting ‘outstanding’ under the Building
Research Establishment Environmental Assessment
Methodology (BREEAM). We changed the usage of
the site, so that in addition to our 12-storey, 121,000
sq. foot office building, Queen’s will also be able to
construct a 459-bed purpose-built managed student
accommodation facility. We are delighted with this
approach, increasing the utility of the site, and
accelerating the pace of regeneration in this area
of the city.
Construction will commence in late 2024, with
occupation anticipated in early 2027.
Our employees
Without doubt, the group that was most interested
in the development of the new office were our
Belfast-based employees. Throughout our search
for a new location, we were very communicative
with our colleagues – providing updates at regular
and important intervals and seeking their feedback,
including their views about location, environmental and
facilities options.
Their feedback was most useful when, faced with
delays, we needed to consider short-term options
such as temporary overflow office space and office
fit-out options. This feedback process will continue
in the new project as we design an office environment
that is supportive of the professional needs of our
colleagues.
Our community
A major building project requires the support of the
local community, both during the construction phase
and for the lifetime of the building. In the case of our
development, the community includes retail owners and
users, publicans, hotel owners, office workers, residents
in local apartments and residents in the settled inner
city local community.
In advance of the planning application process, we
engaged with the political and community leaders
representing these groups, to explain our plans and
to listen to their ambitions and concerns about the
development.
The formal planning process commenced in April 2023
with the submission of our plans; a public consultation
took place in September 2023, with our final plans
approved in April 2024.
While the site was vacant, we supported a social
entrepreneur to launch a street food venue,
Trademarket, to allow independent food vendors the
opportunity to have a temporary location. As part of
this arrangement, we donated the rent we received to
the food charity, the Trussell Trust.
A building project has a positive economic impact and
will create 810 jobs directly and indirectly during the
£35 million construction project.
Beyond the local community benefits, our decision
to construct a ‘Net Zero Ready’ building will have
a positive impact on air quality in the city, and in
minimising emissions through the building’s lifetime.
Our shareholders
At the Board meeting making the decision about the
building project, it was remarked that “we are famous
for building software, not office blocks”. In addition to
the RNS announcing the £7.1 million site purchase, we
also directly contacted our largest shareholders to deal
with any specific questions or concerns they had about
the transaction.
The reaction, and through subsequent iterations of our
plan, has been positive. Our shareholders share our
belief that to build a great company, we need great
people, and a positive working environment, including
the physical office space are an important part of the
attraction and retention of talented people.
Our customers
As with our shareholders, our customers appreciate
the importance of a physical working environment
that supports our colleagues being as productive and
collaborative as possible.
Many of our customers are aware of and supportive
of our climate ambitions, and our decision to target
the highest BREEAM environmental rating for the new
building will be viewed very positively by our customers.
Kainos Annual report 2024
Strategic Report
48
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. 60 million users annually interact with
the systems or services 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.
• 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 October 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 (2023:
zero); and there were zero breaches of our modern slavery
statement (2023: zero). There were zero incidents referred
through our whistleblowing process (2023: zero).
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMMITMENTS
CONTINUED
49
Kainos Annual report 2024
Strategic Report
Quality standards, data privacy and security
Our commitment to delivering a high-quality service
to our customers has been established over 37 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 (2023: zero).
We recognise the sensitivity of the information which
we process daily and have prioritised secure data
handling processes, product design, hosting and
operational management.
Our people complete security awareness and data
handling training annually.
We have selected SOC2 Certification for our Smart
products. This covers security, availability, processing
integrity, confidentiality and privacy. These practices
are subject to external assessment annually, by global
consulting firm EY.
Information security
Information security risks are
assessed and reviewed regularly in
IT steering meetings with our senior
management team.
Kainos Annual report 2024
Strategic Report
50
In summary, we grew revenue by 2% (3% ccy) to £382.4
million (2023: £374.8 million). Digital Services revenue
reduced by 5% to £213.1 million (2023: £224.4 million),
reflecting decreased customer expenditure across the
commercial sector and lack of pandemic-related revenues
in the healthcare sector. Workday Services revenue grew 6%
(9% ccy) to £112.0 million (2023: £105.7 million) driven mainly
by growth in Central Europe. Workday Products revenue
increased to £57.3 million (2023: £44.7 million), representing
growth of 28% (33% ccy) (2023: 40%). The Operating Review
provides more information on our revenue performance.
Our overall gross margin was 49.0% (2023: 47.3%). Digital
Services’ gross margin increased to 38.4% (2023: 38.1%)
driven by lower contractor headcount. Workday Services
margin increased to 54.7% (2023: 54.2%) driven by higher
utilisation. Workday Products margin increased to 77.1%
(2023: 76.6%).
Operating expenses
Operating expenses increased by 3% to £128.4 million (2023:
£124.6 million) and is largely consistent with revenue growth.
Our investment in product development increased to
£13.5 million (2023: £9.1 million), all of which was expensed
during the period. We recognised £5.2 million of Research &
Development Expenditure Credit (RDEC) income during the
year (2023: £4.2 million).
Alternative performance measures
We use several alternative performance measures to monitor
day-to-day performance and to assist management make
financial, strategic and operating decisions.
Specifically, we exclude costs directly attributable to
acquisitions. This includes amortisation of acquired
intangible assets, compensation for post-combination
services and acquisition-related expenses such as legal
and professional costs incurred mainly in the period
of acquisition. These costs can vary between periods
depending on the timing and size of acquisitions, the
nature of intangible assets acquired and the structure of
consideration.
We adjust for the cost of our share-based payment
arrangements in our adjusted measures also. Our
arrangements consist of both equity-settled and cash-
settled schemes and the cost of each award will be
influenced by the share price at the date of grant. The cost
of our cash-settled arrangements will also be impacted by
share price movements between reporting dates. Due to
these variables, we believe adjusting for such costs better
represents our underlying trading performance, providing a
more meaningful comparison between periods.
Adjusted profit measures
(s)
(s)
PROFIT BEFORE TAX , ,
Share-based payment expense and related costs , ,
Amortisation of acquired intangible assets , ,
Increase in fair value of investment property and gain on sale of property (,) –
Compensation for post-combination services , ,
Acquisition-related expenses
ADJUSTED PROFIT BEFORE TAX , ,
PROFIT AFTER TAX , ,
After tax impact of:
Share-based payment expense and related costs , ,
Amortisation of acquired intangible assets , ,
Increase in fair value of investment property and gain on sale of property (,) –
Compensation for post-combination services , ,
Acquisition-related expenses
ADJUSTED PROFIT AFTER TAX , ,
FINANCIAL
REVIEW
FY24 was another year of solid
financial performance.
51
Kainos Annual report 2024
Strategic Report
Adjusted EBITDA
(s)
(s)
ADJUSTED PROFIT BEFORE TAX , ,
Depreciation of property, plant and equipment , ,
Depreciation of right-of-use assets , ,
Finance expense
Finance income (,) (,)
ADJUSTED EBITDA , ,
Adjusted pre-tax profit increased by 14% to £77.2 million
(2023: £67.6 million). Profit before tax increased by 19% to
£64.8 million (2023: £54.3 million).
Corporation tax charge
The effective tax rate for the year was 25% (2023: 23%).
The effective tax rate for the period is in line with the UK
corporation tax rate which increased to 25% effective 1 April
2023. The rates at which our overseas profits are taxed vary
from jurisdiction to jurisdiction but on average have been
subject to a blended rate that is largely in line with 25%.
Financial position
We continue to have a strong financial position, with £126.0
million of cash and treasury deposits (2023: £108.3 million), no
debt and net assets of £156.8 million (2023: £129.3 million).
The underlying trade receivables and accrued income
balance has reduced to £68.6 million (2023: £74.5 million),
despite the growth in revenue, due to strong cash conversion
in the period.
Our deferred income balance at year end is £45.0 million
(2023: £37.1 million). This increase of 21% is attributed mainly
to the growth in our SaaS revenue in the year to £54.8 million
(2023: £43.1 million).
Within non-current assets our property, plant and equipment
balance increased to £12.3 million at the year end (2023:
£9.5 million) due mainly to property refurbishment costs
incurred during the year. During the period we entered into
four new property leases increasing our right-of-use asset
balance to £5.2 million at 31 March 2024 (2023: £1.3 million).
A corresponding increase to our lease liabilities was also
recognised contributing to the increase in our closing lease
liability of £5.9 million (2023: £1.4 million).
In the prior 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. The sale
was subject to planning permission which was obtained
subsequent to year end. An increase in fair value of £1.0
million was recognised during the year.
During the period we completed the sale of property located
in Belfast, recognising a gain on disposal of £1.1 million. At
31 March 2023, the carrying value of this property was £0.3
million and was recognised as assets held for sale within
current assets.
As noted within our Workday Products review, we completed
the acquisition of RapidIT-Cloudbera Inc. on 30 June 2023.
The fair value of assets acquired and liabilities assumed at
acquisition date are detailed further in note 29.
Cash flow and cash conversion
Cash conversion, which is cash generated by operating
activities as a percentage of adjusted EBITDA, remained
strong at 98% (2023: 104%).
Dividend
Our progressive dividend policy provides shareholder returns,
while ensuring we have sufficient funds to invest in long-
term growth. The proposed final dividend recommended by
Directors is 19.1p and, if approved by shareholders, will be
paid on 25 October 2024 to shareholders on the register on
4 October 2024, with an ex-dividend date of 3 October 2024.
This will make the total dividend for the year 27.3p (2023:
23.9p) which will represent a distribution of 58% of adjusted
profit after taxation (2023: 56%).
Richard McCann
Chief Financial Officer
17 May 2024
Furthermore, we also adjust for items which we consider
significant and non-recurring in nature. In the current period
we excluded gains relating to the sale of property, plant
and equipment and fair value movements in our investment
property.
We adjust for the above items consistently across all our
adjusted measures, namely ‘adjusted profit before tax’,
‘adjusted EBITDA’, ‘cash conversion’ and ‘adjusted diluted
and basic earnings per share’. We believe our adjusted
measures are better indicators of trading performance,
assist comparison between periods and are useful measures
for users of the financial statements. The nature and type of
items adjusted are also similar to comparable companies.
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.
As such, these measures should not be considered in
isolation but as supplementary information to the financial
statements.
The adjusted profit measures reconcile to the reported
numbers as follows:
Kainos Annual report 2024
Strategic Report
52
2024 2023
Bookings: £ million
0
50
100
150
200
250
300
350
400
450
424.5
427.8
2024 2023
Customer Net Promoter Score
(21)
:
0
20
40
60
58
N/A
2024 2023
Staff retention: %
0
25
50
75
100
93
88
Financial KPIs
Non-financial KPIs
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)
(21) Prior to 2024 we measured customer satisfaction through our own proprietary survey, which categorised our performance as ‘excellent’, ‘very good’, ‘good’,
‘satisfactory’ or ‘poor’; in 2023, 99% of our customers classified our performance as ‘good’ or ‘better’. For 2024 we moved to the industry standard metric
Net Promoter Score, where a score of above 50 is viewed as ‘excellent’.
53
Kainos Annual report 2024
Strategic Report
2024 2023
Revenue: £ million
0
50
100
150
200
250
300
350
400
450
382.4
374.8
2024 2023
Adjusted pre-tax profit: £ million
0
25
50
75
100
77.2
67.6
2024 2023
Number of customers:
0
250
500
750
1,000
930
821
2024 2023
Number of staff:
0
1,000
2,000
3,000
2,995 2,990
Kainos Annual report 2024
Strategic Report
54
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 a responsibility to ensure that risk is managed
across our Company and understands 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. There are three specific areas of note:
(i) we continue to strengthen and embed cyber and data
privacy controls into our business, (ii) we continue to focus
on addressing climate-related risk, and (iii) we recognise the
potential impacts of Artificial Intelligence on our business.
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 May 2024 we received our draft carbon footprint figures.
Based upon these figures we have achieved our near-term
SBTi targets committing to reduce absolute Scope 1 and 2
GHG emissions 70% by FY26 from a FY20 base year. We have
reduced our Scope 1 and 2 emissions from 496 tonnes COe
in FY20 to 148 tonnes of COe in the current year (target
agreed with SBTi was 149 tonnes of COe by FY26). Our Scope
3 GHG emissions are also below the 45% reduction target set
to be achieved by FY26. During the next months we will work
with SBTi and external verifiers to confirm all related figures.
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’.
Generative AI risk: While Artificial Intelligence presents
opportunities for our Company, and our customers, it also
introduces potential data privacy, security, ethical and
compliance risk. Throughout this year, we have prioritised
the appropriate and safe use of Generative AI through the
appointment of a Chief AI Officer and the establishment of
our AI Governance structures.
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 2024
Strategic Report
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
9. Unsafe use of Generative AI
1
2
3
4
5
6 7
8
IMPACT
LIKELIHOOD
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.
Increased risk No change of risk Decreased riskPeople Customers Market
Key
9
Kainos Annual report 2024
Strategic Report
56
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)
as well as Cyber Essentials and Cyber Essentials Plus.
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.
This year, we have continued 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 company wide mandatory annual training. 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 areas where Kainos acts as data controller.
• Data mapping (Record of Processing) for all areas where Kainos acts
as data controller.
• 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. An example would be
subscription to the revised US Data Privacy Framework and
Transfer Risk Assessments for relevant countries.
- We put in place effective initial controls at the project level.
A Data Protection Steering body is in place, meeting monthly to ensure
that the data privacy mandate is prioritised, planned and governed
accordingly.
Increased risk No change of risk Decreased riskPeople Customers Market
Key
RISK FACTORS AND UNCERTAINTIES
CONTINUED
57
Kainos Annual report 2024
Strategic Report
Risk
Description Potential impact and mitigation
4. Increasing
customer demands
in a competitive
skills market
Risk to:
Change:
Demand for skills
in areas such as
business development,
low code, 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, evidenced by higher staff retention rates.
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.
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.
• Disruption caused
by the UK General
Election.
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 (56%), Workday Services
(29%) and Workday Products (15%);
• derived from separate sectors: commercial (52%), public sector (36%)
and healthcare (12%);
• spread over different regions: UK & Ireland (61%), North America (28%),
Central Europe (11%) and the rest of the world (<1%); and
• from different business models: services (82%), subscriptions (14%),
third party and other (4%).
In addition to this resilience in our revenue streams, we also have a
considerable contracted backlog (typically over 85% of prior year
revenues) that provides short-term protection.
Kainos Annual report 2024
Strategic Report
58
Risk
Description Potential impact and mitigation
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.
9. Unsafe use of
Generative AI
Risk to:
Change: new
The application of
Artificial Intelligence
technology without
appropriate
safeguards or ethical
considerations
could lead to the
mishandling of
sensitive data,
privacy violations
and reputational
damage through bias,
discrimination or use
of technology which
doesn’t consider
ethical concerns.
Potential impact
Unsafe use of AI technology could lead to financial penalties. This could
be due to non-adherence to data privacy regulations such as GDPR,
or instances of copyright infringement. Reputational damage could
result as a consequence of publishing unverified and/or biased content
generated by AI models or through failure to deliver AI projects with
established governance standards.
Reluctance to embrace AI technology may adversely affect Kainos’
competitive advantage due to missed opportunities and an inability to
benefit from the efficiencies that AI technology can offer.
Mitigation
Kainos has appointed a Chief Artificial Intelligence Officer who drives the
strategy and strategic execution of the use of AI by our business. This
includes overseeing the safe and appropriate use of Artificial Intelligence
tools by our Company, both internally and in delivery to our customers.
In addition, Kainos has established AI governance and technology
governance structures, including senior management, to provide
guidance and recommendations as well as to continue to evaluate and
monitor the risk of AI technology use.
Increased risk No change of risk Decreased riskPeople Customers Market
Key
RISK FACTORS AND UNCERTAINTIES
CONTINUED
59
Kainos Annual report 2024
Strategic Report
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 2027. 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 and sustainability information statement
We comply with the non-financial reporting requirements
contained in sections s.414CA 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:
Russell Sloan
Chief Executive Officer
17 May 2024
VIABILITY
AND NON-FINANCIAL
AND SUSTAINABILITY
INFORMATION
Kainos Annual report 2024
Corporate Governance
60
DIRECTORS’
BIOGRAPHIES
Tom Burnet
(aged 56),
Chair
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
Trading Apps. He is also
a Non-Executive Director
of the BMO Private Equity
Trust and at Pipedrive.
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.
Russell Sloan
(aged 48),
Chief Executive Officer
(CEO)
Russell joined Kainos on
21 June 1999, as a trainee
software engineer, before
embarking on a series of
leadership roles. Russell
led the Kainos Services
division from 2013,
growing the division from
35 people to the global
team of over 1,500 people
it is today, delivering
digital transformation for
government, healthcare,
and commercial sector
organisations.
Russell was appointed CEO
of Kainos on 21 September
2023.
Russell studied Electrical
Engineering at Queen’s
University Belfast and
is a Chartered Engineer.
He is an alumnus of
Stanford Graduate School
of Business and Darden
Graduate School of
Business, University
of Virginia.
Richard McCann
(aged 59)
Chief Financial Officer
(CFO)
Richard is a Fellow of the
Institute of Chartered
Accountants in Ireland
and trained with Coopers
& Lybrand, before moving
into industry with Galen
Holdings plc. 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.
Andy Malpass
(aged 62)
Independent Non-Executive
Director
Andy graduated with a BA
(Hons) in Accounting and
Finance from Lancaster
University and is a Fellow of
the Chartered Institute of
Management Accountants.
He has almost 40 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.
Nominations Committee
Remuneration Committee
Audit Committee
Chair of the Committee
Key
61
Kainos Annual report 2024
Corporate Governance
Katie Davis
(aged 59)
Independent Non-Executive
Director
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.
James Kidd
(aged 53)
Independent Non-Executive
Director
James is a Chartered
Accountant and joined
AVEVA in 2004. Prior to
his appointment to the
Board, James held several
senior finance roles within
the AVEVA Group and was
appointed CFO in 2011.
James was Chief Executive
Officer from January 2017 to
February 2018, leading the
merger with the Schneider
Electric industrial software
business before being
appointed Deputy CEO and
Chief Financial Officer of
the enlarged AVEVA Group.
During his time on the
board, AVEVA grew to over
6,500 people globally, with
revenues of £1.2 billion.
James stepped down
from AVEVA in March 2023
following the acquisition of
the company by Schneider
Electric at an enterprise
valuation of £10.6 billion.
Prior to joining AVEVA,
James worked for Arthur
Andersen and Deloitte,
serving technology clients
in both transactional and
audit engagements.
James was appointed to the
Board on 1 October 2023.
He is a member of the Audit
& Risk Committee and the
Remuneration Committee.
Rosaleen Blair
(aged 58)
Independent Non-Executive
Director
Rosaleen is the founder
and Chair of AMS, an
outsourcing and consulting
business, specialising
in the global workforce
solutions industry. She
created the company in
1996 with the ambition of
transforming the way blue-
chip multinationals attract,
engage, and retain top
talent. Rosaleen 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 in the 2017 New Year’s
Honours list for services to
business and recruitment.
Rosaleen was appointed to
the Board on 1 January 2021.
She acts as Deputy Chair,
and is a member of the
Nominations Committee,
Remuneration Committee
and Audit Committee.
Kainos Annual report 2024
Corporate Governance
62
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 UK Corporate Governance Code (‘the Code’), which
is available at www.frc.org.uk.
Throughout the financial year ended March the
Company fully complied with all of the provisions of the Code.
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. Board governance contributes
to the delivery of the strategy in several ways: by actively
participating in the development, review, and approval of the
Company’s strategy and ensuring alignment with long-term
value creation; by exerting a challenge function, probing key
assumptions; by ensuring that execution of the strategy
aligns with the Company’s values; by leveraging its
experience and knowledge to provide expertise and insights
into the proposed strategy, its delivery and its iteration.
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 Statement, which is in the ‘Governance: our
stakeholders’ section in the Strategic Report.
Board and workforce engagement
Continued dialogue between the Board and our workforce is
an important part of the Kainos people approach. In addition
to the Executive Directors’ regular interactions across the
wider business, colleagues are invited to get Board feedback
on key people initiatives. Examples in included our
People Promise programme (including our employee brand
and projects to improve our employee and candidate
experience) and our L&D and Tech Outreach roadmaps.
Workforce engagement mechanisms are reviewed annually
by the Nominations Committee, to ensure that they are
operating effectively and remain effective. Our Workforce
engagement mechanisms are iterated, where the Board feels
that improvements can be made, for example, the move to
Peakon to benefit from the two-way engagement and insights
offered by it.
Our Culture and Development Group (CDG)
This strategic committee 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
oversees our people and continuous improvement agenda,
aligned to our corporate strategy. The work of CDG has been
further enhanced this year with the introduction of our
continuous listening tool, Peakon. The insights provided by
our Peakon global monthly surveys allow CDG to focus on the
projects that matter most for our people.
The CDG meets monthly, our Peakon focus areas being
mental and physical wellbeing, personal and professional
growth and total reward. Improvements driven through CDG
included updates to people policy; targeted wellbeing,
diversity and inclusion and climate action campaigns; the
review and improvement of our talent management,
promotions and hiring processes; and the refresh of our
people intranet to better enable colleagues to self-serve the
information they need. These projects are part of a wider
improvement programme that we call our People Promise,
based on what our people tell us through Peakon.
In we expanded the remit of the CDG, to make it a
formal workforce advisory panel, in accordance with Provision
of the Code. A CDG group member regularly presents to the
Nominations Committee and is invited periodically to attend
and participate in the Remuneration Committee. This process
continues to be positively received by all involved. The
Remuneration and Nominations Committees report the
findings of their respective meetings to the full Board.
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 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.
CORPORATE GOVERNANCE REPORT
63
Kainos Annual report 2024
Corporate Governance
Workday Peakon – listening to and engaging
with our people
As well as interactions with the Executive Team, senior
leaders and colleagues, the Board continues to receive
monthly updates on our people approach and key metrics,
including engagement, retention and recruitment.
Since moving away from our ‘Best Companies’ annual
survey in February to a new Peakon monthly listening
tool, we have built a dataset that provides comprehensive
insights into the sentiment of our people across key areas
of engagement, wellbeing and diversity. Executive and other
senior colleagues can review and respond to the anonymous
employee feedback in real time, and our Board receives
a full update on our engagement trends, strengths, issues
and priorities on a six-monthly basis. In addition, we can
compare our company level engagement scores with c.
other IT and software companies and compare the scores
for teams within Kainos.
Our global Diversity and Inclusion Group (D&I Group)
The D&I Group comprises diverse colleagues from across
Kainos. It informs the D&I plan, ensuring policies, processes
and behaviours are inclusive and that our people are
educated. The D&I group works to create a workplace that
reflects and contributes to the diverse global communities in
which Kainos operates. With the support of five employee
network groups, representing people with disabilities, women,
ethnic diversity, LGBTQ and neurodivergent colleagues, the
group champions and supports the delivery 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 , 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 the Board are available to meet
with shareholders at the Group’s Annual General Meeting.
As CEO, Russell Sloan 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
The following Board changes occurred during the year:
• On 21 September 2023, Brendan Mooney stepped down
as CEO and as a Board Director.
• On 21 September 2023, Russell Sloan was appointed as
CEO and as a Board Director
• On 1 October 2023, James Kidd was appointed as
Non-Executive Director and as a member of the Audit
and Risk Committee and the Remuneration Committee.
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 General Counsel.
Kainos Annual report 2024
Corporate Governance
64
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–––
Russell Sloan CEO
()
Member–––
Richard McCann CFO Member–––
Andy Malpass Senior Independent Director and
Independent NED
Member Chair – –
Katie Davis Independent NED Member Member Chair Member
Rosaleen Blair Independent NED Member Member Member Member
James Kidd Independent NED
()
Member Member Member –
Board and Committee meeting attendance
To ensure that Directors are fully briefed, a Board pack containing comprehensive Board and Committee papers is 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 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 / – / /
Brendan Mooney
()
/–––
Russell Sloan
()
/–––
Richard McCann /–––
Andy Malpass / / – –
Katie Davis / / / /
Rosaleen Blair
()
/ / / /
James Kidd
()
/ / / –
() Brendan Mooney with effect up until September .
() Russell Sloan with effect from September .
() James Kidd with effect from October .
() Brendan Mooney has attended all Board and/or Committee meetings which have fallen within his period of tenure during the year.
() Russell Sloan has attended all Board and/or Committee meetings which have fallen within his period of tenure during the year.
() Rosaleen Blair was absent from two Board meetings and one Audit and Risk meeting as she was recovering following a period of ill health. Rosaleen received and
read all associated Board and Committee board packs and the minutes of these meetings. She also held follow up debriefing calls with the Company Chair and the
Audit & Risk Chair.
() James Kidd has attended all Board and/or Committee meetings which have fallen within his period of tenure during the year.
65
Kainos Annual report 2024
Corporate Governance
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 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 Tom Burnet, Andy Malpass,
Katie Davis, Rosaleen Blair and James Kidd are independent
in character and judgement. The Board 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 AGM, all current Directors will retire. All Directors
will stand for re-election, except for Andy Malpass and
Tom Burnet who will step down immediately following the
AGM. Andy and Tom have served on the Board since the
Company’s admission to the main market on July
and on July will have served on the Kainos Board
for the recommended maximum nine-year tenure.
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 March .
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,
four further Independent Non-Executive Directors and two
Executive Directors. Further information can be found in our
Directors’ biographies.
Two (%) of our five Non-Executive Directors are women
(: %). Including the Executive Directors, % of our
Board are women (: %). All Board members identify
‘White/European’ as their ethnic group.
Although we have not met the 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 continuing to recruit, as part of
succession planning for those Non-Executive Directors who
will step down in , having by then served on the Kainos
Board for the recommended maximum nine-year tenure.
This recruitment activity provides an opportunity for us to
achieve compliance with the Listing Rule targets on gender,
ethnicity, and female director in a senior Board position.
Shortlisting has been completed and members of the
Nominations Committee are currently conducting first stage
interviews. To achieve a fair and balanced selection process,
shortlisting and interview panels consist of equal numbers of
men and women with diverse skillsets and levels of experience.
We expect to achieve full compliance with the Listing Rule
requirements during , as set out in the ‘Board
composition’ section of the Nominations Committee Report.
Kainos Annual report 2024
Corporate Governance
66
CORPORATE GOVERNANCE REPORT
CONTINUED
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 % %
Women % – %
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) % %
Mixed Multiple Ethnic Groups –––––
Asian/Asian British –––––
Black/African/Caribbean/Black British –––––
Other ethnic group including Arab –––––
Not specified/prefer not to say – – – %
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
-day commitment, each year, which is set out in the letter of appointment.
Each Non-Executive Director is appointed for an initial -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 Annual General Meeting.
67
Kainos Annual report 2024
Corporate Governance
Dear fellow shareholders,
As Chair of the Nominations Committee, I am
pleased to present the Committee’s Report for
the year ended 31 March 2024.
The Nominations Committee plays a vital role
in supporting the Board in discharging its
succession planning responsibilities and ensuring
that the Board has the correct balance of skills
and experience to support the Company’s long-
term success and delivery on the strategy. This
year has been a particularly important one as we
have welcomed our new CEO, Russell Sloan and
a new Non-Executive Director, James Kidd, who
from the 1 June 2024, is taking up the important
role as Chair of the Audit and Risk Committee.
Having joined the Board of Kainos immediately
before our IPO in 2015 and having had the
privilege of being the Chairperson of the
Company and Nominations Committee since
2019, it is not my intention to stand for re-election
at the September 2024 AGM. I am very pleased
that our Deputy Chairperson, Rosaleen Blair, has
agreed to take over as Chairperson of both the
Company and the Nominations Committee on
my retirement. I am certain that Rosaleen will be
an outstanding Chairperson and I thank her for
all her support since her arrival on the Board.
In September 2024 we also bid farewell to Andy
Malpass who has also served as a Non-Executive
Director since our 2015 IPO. Andy has been an
outstanding member of the Board and Chair of
the Audit and Risk Committee, and we all wish
him a very happy retirement.
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 FY24.
I will be happy to answer any questions about the
work of the Committee at the forthcoming AGM
on 24 September 2024.
Tom Burnet
Chair
May
Committee membership and meetings
I have chaired the Nominations Committee since
September . During the year, the Nominations
Committee members were Katie Davis and Rosaleen Blair.
The Committee’s membership therefore complies with
Provision of the Code’s requirements.
The Committee held two 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.
NOMINATIONS COMMITTEE REPORT
Kainos Annual report 2024
Corporate Governance
68
NOMINATIONS COMMITTEE REPORT
CONTINUED
Matters considered during the year
During the year ended March , the areas of focus and
achievement for the Nominations Committee were:
CEO succession
The Committee, supported by the Board and many of the
wider senior leadership team, has been actively considering
CEO succession for a number of years. A pool of potential
internal candidates was identified, as it was felt strongly by
the Committee that our preference was to develop our
internal talent before looking externally for potential CEO
replacements. We are delighted that over a number of years
Russell Sloan emerged as an outstanding candidate for the
role. Russell has been at the centre of developing our strategy
over that period as well as running the largest part of our
business, attending our Board meetings, and increasingly
supporting investor meetings. The Committee and wider
Board are confident he is the right person for the job and wish
him every success as our third-ever Chief Executive.
Board composition
For all Board appointments (and in all succession planning
at Board and management levels), the Board ensures 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.
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.
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.
The Nominations Committee regularly reviews the wider
Board’s composition. This year the Committee continued 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.
During the year, the Nominations Committee has been
coordinating the recruitment of two new Non-Executive
Directors and we are delighted that one, James Kidd, joined
the Board on October . As of June , James will
take over as Chair of our Audit and Risk Committee, ahead
of Andy Malpass’ planned retirement in September .
Immediately after the AGM on September . James
will become our Senior Independent Director and Chair of the
Disclosure Committee.
Immediately after the AGM on September , Rosaleen
Blair will assume the role of Board Chair, from which time,
the Board will meet the FCA Listing Rule requirements (at
least one woman in a senior board position within its
accounting period).
The Board will meet the FCA Listing Rule gender diversity
target (% of women on the board of directors) on Andy and
Tom’s retirement from the board on September .
Recruitment of a second Non-Executive Director is ongoing
and good progress has been made. New Board appointments
provide us with opportunities to exceed the targets on gender
diversity set by the FCA Listing Rules (% women on the
board of directors within its accounting period), the FTSE
Women Leaders Review (% women on the board of
directors by ) and to meet the ethnicity targets set
by the Parker Review (one director from an ethnic minority
group by December ). We are confident that this
recruitment will help us to achieve these targets as of the
shortlisted candidates, % of the candidates identify as
women and % of the candidates are from an ethnic
minority group. We believe this new appointment, alongside
our existing board members will allow us to leverage the
advantages that a more diverse Board brings.
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
emergency successor to ensure business continuity, 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
emergency and longer-term successors identified with
supporting development plans in place to ensure successors’
readiness for the role when required.
69
Kainos Annual report 2024
Corporate Governance
In FY, the Nominations Committee reviewed all Executive
roles succession plans and had the opportunity to meet
successors at Board presentations and/or in an informal
setting at the Board dinner. In September , the
Nominations Committee overseen the smooth transition of
Russell Sloan into the CEO role – this was a planned, four-year
succession process. To establish a robust talent pipeline,
Leadership programmes are in place to support and
accelerate future leader development. Following further
learning needs analysis, we have expanded our talent
development programmes from three to five introducing two
additional programmes in FY to further support leadership
development at key careers and for minority groups. Our
talent programmes now consist of 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.
• Engaging Leaders programme: aimed at Senior Managers
who are displaying leadership potential and are not
currently identified on succession plan.
• Inspiring Leaders programme: for senior management who
are recognised to be successors for future executive role
within the business.
• Empowering Leaders programme: a course specifically
designed for developing future senior women in leadership.
During FY, employees attended and graduated from
across all talent programmes.
This year the Nominations Committee received updates
on all of these talent development programmes including
the outcomes achieved, business impact and the plans for
further cohorts. There was a specific focus this year on the
new Women in Leadership programme – “Empowering
Leaders” – introduced as part of the Company’s Diversity and
Inclusion Strategy to help develop women to fulfil senior roles
within Kainos.
Fourteen women in senior management positions completed
the programme in FY. Upon hearing the successful
achievements delivered from the first cohort of the
programme, there was a “strong recommendation” to run
a second cohort of the programme in FY.
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.
Board evaluation
During the year, we undertook an external evaluation of the
Board’s performance, by Lintstock. The evaluation process
sought views from all Directors and the Company Secretary,
through a comprehensive questionnaire covering:
• Board Composition
• Stakeholder Oversight
• Board Dynamics
• Board Support
• Board Committees
• Focus of Meetings
• Strategic Oversight
• Risk Management and Internal Control
• People Oversight
• Priorities for Change
The evaluation concluded that the Board was either highly or
very highly rated overall. The biggest focus area was Board
composition, and the evaluation highlighted the scope to
improve on diversity, particularly in terms of ethnicity.
The Nominations Committee discussed the survey results
at the January meeting where the Company Secretary
presented the results to the Board, giving the Directors the
opportunity to discuss the outcomes and identify priorities
for .
The survey concluded that the Board is operating effectively,
and that each Director continues to perform effectively and
demonstrates commitment to their roles.
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
and will be internally facilitated.
Kainos Annual report 2024
Corporate Governance
70
AUDIT, RISK AND INTERNAL CONTROL
AUDIT COMMITTEE REPORT
As Chair of the Audit Committee, I am pleased
to present the Committee’s Report for the year
ended 31 March 2024.
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 FY24.
This report should be read in conjunction with the
Independent Auditor’s Report and the financial
statements of Kainos Group plc.
During the year we welcomed James Kidd to
the Committee, bringing his immense relevant
experience from his many years at AVEVA. I am
pleased to announce that James will succeed
me as Chair of the Audit Committee, effective
1 June 2024. I have no doubt that James will be an
exceptional Chair of this Committee and I wish
him every success in this role
I look forward to attending our forthcoming
AGM on 24 September 2024 and will be happy to
answer any questions regarding the work of the
Committee.
Andy Malpass
Chair of the Audit Committee
May
Composition
In addition to myself as Chair, the Committee comprises
Katie Davies, who has been a member of the Committee since
November , Rosaleen Blair, who joined the Committee in
September , and as mentioned above, James Kidd who
joined the Committee during the year, in October .
The Code (Provision ) 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 and my previous experience
includes serving as Finance Director of Fidessa Group plc
for over years until October , and from June ,
serving as a Non-Executive Director and Chair of the Audit
Committee of accesso Technology Group plc. James Kidd,
a chartered accountant, also brings a wealth of relevant
financial experience having served as CFO, Deputy CEO and
CEO during his year tenure on the Board of AVEVA Group
plc. The Board is satisfied that we more than meet the
requirements of the Code in this regard.
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 are 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.
71
Kainos Annual report 2024
Corporate Governance
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 externally evaluated
during the year by Lintstock. The evaluation process sought
views from all Directors and the Company Secretary, through
a comprehensive questionnaire covering:
• Composition, meetings and information
• The composition of the Committee
• The meetings of the Committee
• The information/support received
• The performance of the Committee
• The work of the Audit Committee
• Committee relationships/communication
– CFO
– External audit partner
• Assessment of internal/external audit
• Performance in key areas, namely:
– Significant accounting judgments
– Financial reporting
– The control environment
– Risk management systems
• Invitation to identify any causes for concern
with a focus on:
– Financial health
– Accounting treatment
– Risk exposure
• Priorities for change
• Overall performance and suggestions for improvement
The evaluation concluded that the Committee’s performance
was very highly rated overall.
Audit Committee meetings and key activities
during 2023/24
The Committee held three meetings during the year and
member attendance at these meetings is detailed within the
Corporate Governance Report. 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, including those presenting
to the Committee on risk-related matters, 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 2023
• Review of the external auditor’s report to the Audit
Committee for the year ended 31 March 2023.
• 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 2023 Annual Report,
concluding it was fair, balanced and understandable.
• Review and conclude on the effectiveness of our external
auditor.
• Review of the Group’s Incident Management process.
• Review of the Group’s Enterprise Risk Register.
November 2023
• Review of the Interim Report, including the going concern
statement and key disclosures, and recommendation of its
approval to the Board.
• Review of auditor performance.
• Review of the Group’s Enterprise Risk Register.
• Information security update.
• Group insurance update.
February 2024
• Review of the external auditor’s audit plan and strategy
for the year ended 31 March 2024.
• Review of internal audit activities and requirements.
• Review of Group treasury function.
• Review of Group legal and compliance matters.
• Task Force on Climate-related Financial Disclosures
(TCFD) update.
Kainos Annual report 2024
Corporate Governance
72
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 FY we ran a competitive audit tender process,
resulting in KPMG’s appointment at the AGM in September
.
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
during the financial year ended March .
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 in September . Audit partners for
listed companies are ordinarily rotated every five years.
The Company has a non-audit services policy in place to
ensure that the provision of non-audit services by the
external auditor does not impair its independence or
objectivity. Other than the review of the interim financial
statements for the period ended September , KPMG
has not provided any non-audit services during the year.
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 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 2024 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 the Committee reviewed the Annual Report
including the financial statements, the Full Year Results
Announcement for the year ended March 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 FY 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.
73
Kainos Annual report 2024
Corporate Governance
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.
Acquisition
accounting
• We received updates from management with regards to the accounting treatment for the acquisition
of RapidIT-Cloudbera, completed during the year.
• In particular, we considered the judgement applied in accounting for the agreed purchase
consideration.
• We are satisfied that accounting for this acquisition is in line with IFRS3 ‘Business Combinations’.
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 March .
Kainos Annual report 2024
Corporate Governance
74
AUDIT COMMITTEE REPORT
CONTINUED
Financial Reporting Council (FRC) review
In March , the FRC’s Corporate Reporting Review team
notified the Audit Committee of its review of the Company’s
Interim Report for the period ended September .
The FRC did not require a substantive response to their review
and no queries or questions were raised. The FRC highlighted
a number of areas where users of the accounts could benefit
from improvements to existing reporting. These areas were
fully considered in the preparation of this Annual Report.
The scope of this FRC review was limited to consider
compliance with reporting requirements only and not to
verify the information contained in the Interim Report.
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 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 and engage external specialists when appropriate.
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:
. the principles of how internal audit activities operate;
. the areas with internal control systems in place, to identify
and mitigate risks and issues impacting the business; and
. the owner for each internal audit area.
The Committee reviews this documentation annually.
75
Kainos Annual report 2024
Corporate Governance
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 , 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 was considered
not yet to be appropriate for 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 2024
Corporate Governance
76
DIRECTORS’ REMUNERATION REPORT
Statement from the Chair of the
Remuneration Committee
Katie Davis
Chair
May
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 , Rosaleen Blair, who joined the Committee
in January , and James Kidd who joined the Committee
on October . Further information can be found in the
Directors’ biographies section.
There were five meetings during the year, with all Committee
members attending all meetings and James Kidd attending
all meetings from his date of joining.
Key activities
• We oversaw the operation of the Remuneration Policy that
was approved by shareholders at the 2022 AGM, and we
discussed medium-term strategic remuneration plans for
FY25 and beyond.
• We discussed Executive and Non-Executive Director
total reward. In the context of the appointment of a new
CEO on 21 September 2023, we conducted additional
benchmarking to ensure that the structure and quantum
are appropriate to motivate and retain the skills needed
to lead the business.
• We continued to support ongoing engagement with our
workforce on remuneration philosophy, strategy and policy
through company briefings, e-learning and webinars.
In addition, employee representatives from our Culture
and Development Group and Diversity & Inclusion Council
attended Remuneration Committee meetings to participate
in strategic remuneration discussions.
• We supported the establishment of internal business-led
governance committees for bonus and remuneration. These
fora seek to ensure a strategic three-year look ahead as
well as robustly implement associated decisions.
• We continued to oversee remuneration practice across
Kainos to ensure alignment with our reward philosophy.
This includes initiatives such as gender pay equity, bonus,
long-term incentive awards, global benefits and critical
market salary adjustments.
• We discussed and supported formal job evaluation for
Executive positions to ensure objective decision-making on
Total Reward taking into consideration market standards
and internal equity.
As Chair of the Remuneration Committee, I am
pleased to introduce our Directors’ Remuneration
Report for the year ended 31 March 2024.
77
Kainos Annual report 2024
Corporate Governance
Strategic context
I am delighted to welcome our new CEO, Russell Sloan,
and I look forward to the continued delivery of our reward
strategy under his leadership. For the first time, executive-led
committees have been established to take the lead on
remuneration strategy and bonus. Our people remain
critical to our business, and I am grateful for the leadership
that Russell is showing as our reward strategy is key to
ensuring that we are able to attract, motivate and retain
high quality talent.
We remain committed to ensuring that executive reward
is aligned to workforce and shareholder experience. As part
of the CEO transition, we took the opportunity to undertake
additional benchmarking of our reward structure and
quantum for Executive Directors using comparators within
the High-Tech industry and the FTSE whilst ensuring
continued alignment to our overall Remuneration policy.
Additionally, we considered internal relativity at Director and
senior management level. This review has resulted in a
greater proportional emphasis on long-term incentives which
aligns to our broader plans for senior leaders as well as
aligning with longer-term shareholder expectations.
We continue to expand strategically into new markets.
For example, the acquisition of RapidIT-Cloudbera extended
our geographic footprint to India. We have also looked
critically at locations where we have a very small presence,
ensuring that the decisions that we take around where to
base our people balance the need for simplicity with
customer demand and commerciality.
Given ongoing cost of living challenges and our wide
geographical presence, global benefits remain a priority focus
area. During the year, we undertook a comprehensive gap
analysis of our global benefits with a view to implementing
recommended changes on a phased basis. We reviewed core
insured benefits and paid leave in our larger locations to
ensure that we have a fair and consistent approach. In doing
so, we recognise the need to have common standards in all our
locations in line with our Reward Philosophy, particularly our
duty of care to provide adequate health, risk, retirement and
paid time-off benefits for our people. We will continue
to assess our global benefits in line with market trends and,
over time, close any associated gaps.
Embedding our Reward Philosophy and Strategy remains
a focus through employee communication and training.
Initiatives such as “Understanding Your Reward in Kainos”
e-learning for all our managers (and all employees in FY)
ensures greater clarity and transparency whilst educating on
providing reward structures that meet local needs in different
parts of the world. This, coupled with awareness campaigns to
ensure our people are maximising the value of existing
benefits, remains a key focus for the year ahead.
Pay equity has also remained a focus and, as part of our
Annual Salary Review in , we proactively looked for
gender pay equity anomalies and allocated a portion of our
annual pay budget to enable targeted interventions where
appropriate. There is more to be done; and, following a
successful campaign to encourage employees to update their
D&I data, we have increased the scope of this exercise for the
Annual Salary Review in June to include ethnicity. We
will continue to track progress year on year in closing any
identified pay gaps.
Executive outcomes and reward
The Strategic Report outlines that we have recorded our
th consecutive year of growth across a wide range of key
metrics, with our business performance demonstrating
disciplined execution against a backdrop of macro-economic
uncertainty.
Executive Directors’ remuneration has been determined in
line with the policy approved by shareholders at the
Annual General Meeting (AGM) on September .
As described in the Strategic Report, there are a number of
key performance measures to identify trends in our operating
performance and to assess progress against our strategic
objectives. Our financial KPIs of revenue, adjusted pre-tax
profit and bookings are used in establishing the Executive
Directors’ annual bonus targets.
Given the weightings in our scheme, our performance for the
year translates to % pay-out against these targets, with the
key measures outlined below.
Revenue .m .m
Adjusted pre-tax profit .m .m
Bookings .m .m
Total dividend per share .p .p
In June , the Group made performance share awards
to the CEO and CFO of , and , share options
respectively.
In November , the Group made performance share
awards to the incumbent CEO of ,, and in December
, the Group made performance share awards to the CFO
of ,.
Kainos Annual report 2024
Corporate Governance
78
DIRECTORS’ REMUNERATION REPORT
CONTINUED
On June , we granted long-term incentive awards
to the CEO and CFO. These awards vested in full during the
year with the CEO receiving , share options and the
CFO receiving , share options.
Further detail of these awards is provided in the Annual
Report on Remuneration.
The Remuneration Committee believes that the FY share
awards are aligned with our Remuneration Policy and are
appropriate in the context of the Company’s results and the
appointment of a new CEO. They are at the lower quartile of
our identified market comparators (High Tech and FTSE )
and are reflective of our longer-term strategic focus.
Alignment with UK Corporate Governance Code
The Remuneration Policy which was approved in September
is aligned with the UK Corporate Governance Code
, 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 continues to be communicated and embedded in the
organisation to ensure greater transparency.
• The Committee’s workings and the Remuneration Policy
have been discussed with representatives of 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 ‘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
Despite lower than usual attrition and measured business
growth, we anticipate that we will still need to grow our
business through the external market, particularly in areas
such as Business Development, Data & AI and Low Code.
We will continue to ensure that our reward practices not only
serve to retain our existing talented employees but also to
support our future strategic goals. This, of course, will be
balanced against the need for fiscal prudency which is critical
to our ongoing business success.
The Committee’s priorities over the next year include:
• Continue to educate and embed our reward philosophy,
strategy and Remuneration Policy;
• Oversee the creation of a strategic remuneration roadmap
for 2025+ and the implementation of associated initiatives;
• Continue to review total reward in the context of formal
job sizing and comparable market data (including salaries,
share programmes, bonus and benefits) to ensure that we
are able to attract, motivate and retain talent everywhere
we operate;
• Review and refresh our share plans as we reach the 10-year
anniversary of IPO to ensure that they continue to support
our strategic business priorities;
• 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 newly established and business-led
Remuneration Steering Committee will help us to deliver these
priorities and will strongly support the measured growth that
we are hoping to achieve in the year ahead.
79
Kainos Annual report 2024
Corporate Governance
Directors’ Remuneration Policy
The Directors’ Remuneration policy was approved at the AGM held on September and is effective for three years
from that date. The table below outlines the key components, and the full Policy can be accessed on the Company website
www.kainos.pub/rempolicy. No changes have been made to the policy since it was approved.
Executive Director reward components
Base Salary
Purpose To attract and retain Executive Directors.
Operation Reviewed annually and fixed for months, commencing 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 % in line with other employees
in the same location.
Performance metrics None.
Kainos Annual report 2024
Corporate Governance
80
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 % 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 % 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 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,
within a period of years following the vesting of an award, 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 % of salary. In exceptional circumstances, awards
may be made up to a maximum of % 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.
81
Kainos Annual report 2024
Corporate Governance
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 , per annum. The base fee for Non-Executive Directors is
currently , 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 , each year.
They may purchase partnership shares out of pre-tax salary up to , 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 , were awarded to UK
employees, including Executive Directors, depending on their length of service.
Performance metrics None.
Kainos Annual report 2024
Corporate Governance
82
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 % 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 . 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 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 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 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.
83
Kainos Annual report 2024
Corporate Governance
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.
There were no payments to past Directors for loss of office during the year ended March .
Shareholders and statement of voting at AGM
The Annual Report on Remuneration for the year ended March was approved at the AGM. The Directors
Remuneration Policy was approved at the AGM.
Both were approved as set out below:
Resolution Votes cast for
% of votes
cast for
Votes
against
% of votes
against
Tot al
votes cast
Votes
withheld
Approval of Annual Report on
Remuneration for the year ended
March ,, .% ,, .% ,, ,
Approval of the Directors’
Remuneration Policy at the AGM ,, .% ,, .% ,, ,
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 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 March .
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 March .
Kainos Annual report 2024
Corporate Governance
84
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, Rosaleen Blair and James Kidd. 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 and James
Kidd attending all meetings from his date of joining.
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, this year, the performance of the Board and all the Committees was externally
evaluated by Lintstock.
The evaluation process sought views from all Directors and the Company Secretary, through a comprehensive questionnaire
covering:
Composition, meetings and information
• Composition, management and support
• The composition of the Committee
• The meetings of the Committee
• The information/support received
• The performance of the Committee Chair
The work of the Remuneration Committee
• Engagement with key parties
• Management
• The wider workforce
• Shareholders
• External advisors
• Remuneration policy
• Alignment with group strategic priorities
• Appropriateness of financial measures
• Integration of non-financial measures
• Remuneration policy effectiveness in attracting, retaining and motivating talent
Priorities for change
• Overall performance and suggestions for improvement
The evaluation concluded that the Remuneration Committee was very highly rated overall.
ANNUAL REPORT ON REMUNERATION
85
Kainos Annual report 2024
Corporate Governance
Remuneration details
The following tables set out the remuneration for each Director for the years ended March and March .
Single total figure of remuneration for Executive Directors (audited)
Name Year Salary Benefits
()
Bonus Pension
()
Other
()
Incentive
vested Total Total fixed
Tot al
variable
All amounts in (s)
Russell Sloan
()
–
– – – – – ––––
Richard McCann
()
Brendan Mooney
()
– –
() Pension amounts for Brendan Mooney and Richard McCann are payments in lieu of pension.
() Other relates to the award of SIP shares.
() Brendan Mooney stepped down from the role of CEO, effective September . The table above for FY includes base salary payments from April
to September .
() Russell Sloan was appointed CEO effective September . The table above for FY includes base salary payments from October to March .
Russell’s annual base salary for the role of CEO is ,.
() Annual base salary for Richard McCann is , effective October . For clarity, annual base salary from April to May was , and from
June to September was ,.
() Benefits is the taxable value of private health insurance received by Executive Directors.
Single total figure of remuneration for Non-Executive Directors (audited)
Name Year Fees
All amounts in (s)
Andy Malpass
James Kidd
–
Tom Burnet
Katie Davis
Rosaleen Blair
The above table includes remuneration details for James Kidd from the date of his appointment on October .
Annual bonus (audited)
The following table details the eligible bonus payment for the Executive Directors.
Eligible bonus pay-out
Objective Weighting
Target
performance
( million)
Threshold
performance
( million)
Outcome
( million)
Russell
Sloan
(s)
Brendan
Mooney
(s)
Richard
McCann
(s)
Revenue % . . .
Adjusted
pre-tax profit % . . .
Bookings % . . .
Totals %
Kainos Annual report 2024
Corporate Governance
86
ANNUAL REPORT ON REMUNERATION
CONTINUED
The bonuses payable to Russell Sloan, Brendan Mooney and Richard McCann are %, % and % of salary respectively.
Under the Remuneration Policy, the maximum annual bonus opportunity is % of salary for the CEO and CFO.
The bonus amount for Brendan Mooney has been calculated on a pro-rata basis reflecting the amount earned to the point
he stepped down as CEO on September .
As per the revised Remuneration policy (approved September ), one third of the annual bonus amount will be deferred
for a period of three 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 June ,
November and December as outlined in the table below. The awards are share options with a nominal exercise
price of . 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
()
(s)
Exercise price per
ordinary share First exercise date Lapsing date
Brendan Mooney June , . June June
Richard McCann June , . June June
Russell Sloan Nov , . Nov Nov
Richard McCann Dec , . Dec Dec
() Face value is calculated using the closing share price on the date of grant as follows: June ., November . and December ..
The PSP awards are subject to the following performance conditions:
Performance condition Weighting Minimum performance Mid performance Maximum performance
TSR performance
(FTSE techMARK index)
% % vesting if Company
performance is at mean
average index price growth
Linear vesting between
minimum and maximum
performance
% vesting if Company
performance is at or
above mean average
index price growth plus
% points
EPS percentage growth % % vesting for
growth of %
Linear vesting between
minimum and maximum
performance
% vesting if growth
is % or higher
Responsible company
()
% N/A N/A N/A
() 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 (FY) 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 SIP shares
Face value
()
(s) Vesting period
Russell Sloan years from the date of grant.
Richard McCann years from the date of grant.
() Face value is calculated using the average middle market closing price for the five days prior to grant date.
87
Kainos Annual report 2024
Corporate Governance
2020 PSP (audited)
On June , awards were granted under the Kainos PSP to Brendan Mooney and Richard McCann.
% of the awards related to an EPS performance condition, for which the measurement period ended March .
The outcome (% vesting) was reported in our prior year report.
The TSR and Best Companies performance measurement period ended on June , with the following outcome:
Award Measure Weighting Vesting scale
% of award
vesting
TSR
(FTSE techMARK Index)
% Minimum performance: % vesting at median performance.
Maximum performance: % vesting if in upper quartile.
Mid performance: Linear vesting between minimum and
maximum performance.
%
Best Companies % % vesting if score at end of the three-year period is
at least equal to the score at the start of the period.
()
%
() Best Companies score was available in November . In the Company determined that the all-company staff survey, Peakon, provided a more relevant
measure of employee engagement. The score at the end of the three-year period was at least equal to scores at the start.
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
(s)
Brendan Mooney , % , – .
Richard McCann , % , – .
2021 PSP (audited)
On June , awards were granted under the Kainos PSP to Brendan Mooney and Richard McCann. The performance
measurement period for the EPS performance condition ended on March , with the following outcome:
Award Measure Weighting Vesting scale
Performance
achieved
% of award
vesting
EPS % No vesting if EPS growth below % p.a., % of
awards vest if EPS growth equals % p.a. and %
vests if EPS growth exceeds % p.a. Straight-line
pro-rata basis from % to % if EPS growth
exceeds % but is less than % p.a.
.% %
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
(s)
Brendan Mooney , % , – .
Richard McCann , % , – .
The PSP awards also included performance conditions relating to Company TSR and Employee Engagement for which
the measurement period ends on June . Achievement against these performance conditions will be reported in next
year’s Annual Report on Remuneration.
Kainos Annual report 2024
Corporate Governance
88
ANNUAL REPORT ON REMUNERATION
CONTINUED
Payments to past directors (audited)
At our AGM on September , we completed the planned, four-year succession process, with Brendan Mooney stepping
down as CEO and Russell Sloan assuming the position from this date.
The details of the remuneration arrangements for Brendan are outlined below.
Salary and benefits
Following Brendan’s step-down as CEO and Director on September , he will remain an employee of Kainos until June
, or longer by agreement. Until June , he will continue to be paid and receive benefits on the same basis as
disclosed in this report up to the point of his resignation.
LTIP
When Brendan ceases to be employed by the Company, he will be treated as a good leaver for the purposes of the LTIP scheme,
and with awards vesting on their normal vesting dates subject to applicable performance and time prorating terms.
He will not receive an LTIP (Long Term Incentive Plan) grant in respect of the financial year commencing April .
Bonus
Brendan is eligible to receive an annual bonus for the full year to March . This report details the pro-rata amount
earned while in the position of CEO.
For the period April to June , Brendan will be paid a pro rata amount, calculated from the actual bonus
achievement in the financial year ended March .
Outstanding share awards
Brendan will remain an employee of Kainos until June , therefore his existing share awards will continue to vest
in line with their original award terms, including, where applicable, performance conditions measurement, post vesting holding
periods, and malus and clawback. There are no other remuneration payments related to Brendan stepping down as a Director
of the Company, and the arrangements outlined above are in line with the Directors’ Remuneration Policy.
Directors’ shareholdings (audited)
The interests in Kainos ordinary shares of the Directors in office at March , including their connected persons, were:
Shares Options
()
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
Russell Sloan , , , ,
Richard McCann ,, , , ,
Andy Malpass , N/A N/A N/A N/A N/A N/A
Tom Burnet , 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
James Kidd N/A N/A N/A N/A N/A N/A N/A
Katie Davis , N/A N/A N/A N/A N/A N/A
() Dividend equivalent payments are not made in respect of options held.
During the year:
• Richard McCann and Russell Sloan exercised 580 options relating to the 2020 SAYE scheme.
No other changes in the Directors’ interests took place between March and April .
89
Kainos Annual report 2024
Corporate Governance
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 % of annual salary, over a four-year period, applies. In addition, Executive Directors are
required to retain shares post-employment equal to % 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)
Shareholding
requirement met
Russell Sloan % Note ()
Richard McCann % Yes
Brendan Mooney % Yes
() The shareholding guideline for Russell Sloan has been calculated as % as at March , based on the methodology set out below. As per the terms of our
policy, new Executive Directors have a period of four years from appointment to accrue the required holding amount. Russell was appointed on September .
The shareholding requirement has been assessed in relation to annual base salaries of Executive Directors as at March
and a closing share price of . on March .
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 to the
end of March , is shown below. The Kainos share price and the FTSE techMARK All-Share Index are both set to at
the start of the period.
Kainos TSR performance against FTSE techMARK All-Share Index
Total shareholder return (rebased to 100)
Jul 15
Oct 15
Jan 16
Apr 16
Jul 16
Oct 16
Jan 17
Apr 17
Jul 17
Oct 17
Jan 18
Apr 18
Jul 18
Oct 18
Jan 19
Apr 19
Jul 19
Oct 19
Jan 20
Apr 20
Jul 20
Apr 21
Jul 21
Oct 20
Jan 21
Jan 22
Apr 23
Jan 23
Oct 21
Apr 22
Jul 22
Oct 22
Mar 24
Jan 24
Jul 23
Oct 23
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
Kainos Annual report 2024
Corporate Governance
90
ANNUAL REPORT ON REMUNERATION
CONTINUED
CEO remuneration (nine-year analysis)
The table below sets out the CEO’s total remuneration over the last nine years, valued using the methodology applied to the
single total figure of remuneration.
CEO single figure of
total remuneration
(s)
Annual bonus
pay-out against
maximum (%)
Long-term incentive
vesting rates
against maximum
opportunity (%)
()
,
N/A
N/A
() CEO remuneration is the total remuneration for the role of CEO. For FY it includes remuneration for Brendan Mooney and Russell Sloan as per the single table of
remuneration above.
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 compared with remuneration in
Russell Sloan
()
Richard McCann Brendan Mooney
()
Employees
Salary and fees
()
N/A .% (.%) .%
All taxable benefits N/A .% (.%) .%
Annual bonuses N/A (.%) (.%) (.%)
TOTAL N/A (.%) (.%) .%
() Executive Directors’ salary movements calculated using the single total figure of remuneration.
() Remuneration included for Brendan Mooney up to the date of his resignation as CEO, September .
() Russell Sloan was appointed to the Board on September and has no comparative remuneration information as an Executive Director.
Percentage increase in remuneration in compared with remuneration in
Brendan Mooney Richard McCann Employees
Salary and fees
()
.% .% .%
All taxable benefits
()
(.%) (.%) .%
Annual bonuses (.%) (.%) (.%)
TOTAL (.%) (.%) .%
() Executive Directors’ salary calculated using the single total figure of remuneration.
() FY benefits included travel allowance payments in April and May . Travel allowance payments ceased effective June .
91
Kainos Annual report 2024
Corporate Governance
b) Non-Executive Directors
Percentage increase in remuneration in compared with remuneration in
()
Andy Malpass Tom Burnet Katie Davies James Kidd
()
Rosaleen Blair Employees
Salary and fees .% .% .% N/A .% .%
All taxable benefits –––– –.%
Annual bonuses – – – – – (.%)
TOTAL .% .% .% N/A .% .%
() Calculated using the single total figure of remuneration table.
() James Kidd was appointed on October and has no comparative remuneration in FY.
Percentage increase in remuneration in compared with remuneration in
()
Andy Malpass Tom Burnet Katie Davies Rosaleen Blair Employees
Salary and fees .% .% .% .% .%
All taxable benefits ––––.%
Annual bonuses – – – – (.%)
TOTAL .% .% .% .% .%
() Calculated using the single total figure of remuneration table.
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
th percentile
pay ratio Median pay ratio
th percentile
pay ratio
A .: .: .:
A .: .: .:
The Committee has adopted option A as its preferred method for calculating the pay ratio for the year ended March .
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.
The wages and salaries figures for the median, th and th percentile employees used in the pay ratio calculation are
as follows:
Y Y Y
Wages and salaries k k k
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.
(s)
(s)
Change
(s)
Change
%
Staff remuneration , , , %
Profit before tax , , , %
Corporation tax , , , %
Effective tax rate % % N/A %
Dividends paid , , , %
Kainos Annual report 2024
Corporate Governance
92
ANNUAL REPORT ON REMUNERATION
CONTINUED
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.
We continue to seek anonymous feedback monthly from colleagues via Peakon, our employee listening tool. Peakon enables
the Group to see how its engagement levels compare with around other global companies from the IT and software sector.
Peakon measures engagement through a number of drivers including questions on reward and the outputs are used to
influence our overall Reward Strategy and roadmap.
Education of our people on reward remains a key theme for us, and we continued to embed our Reward Philosophy and Strategy
through Company briefings and inviting members of our Culture and Development Group and D&I Council to participate in
Remuneration Committee meetings. We further embedded Annual Salary Review e-learning modules and provided drop-in
sessions for managers to equip them with the knowledge to make and convey reward decisions confidently. We enhanced
communications on employee benefits, created a UK Pensions Committee with employee representatives and delivered a series
of employee benefit webinars to ensure employees maximise the benefits available to them. Additionally, we created a new
e-learning module “Understanding Your Reward in Kainos”. This is designed to deepen employees’ comprehension of key reward
principles and their overall compensation package. We plan to extend this education in FY to train our senior leaders, followed
by all employees on the mechanics of salary progression and how we benchmark globally to enable them to have a better
understanding of salary positioning.
Ensuring our Remuneration Policy for Executive Directors and Executive Managers is aligned with the employee experience
is a continuing priority for the Remuneration Committee, and both the Board and the Remuneration 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 AGM.
Directors’ remuneration for the year commencing 1 April 2024
Salary The Remuneration Committee will continue to monitor the remuneration of Executive Directors
against 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 salary increases across the
wider workforce.
Benefits There will be no change to the Executive Directors’ benefits in the year commencing April .
Pension There will be no change to the Executive Directors’ pension contributions in the year commencing
April .
Annual bonus Annual bonus for the year commencing April will be determined by the policy disclosed in
this report. Executive Directors will defer one third of the annual bonus payable in June for
three years.
The targets for the annual bonus for FY 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 Annual Report.
Long-term
incentives
The Remuneration Committee intends to make further performance share awards in mid-.
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 Annual Report.
Non-Executive Director
remuneration
A review of Non-Executive Director fees is planned for June . Any changes will be disclosed
in the Annual Report.
On behalf of the Board
Katie Davis
Chair of the Remuneration Committee
May
93
Kainos Annual report 2024
Corporate Governance
DIRECTORS’ REPORT
The Directors present their report and the audited financial
statements for Kainos Group plc (company number )
for the year ended March . These will be laid before
the shareholders at the Annual General Meeting (AGM) to be
held on September . 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 C () of the Companies Act
, 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.
Information on the Group’s financial instruments and risk
management objectives and policies, including our policy
for hedging is provided in note of the financial statements.
Political donations
No political donations were made during the year ended
March (nil for year ended March ).
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 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 LR..C R, the information required to be
disclosed by LR.. R can be found in the following locations:
Section topic Location
Interest capitalised Not applicable
Publication of unaudited
financial information
Not applicable
Details of long-term incentive
schemes
Directors’
Remuneration Report
Waiver of emoluments
by a Director
Not applicable
Waiver of future emoluments
by a Director
Not applicable
Non pre-emptive issues of
equity for cash
Not applicable
Section () in relation to major
subsidiary undertakings
Not applicable
Parent participation in a
placing by a listed subsidiary
Not applicable
Contracts of significance Directors’ Report
Provision of services by a
controlling shareholder
Not applicable
Shareholder waivers of
dividends
Not applicable
Shareholder waivers of
future dividends
Not applicable
Agreements with
controlling shareholders
Not applicable
Kainos Annual report 2024
Corporate Governance
94
DIRECTORS’ REPORT
CONTINUED
Share capital and articles of association
Details of the called-up and fully paid share capital are set
out in note to the consolidated financial statements. The
rights and obligations attaching to the shares and the powers
of the Directors are set out in the Articles of Association,
copies of which can be obtained from Companies House.
There are no restrictions on the voting rights attached to the
shares and no person holds securities carrying special rights
regarding control.
Authority to purchase own shares
Kainos holds a general authority to purchase up to ,,
ordinary shares in the market. This represented approximately
% of Kainos’ issued share capital as at August , as
approved by shareholders at the 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 % 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 Section of the
Companies Act .
Auditor
In accordance with Section of the Companies Act ,
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, where appropriate) have an interest in %
or more of the issued ordinary share capital. At March
, the last holding notified to the Company is shown below.
These holdings are likely to have changed since the Company
was notified, however, notification of any change is not
required until the next notifiable threshold is crossed.
Investor
Ordinary
.p shares
% of issued
share capital
QUBIS Ltd ,, .%
Baillie Gifford & Co ,, .%
Liontrust Asset Management plc ,, .%
Brendan Mooney ,, .%
Paul Gannon ,, .%
Eileen Mooney ,, .%
Richard McCann ,, .%
Dr Brian Gannon ,, .%
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.
95
Kainos Annual report 2024
Corporate Governance
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 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.
Long-term viability
The full Viability Statement and the associated explanations
made in accordance with Provision 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
FRS 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 . They are responsible
for such internal controls as they determine are 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 ..R, 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 May and is signed on its behalf by:
Tom Burnet
Chair
May
Kainos Annual report 2024
Financial Statements
96
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KAINOS GROUP PLC
97
Kainos Annual report 2024
Financial Statements
Kainos Annual report 2024
Financial Statements
98
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KAINOS GROUP PLC
99
Kainos Annual report 2024
Financial Statements
Kainos Annual report 2024
Financial Statements
100
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KAINOS GROUP PLC
101
Kainos Annual report 2024
Financial Statements
Kainos Annual report 2024
Financial Statements
102
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KAINOS GROUP PLC
103
Kainos Annual report 2024
Financial Statements
CONTINUING OPERATIONS Note
| 2024 | 2023 | ||
| (£000s) | (£000s) | ||
REVENUE | 5 | ||
Cost of sales | 5 | ( | ( |
GROSS PROFIT | 5 | ||
Operating expenses | ( | ( | |
Impairment (loss)/gain (including amounts recovered) on trade receivables and accrued income | 27 | ( | |
Gain on disposal of property, plant and equipment | |||
Increase in fair value of investment property | 14 | ||
OPERATING PROFIT | 6 | ||
Finance income | 7 | ||
Finance expense | 7 | ( | ( |
PROFIT BEFORE TAX | |||
Income tax expense | 9 | ( | ( |
PROFIT FOR THE YEAR | |||
| EARNINGS PER SHARE | |||
Basic | 11 | ||
Diluted | 11 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2024
| 2024 | 2023 | |
| (£000s) | (£000s) | |
PROFIT FOR THE YEAR | ||
| ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: | ||
Foreign operations – foreign currency translation differences | ( | |
TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2024
Kainos Annual report 2024
Financial Statements
104
Note
| 2024 | 2023 | ||
| (£000s) | (£000s) | ||
| NON-CURRENT ASSETS | |||
Goodwill | 12 | ||
Other intangible assets | 12 | ||
Investment property | 14 | ||
Property, plant and equipment | 13 | ||
Right-of-use assets | 17 | ||
Investments in equity instruments | |||
Deferred tax asset | 19 | ||
| CURRENT ASSETS | |||
Trade and other receivables | 18 | ||
Prepayments | 18 | ||
Accrued income | 18 | ||
Tax receivable | |||
Cash and cash equivalents | 20 | ||
Treasury deposits | 20 | ||
Assets held for sale | 15 | ||
TOTAL ASSETS | |||
| CURRENT LIABILITIES | |||
Trade payables and accruals | 22 | ( | ( |
Deferred income | 22 | ( | ( |
Tax payable | 22 | ( | |
Lease liabilities | 21 | ( | ( |
Provisions | 23 | ( | |
Other tax and social security | 22 | ( | ( |
( | ( | ||
| NON-CURRENT LIABILITIES | |||
Provisions | 23 | ( | ( |
Deferred tax liability | 19 | ( | |
Lease liabilities | 21 | ( | ( |
( | ( | ||
| TOTAL LIABILITIES | ( | ( | |
NET ASSETS | |||
| EQUITY | |||
Share capital | 24 | ||
Share premium account | |||
Capital reserve | |||
Share-based payment reserve | |||
Translation reserve | ( | ||
Retained earnings | |||
TOTAL EQUITY |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
105
Kainos Annual report 2024
Financial Statements
| Share-based | |||||||
| Share | Share | Capital | payment | Translation | Retained | Tot al | |
| capital | premium | reserve | reserve | reserve | earnings | equity | |
| (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | |
BALANCE AT 31 MARCH 2022 | |||||||
Profit for the year | |||||||
Other comprehensive income | |||||||
Total comprehensive income for the year | |||||||
Equity-settled share-based payments | |||||||
| Current tax for equity-settled | |||||||
share-based payments | |||||||
| Deferred tax for equity-settled | |||||||
share-based payments | ( | ( | |||||
Issue of share capital – share options exercised | |||||||
Dividends | ( | ( | |||||
BALANCE AT 31 MARCH 2023 | |||||||
Profit for the year | |||||||
Other comprehensive income | ( | ( | |||||
Total comprehensive income for the year | ( | ||||||
Equity-settled share-based payments | |||||||
| Current tax for equity-settled | |||||||
share-based payments | |||||||
| Deferred tax for equity-settled | |||||||
share-based payments | ( | ( | |||||
Issue of share capital – share options exercised | |||||||
Dividends | ( | ( | |||||
BALANCE AT 31 MARCH 2024 | ( |
(29)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
(29) £21.7 million relates to exercised or lapsed options or fully vested free share awards and is considered distributable.
Kainos Annual report 2024
Financial Statements
106
Note
| 2024 | 2023 | ||
| (£000s) | (£000s) | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||
PROFIT FOR THE YEAR | |||
| Adjustments for: | |||
Finance income | 7 | ( | ( |
Finance expense | 7 | ||
Tax expense | 9 | ||
Share-based payment expense | |||
Depreciation of property, plant and equipment | 13 | ||
Depreciation of right-of-use assets | 17 | ||
Amortisation of intangible assets | 12 | ||
Gain on disposal of property, plant and equipment | ( | ||
Increase in fair value of investment property | 14 | ( | |
Post-acquisition remuneration settled by shares | |||
Increase/(decrease) in provisions | 23 | ( | |
OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING CAPITAL | |||
Decrease/(increase) in trade and other receivables | ( | ||
(Decrease)/increase in trade and other payables | ( | ||
CASH GENERATED FROM OPERATING ACTIVITIES | |||
Income taxes paid | ( | ( | |
NET CASH FROM OPERATING ACTIVITIES | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
Interest received | |||
Purchases of property, plant and equipment | 13 | ( | ( |
Proceeds from sale of property, plant and equipment | |||
Amounts placed on treasury deposit | 20 | ( | |
Acquisition of subsidiaries net of cash acquired | 29 | ( | |
NET CASH USED IN INVESTING ACTIVITIES | ( | ( | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
Dividends paid | 10 | ( | ( |
Interest paid | ( | ( | |
Repayment of lease liabilities | ( | ( | |
Proceeds on issue of shares | |||
NET CASH USED IN FINANCING ACTIVITIES | ( | ( | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | |||
Cash and cash equivalents at beginning of year | |||
| Effect of exchange rate fluctuations on cash held | ( | ||
CASH AND CASH EQUIVALENTS AT END OF YEAR | 20 |
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2024
107
Kainos Annual report 2024
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Adoption of new and revised standards
Kainos Annual report 2024
Financial Statements
108
3. Material accounting policies
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
109
Kainos Annual report 2024
Financial Statements
3. Material accounting policies continued
Business combinations continued
Kainos Annual report 2024
Financial Statements
110
3. Material accounting policies continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
111
Kainos Annual report 2024
Financial Statements
3. Material accounting policies continued
Kainos Annual report 2024
Financial Statements
112
3. Material accounting policies continued
Deferred tax continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
113
Kainos Annual report 2024
Financial Statements
3. Material accounting policies continued
Kainos Annual report 2024
Financial Statements
114
3. Material accounting policies continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
115
Kainos Annual report 2024
Financial Statements
3. Material accounting policies continued
Kainos Annual report 2024
Financial Statements
116
4. Material accounting judgements and key sources of estimation uncertainty continued
Critical judgements in applying the Group’s accounting policies continued
Product development expenditure continued
Generally, commercial viability of new products is not proven until all high-risk development issues have been resolved through
testing pre-launch versions of the product. As a result, technical feasibility is proven only after completion of the detailed
design phase and formal approval, which occurs just before the products are ready to go to market. Certain development costs
are incurred for specific projects and there is a lack of certainty that the work may have future economic benefit on future
projects. Accordingly, development costs have not been capitalised.
Costs which are incurred after the general release of internally generated software, or costs which are incurred in order to
enhance existing products are expensed in the period in which they are incurred and included within the research and
development expense in the financial statements.
RDEC income
Judgements are made regarding the assessment of the eligibility of product development expenditure incurred for
RDEC claims. The Group’s assessment of eligible expenditure must align with the definition of R&D for RDEC purposes.
This assessment is more difficult in some industries such as software development resulting in judgement over the qualifying
R&D costs and the eligibility of these costs for the RDEC claim. The unrecognised component of RDEC as at 31 March 2024
is £4.4 million (2023: £4.8 million) and represents the Group’s determination of the value subject to this judgement. This portion
is recognised when this judgement has been removed either via formal acceptance of the claim value submitted or the expiry
of the enquiry window. The net value of RDEC receivable as at 31 March 2024 is £4.3 million (2023: £3.0 million) and is included
within other receivables in the statement of financial position.
RapidIT-Cloudbera Acquisition
The acquisition of RapidIT-Cloubdbera (‘RIC’) resulted in the purchase of a US-based entity (‘RIC USA’) and the transfer of over
70 staff from a company registered in India (‘RIC India’) that was under the control of the majority shareholders of RIC USA, to a
newly formed company set up by Kainos (‘Kainos India’). The individuals transferring from RIC India worked solely under the
direction of RIC USA and the transfer of employment was completed within five business days of the incorporation of Kainos
India. An amount was held in escrow on the acquisition date in accordance with the purchase agreement to facilitate the
transfer of employment to Kainos India. The amount payable to the vendors would have been reduced had the number of
employees joining Kainos India fallen below a threshold. The amount was payable in full had Kainos India not been incorporated
within the 120-day period. There were no other conditions required to be met to facilitate the release of this amount.
It is our view that the transfer of employees was solely to facilitate the successful acquisition of the entire RIC business
and was administrative in nature. The payment was not subject to continuing employment of the selling shareholders and
no other service conditions were required to be delivered. As such, our accounting judgement is that the $6.0 million amount
initially held in escrow and paid in full during the year, should be reflected as purchase consideration rather than post-
acquisition services.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are discussed below.
Revenue recognition
Service revenue
Kainos charges for its digital services on a time and materials or fixed price basis. Where there are fixed price contracts,
revenue is recognised based on the stage of completion. Stage of completion is measured by reference to costs incurred to
date as a percentage of total estimated costs. The Group estimates costs to complete its contractual obligations by reference
to the current run rate of these costs until contractual completion. The estimation of stage of completion is sensitive to future
uncertainties such as technical challenges, timescale changes and commercial issues. During the year revenue relating to
fixed price project income was £35.1 million (2023: £33.8 million). The associated carrying values of accrued and deferred
income at 31 March 2024 were £11.5 million (2023: £10.8 million) and £2.0 million (2023: £2.5 million) respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
117
Kainos Annual report 2024
Financial Statements
5. Segment reporting continued
| Digital | Workday | Workday | ||
| Services | Services | Products | Consolidated | |
| 12 MONTHS TO 31 MARCH | (£000s) | (£000s) | (£000s) | (£000s) |
REVENUE | 213,097 | 112,044 | 57,252 | 382,393 |
Cost of sales | (131,280) | (50,717) | (13,082) | (195,079) |
GROSS PROFIT | 81,817 | 61,327 | 44,170 | 187,314 |
| Direct expenses | (20,778) | (35,889) | (28,280) | (84,947) |
CONTRIBUTION | 61,039 | 25,438 | 15,890 | 102,367 |
| Central overheads | (29,183) | |||
Net finance income | 4,002 | |||
ADJUSTED PRE-TAX PROFIT | 77,186 | |||
Share-based payments expense and related costs | (5,952) | |||
Amortisation of acquired intangible assets | (4,190) | |||
Compensation for post-combination remuneration | (3,800) | |||
Acquisition-related expenses | (626) | |||
| Increase in fair value of investment property and gain on sale | ||||
of property | 2,154 | |||
PROFIT BEFORE TAX | 64,772 |
| Digital | Workday | Workday | ||
| Services | Services | Products | Consolidated | |
| 12 MONTHS TO 31 MARCH | (£000s) | (£000s) | (£000s) | (£000s) |
REVENUE | 224,384 | 105,741 | 44,682 | 374,807 |
Cost of sales | (138,798) | (48,406) | (10,448) | (197,652) |
GROSS PROFIT | 85,586 | 57,335 | 34,234 | 177,155 |
| Direct expenses | (24,326) | (36,439) | (21,687) | (82,452) |
CONTRIBUTION | 61,260 | 20,896 | 12,547 | 94,703 |
| Central overheads | (28,536) | |||
Net finance income | 1,392 | |||
ADJUSTED PRE-TAX PROFIT | 67,559 | |||
Share-based payments expense and related costs | (6,346) | |||
Amortisation of acquired intangible assets | (2,642) | |||
Compensation for post-combination remuneration | (4,176) | |||
Acquisition-related expenses | (57) | |||
PROFIT BEFORE TAX | 54,338 |
Kainos Annual report 2024
Financial Statements
118
5. Segment reporting continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
United Kingdom & Ireland | 232,557 | 242,787 |
North America | 106,990 | 95,505 |
Central Europe | 41,433 | 35,262 |
Rest of world | 1,413 | 1,253 |
382,393 | 374,807 |
| Digital | Workday | Workday | ||
| Services | Services | Products | Tot al | |
| 2024 | 2024 | 2024 | 2024 | |
| (£000s) | (£000s) | (£000s) | (£000s) | |
| TYPE OF REVENUE | ||||
Services | 204,950 | 105,428 | 2,430 | 312,808 |
Subscriptions | – | – | 54,822 | 54,822 |
Third party and other | 8,147 | 6,616 | – | 14,763 |
213,097 | 112,044 | 57,252 | 382,393 |
| Digital | Workday | Workday | ||
| Services | Services | Products | Tot al | |
| 2023 | 2023 | 2023 | 2023 | |
| (£000s) | (£000s) | (£000s) | (£000s) | |
| TYPE OF REVENUE | ||||
Services | 217,490 | 98,961 | 1,625 | 318,076 |
Subscriptions | – | – | 43,057 | 43,057 |
Third party and other | 6,894 | 6,780 | – | 13,674 |
224,384 | 105,741 | 44,682 | 374,807 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
119
Kainos Annual report 2024
Financial Statements
5. Segment reporting continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
| DIGITAL SERVICES | ||
Public | 138,168 | 136,951 |
Commercial | 30,749 | 37,782 |
Healthcare | 44,180 | 49,651 |
213,097 | 224,384 | |
| WORKDAY SERVICES | ||
Public | 89 | 167 |
Commercial | 111,949 | 105,423 |
Healthcare | 6 | 151 |
112,044 | 105,741 | |
| WORKDAY PRODUCTS | ||
Public | – | 891 |
Commercial | 57,170 | 43,171 |
Healthcare | 82 | 620 |
57,252 | 44,682 | |
| GROUP | ||
Public | 138,257 | 138,009 |
Commercial | 199,868 | 186,376 |
Healthcare | 44,268 | 50,422 |
TOTAL | 382,393 | 374,807 |
| 2024 | 2023 | ||
| Note | (£000s) | (£000s) | |
Trade receivables | 18 | 35,368 | 35,693 |
Accrued income | 18 | 33,225 | 38,808 |
Deferred income | 22 | (44,954) | (37,087) |
Kainos Annual report 2024
Financial Statements
120
5. Segment reporting continued
Disaggregation of revenue by sector continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Northern Ireland | 18,177 | 16,685 |
Rest of UK | 2,231 | 2,231 |
United States of America | 34,954 | 11,366 |
Finland | 8,454 | 8,822 |
Canada | 2,208 | 8 |
Poland | 2,112 | 56 |
Other | 275 | 884 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Total staff costs (note 8) | 261,430 | 232,033 |
| Government grants | (2,070) | (12) |
Research and development expensed as incurred | 13,493 | 9,061 |
Research and Development Expenditure Credit | (5,161) | (4,230) |
Depreciation of property, plant and equipment (note 13) | 2,886 | 2,249 |
Depreciation of right-of-use assets (note 17) | 1,152 | 1,163 |
Gain on disposal of property, plant and equipment | (1,173) | – |
Net foreign exchange loss/(gain) | 553 | (873) |
Amortisation of acquired intangibles (note 12) | 4,190 | 2,642 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Fees payable to the Group’s auditor for the audit of the Group’s annual accounts | 160 | 110 |
Fees payable to the Group’s auditor for the audit of subsidiaries | 88 | 61 |
TOTAL AUDIT FEES | 248 | 171 |
Fees payable to the Group’s auditor for other services to the Group: | – | – |
Review of interim report | 27 | 25 |
TOTAL AUDIT-RELATED FEES | 275 | 196 |
Non-audit fees | – | – |
Total audit and non-audit fees | 275 | 196 |
Total % of non-audit fees | 0% | 0% |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
121
Kainos Annual report 2024
Financial Statements
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Bank interest | 4,336 | 1,463 |
FINANCE INCOME | 4,336 | 1,463 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Interest expense on lease liabilities | 320 | 64 |
Other finance expense | 14 | 7 |
FINANCE EXPENSE | 334 | 71 |
8. Staff numbers and costs
The average number of employees during the year was:
| 2024 | 2023 | |
| Number | Number | |
Technical | 2,354 | 2,107 |
Administration | 331 | 311 |
Sales | 258 | 188 |
2,943 | 2,606 |
The aggregate payroll costs of these persons were as follows:
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Wages and salaries | 222,916 | 194,210 |
Social security costs | 21,821 | 20,290 |
Contributions to defined contribution plans | 9,270 | 7,907 |
Share-based payments (note 25) | 7,423 | 9,626 |
261,430 | 232,033 |
The split of remuneration between cost of sales and operating expenses is as follows:
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Cost of sales | 164,101 | 140,142 |
Operating expenses | 97,329 | 91,891 |
261,430 | 232,033 |
Kainos Annual report 2024
Financial Statements
122
| 2024 | 2023 | |
| (£000s) | (£000s) | |
| CURRENT TAX EXPENSE: | ||
Current year (UK) | 12,201 | 7,793 |
Current year (overseas) | 6,456 | 5,271 |
Adjustments in respect of prior years | (444) | (385) |
18,213 | 12,679 | |
| DEFERRED TAX (NOTE 19) | ||
Origination and reversal of temporary differences | (1,439) | (1,130) |
Adjustments in respect of prior years | (717) | 1,144 |
(2,156) | 14 | |
TOTAL TAX EXPENSE | 16,057 | 12,693 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
| CURRENT TAX | ||
Permanent element of share-based payment deduction | 514 | 237 |
| DEFERRED TAX | ||
Deferred tax on share-based payments | (968) | (931) |
TOTAL TAX RECOGNISED DIRECTLY IN EQUITY | (454) | (694) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
123
Kainos Annual report 2024
Financial Statements
9. Tax expense continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
PROFIT BEFORE TAX ON CONTINUING OPERATIONS | 64,772 | 54,338 |
Tax at the UK corporation tax rate of 25% (2023: 19%) | 16,193 | 10,324 |
Expenses not deductible for tax purposes | 1,333 | 919 |
Tax exempt income | (428) | (3) |
Effect of foreign exchange on consolidation | – | (92) |
Effect of tax rates in foreign jurisdictions | 120 | 740 |
Adjustments to tax charge in respect of prior years | (1,161) | 759 |
Change in UK tax rates | – | 46 |
TAX EXPENSE FOR THE YEAR | 16,057 | 12,693 |
EFFECTIVE TAX RATE | 25% | 23% |
10. Dividends
| 2024 | 2023 | |
| (£000s) | (£000s) | |
| AMOUNTS RECOGNISED AS DISTRIBUTIONS TO EQUITY HOLDERS IN THE PERIOD: | ||
Interim dividend for 2024 of 8.2p per share | 10,287 | – |
Final dividend for 2023 of 16.1p per share | 20,135 | – |
Interim dividend for 2023 of 7.8p per share | – | 9,702 |
Final dividend for 2022 of 15.1p per share | – | 18,732 |
30,422 | 28,434 |
The Board has proposed a final dividend in respect of the year ended 31 March 2024 subject to approval by shareholders at
the Annual General Meeting. This dividend has not been recognised as a liability in these financial statements and there are no
tax consequences. The proposed final dividend, if approved by shareholders, will be 19.1 p per share (£24.0 million in total) and
payable on 25 October 2024 to all shareholders on the Register of Members on 4 October 2024, and with an ex-dividend date
of 3 October 2024.
Kainos Annual report 2024
Financial Statements
124
11. Earnings per share
Basic
The calculation of basic earnings per share (EPS) has been based on the following profit attributable to ordinary shareholders
and weighted average number of ordinary shares outstanding.
| 2024 | 2023 | |
| (£000s) | (£000s) | |
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS | 48,715 | 41,645 |
Thousands | Thousands | |
Issued ordinary shares at 1 April | 124,628 | 124,078 |
Effect of shares held in trust | (790) | (786) |
Effect of share options vested and exercised | 711 | 392 |
Effect of shares issued related to a business combination | 113 | 18 |
Effect of shares issued related to free share awards | 109 | 99 |
Weighted average number of ordinary shares at 31 March | 124,771 | 123,801 |
BASIC EARNINGS PER SHARE | 39.0p | 33.6p |
Diluted
The calculation of diluted EPS has been based on the following profit attributable to ordinary shareholders and weighted-
average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.
| 2024 | 2023 | |
| (£000s) | (£000s) | |
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS | 48,715 | 41,645 |
Thousands | Thousands | |
Weighted average number of ordinary shares (basic) | 124,771 | 123,801 |
Effect of share options in issue | 626 | 758 |
Effect of shares held in trust | 790 | 786 |
Effect of potential shares to be issued related to a business combination | 138 | 299 |
Weighted average number of ordinary shares (diluted) at 31 March | 126,325 | 125,644 |
DILUTED EARNINGS PER SHARE | 38.6p | 33.1p |
The average market value of the Company’s shares for the purpose of calculating the dilutive effect of share options was
based on quoted market prices for the year during which the options were outstanding.
At 31 March 2024, 181,451 options (2023: 159,755) were excluded from the diluted weighted average number of ordinary
shares calculation because their effect would have been anti-dilutive.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
125
Kainos Annual report 2024
Financial Statements
11. Earnings per share continued
Adjusted (unaudited)
Adjusted basic and adjusted diluted earnings per share is calculated using the adjusted profit for the year measure.
The calculation of adjusted profit for the year is detailed in the Financial Review section of the Strategic Report.
| 2024 | 2023 | |
| (£000s) | (£000s) | |
ADJUSTED PROFIT FOR THE YEAR | 58,760 | 53,406 |
Thousands | Thousands | |
Weighted average number of ordinary shares for the purposes of basic earnings per share | 124,771 | 123,801 |
Weighted average number of ordinary shares for the purposes of diluted earnings per share | 126,325 | 125,644 |
ADJUSTED BASIC EARNINGS PER SHARE | 47.1p | 43.1p |
ADJUSTED DILUTED EARNINGS PER SHARE | 46.5p | 42.5p |
| Order | Customer | |||
| Goodwill | backlog | relationships | Tot al | |
| (£000s) | (£000s) | (£000s) | (£000s) | |
| COST | ||||
At 1 April 2022 | 18,765 | 1,069 | 7,271 | 27,105 |
Exchange adjustments | 242 | 29 | 415 | 686 |
At 31 March 2023 | 19,007 | 1,098 | 7,686 | 27,791 |
Exchange adjustments | (720) | (43) | (79) | (842) |
Acquisitions through business combinations (note 29) | 19,916 | 677 | 4,892 | 25,485 |
AT 31 MARCH 2024 | 38,203 | 1,732 | 12,499 | 52,434 |
| AMORTISATION AND IMPAIRMENT | ||||
At 1 April 2022 | – | 333 | 2,014 | 2,347 |
Charge for the year | – | 792 | 1,850 | 2,642 |
Exchange adjustments | – | (27) | 6 | (21) |
At 31 March 2023 | – | 1,098 | 3,870 | 4,968 |
Charge for the year | – | 179 | 4,011 | 4,190 |
Exchange adjustments | – | (23) | (112) | (135) |
AT 31 MARCH 2024 | – | 1,254 | 7,769 | 9,023 |
| CARRYING AMOUNT | ||||
AT 31 MARCH 2024 | 38,203 | 478 | 4,730 | 43,411 |
At 31 March 2023 | 19,007 | – | 3,816 | 22,823 |
Kainos Annual report 2024
Financial Statements
126
12. Intangible assets and goodwill continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Kainos Workday Adaptive Practice | 3,199 | 3,219 |
Workday Services Americas | 6,649 | 7,251 |
Workday Services Europe | 8,290 | 8,537 |
Workday Products | 20,065 | – |
TOTAL | 38,203 | 19,007 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Workday Adaptive Practice | 12–13% | 11-12% |
Workday Services Americas | 12-13% | 11-12% |
Workday Services Europe | 13-14% | 12-13% |
Workday Products | 11-12% | – |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Workday Adaptive Practice | 2% | 2% |
Workday Services Americas | 2% | 2% |
Workday Services Europe | 2% | 2% |
Workday Products | 2% | – |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
127
Kainos Annual report 2024
Financial Statements
12. Intangible assets and goodwill continued
Impairment testing of goodwill continued
Key assumptions continued
13. Property, plant and equipment
| Property | Property and | ||||
| under | leasehold | Office | Fixtures | ||
| construction | improvements | equipment | and fittings | Tot al | |
| (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | |
| COST | |||||
At 1 April 2022 | 8,207 | 2,547 | 7,817 | 1,575 | 20,146 |
Impact of foreign exchange | – | (103) | (8) | (9) | (120) |
Reclassification to investment property (note 14) | (5,160) | – | – | – | (5,160) |
Reclassification to assets held for sale | – | (1,436) | – | – | (1,436) |
Additions | 811 | 45 | 1,515 | 128 | 2,499 |
Disposals | – | – | (718) | (215) | (933) |
At 31 March 2023 | 3,858 | 1,053 | 8,606 | 1,479 | 14,996 |
Impact of foreign exchange | – | (89) | 543 | 3 | 457 |
Additions | 355 | 4,237 | 1,045 | 25 | 5,662 |
Disposals | – | – | (28) | – | (28) |
AT 31 MARCH 2024 | 4,213 | 5,201 | 10,166 | 1,507 | 21,087 |
| ACCUMULATED DEPRECIATION | |||||
At 1 April 2022 | – | 1,355 | 3,340 | 584 | 5,279 |
Impact of foreign exchange | – | (30) | 27 | (6) | (9) |
Charge for the year | – | 250 | 1,751 | 248 | 2,249 |
Reclassification to assets held for sale | – | (1,126) | – | – | (1,126) |
Eliminated on disposals | – | – | (691) | (215) | (906) |
At 31 March 2023 | – | 449 | 4,427 | 611 | 5,487 |
Impact of foreign exchange | – | (27) | 479 | 5 | 457 |
Charge for the year | – | 826 | 1,818 | 242 | 2,886 |
Eliminated on disposals | – | – | (28) | – | (28) |
AT 31 MARCH 2024 | – | 1,248 | 6,696 | 858 | 8,802 |
| CARRYING AMOUNT | |||||
AT 31 MARCH 2024 | 4,213 | 3,953 | 3,470 | 649 | 12,285 |
At 31 March 2023 | 3,858 | 604 | 4,179 | 868 | 9,509 |
Kainos Annual report 2024
Financial Statements
128
13. Property, plant and equipment continued
Property under construction
During the year ended 31 March 2020, the Group acquired a site for development of Kainos’ future Belfast headquarters
at a purchase price of £7.4 million. Costs incurred since purchase relate to legal and professional fees and demolition works.
During the year ended 31 March 2023, £5.2 million was transferred to investment property, reflecting the Group’s agreement
to sell part of this site (note 14). Immediately before the transfer, the Group internally remeasured the relevant portion of the
site to fair value with no gain or loss arising.
£0.1 million of capital commitments exist at 31 March 2024 (2023: nil) relating to the property under construction.
| (£000s) | |
At 1 April 2022 | – |
Reclassification from property, plant and equipment | 5,160 |
At 31 March 2023 | 5,160 |
Increase in fair value | 1,040 |
AT 31 MARCH 2024 | 6,200 |
15. Asset held for sale
| (£000s) | |
At 1 April 2022 | – |
Reclassification from property, plant and equipment | 310 |
At 31 March 2023 | 310 |
Disposal of property | (310) |
AT 31 MARCH 2024 | – |
In February 2023, the Group committed to selling a number of properties located in Belfast and actively listed these for sale.
Accordingly, the Group classified these properties as assets held for sale at 31 March 2023 and was measured at their carrying
amount of £0.3 million. During FY24, the Group completed the sale and recognised a gain on disposal of this property of
£1.1 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
129
Kainos Annual report 2024
Financial Statements
| Proportion of | ||||||
| ordinary share | ||||||
Subsidiary undertakings | Incorporated | Registered office | Principal activity | capital held | ||
Kainos Software Limited | Northern Ireland | Kainos House, 4-6 Upper Crescent, | Software | 100% | ||
| Belfast, BT7 1NT, Northern Ireland | development | |||||
Kainos Software Ireland Limited | Republic of Ireland | Glandore, Fitzwilliam Court, Suite 103, | Software | 100% | ||
| Leeson Close, Dublin 2, D02 YW24, | development | |||||
| Ireland | ||||||
Kainos Software Poland Spólka z.o.o | Poland | Tryton Business House, ul. Jana z Kolna | Software | 100% | ||
11, 80-864 | Gdańsk, Poland | development | ||||
Kainos Poland Services Spólka z.o.o | Poland | Jana z Kolna 11 | Software | 100% | ||
| 80-864 Gdańsk, Poland | services | |||||
Kainos Trustees Limited | Northern Ireland | Kainos House, 4-6 Upper Crescent, | Share Scheme | 100% | ||
| Belfast, BT7 1NT, Northern Ireland | Trustee | |||||
Kainos Managers Limited | Northern Ireland | Kainos House, 4-6 Upper Crescent, | Property | 100% | ||
| Belfast, BT7 1NT, Northern Ireland | company | |||||
Kainos Evolve Limited | Northern Ireland | Kainos House, 4-6 Upper Crescent, | Software | 100% | ||
| Belfast, BT7 1NT, Northern Ireland | development | |||||
Kainos WorkSmart Limited | Northern Ireland | Kainos House, 4-6 Upper Crescent, | Software | 100% | ||
| Belfast, BT7 1NT, Northern Ireland | development | |||||
Kainos WorkSmart Inc. | US | Suite 4300, | 111 | Monument Circle | Software | 100% |
| Indianapolis, USA | development | |||||
Kainos WorkSmart GmbH | Germany | 5th Floor, Hahnstraße 70 | Software | 100% | ||
60528 | Frankfurt am Main, Germany | development | ||||
Kainos WorkSmart ApS | Denmark | Office no. 280110080 | Software | 100% | ||
| Harsdorffs Hus Office Club | development | |||||
| Kongens Nytorv 5 | ||||||
1050 | Copenhagen, Denmark | |||||
Kainos Canada Inc. | Canada | 20 Wellington Street East, | Software | 100% | ||
| Suite 500, Toronto, | development | |||||
| ON, M5E 1C5, Canada | ||||||
Kainos WorkSmart SAS | France | 3-5 Rue Saint Georges TMF | Software | 100% | ||
Pole 75009, | Paris, France | development | ||||
Kainos WorkSmart Oy | Finland | c/o TMF Finland Oy, | Software | 100% | ||
| Erottajankatu 15-17, | development | |||||
00130 | Helsinki, Finland | |||||
Formulate Kainos Limited | England | 2nd Floor, 21 Farringdon Road, | Software | 100% | ||
| London, EC1M 3HA, England | services | |||||
Kainos Planning, LLC | US | Suite 4300, | 111 | Monument Circle | Software | 100% |
| Indianapolis, Indiana 46204, USA | services | |||||
KW Software Oy | Finland | c/o TMF Finland Oy, | Software | 100% | ||
| Erottajankatu 15-17 | services | |||||
00130, | Helsinki, Finland | |||||
Kainos AB | Sweden | c/o Baker & McKenzie Advokatbyrå | Software | 100% | ||
| KB, Box 180, 101 23 Stockholm, | services | |||||
| Sweden | ||||||
Kainos the Netherlands B.V. | Netherlands | Hogebrinkerweg 15 b, | Software | 100% | ||
3871KM, | Hoevelaken, Netherlands | services | ||||
Kainos Belgium BV | Belgium | 2160 | Wommelgem | Software | 100% | |
| Nijverheidsstraat 70, Belgium | services | |||||
Kainos Annual report 2024
Financial Statements
130
| Proportion of | |||||
| ordinary share | |||||
Subsidiary undertakings | Incorporated | Registered office | Principal activity | capital held | |
Kainos WorkSmart S.R.L. | Romania | Bucureşti Sectorul 4, Calea Văcăreşti, | Software | 100% | |
| Nr. 391, Intrarea A, Etaj 3, Sector 4, | services | ||||
| Bucuresti, Romania | |||||
Kainos AS | Norway | c/o Azets Insigt AS, | Software | 100% | |
| Drammensveien, 151, | services | ||||
0277 | Oslo, Norway | ||||
Kainos OÜ | Estonia | Harju maakond, Tallinn, | Software | 100% | |
| Lasnamäe linnaosa, | services | ||||
| Valukoja tn 8/1, 11415 | |||||
| Estonia | |||||
Blackline Group, Inc. | US | 522 | W Riverside Avenue, | Software | 100% |
Suite 4197, | Spokane, | services | |||
WA 99201, | USA | ||||
Kainos Argentina S.A.U. | Argentina | Av. del Libertador 498, 13th floor, | Software | 100% | |
| ‘South’, Buenos Aires, Argentina | services | ||||
Kainos (Philippines) Inc. | Philippines | 24/Floor Philam Life Tower, | Software | 100% | |
8767 | Paseo de Roxas Avenue, Brgy. | services | |||
| Bel-Air, Makati City, NCR, | |||||
| Philippines 1226 | |||||
RapidIT – Cloudbera, Inc. | US | 6110 | McFarland Station Dr, Suite 103, | Software | 100% |
| Alpharetta, GA 30004, USA | development | ||||
| Kainos cell, Mangrove Insurance | Guernsey | PO BOX 155, Mill Court, | Insurance cell | 100% | |
| Guernsey PCC Limited | La Charroterie, St Peter Port, | (redeemable | |||
| GY1 4ET, Guernsey | preference | ||||
| shares) | |||||
| Kainos Software | India | Plot No.1202 & 1215A, | Software | 100% | |
| Technologies Private Limited | 3rd Floor, SL Jubilee, Rd Number 36, | Jubilee Hills, Hyderabad, | development | ||
| Telangana 500033, India | |||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
16. Subsidiaries continued
131
Kainos Annual report 2024
Financial Statements
| Property | Other | Tot al | |
| (£000s) | (£000s) | (£000s) | |
| COST | |||
1 April 2022 | 6,555 | 87 | 6,642 |
Additions | 751 | – | 751 |
Disposals | (4,546) | – | (4,546) |
Exchange adjustments | 77 | – | 77 |
At 31 March 2023 | 2,837 | 87 | 2,924 |
Additions | 5,124 | – | 5,124 |
Disposals | (1,349) | (87) | (1,436) |
Exchange adjustments | 1 | – | 1 |
AT 31 MARCH 2024 | 6,613 | – | 6,613 |
| ACCUMULATED DEPRECIATION | |||
1 April 2022 | 3,420 | 56 | 3,476 |
Charge for the year | 1,154 | 9 | 1,163 |
Elimination on disposal | (3,074) | – | (3,074) |
Exchange adjustments | 96 | 2 | 98 |
At 31 March 2023 | 1,596 | 67 | 1,663 |
Charge for the year | 1,132 | 20 | 1,152 |
Elimination on disposal | (1,349) | (87) | (1,436) |
Exchange adjustments | 18 | – | 18 |
AT 31 MARCH 2024 | 1,397 | – | 1,397 |
| CARRYING AMOUNT | |||
AT 31 MARCH 2024 | 5,216 | – | 5,216 |
At 31 March 2023 | 1,241 | 20 | 1,261 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Depreciation expense on right-of use assets | 1,152 | 1,163 |
Interest expense on lease liabilities (note 7) | 320 | 64 |
Expense relating to short-term and low value leases | 726 | 722 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
TOTAL CASH OUTFLOW FOR LEASES | 1,512 | 1,861 |
Kainos Annual report 2024
Financial Statements
132
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Trade receivables | 35,368 | 35,693 |
Other receivables | 6,464 | 3,277 |
41,832 | 38,970 | |
Prepayments | 4,268 | 3,656 |
Accrued income | 33,225 | 38,808 |
79,325 | 81,434 |
Assets | Liabilities | Net | ||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | |
Accelerated capital allowances | – | – | (1,176) | (1,007) | (1,176) | (1,007) |
Share-based payments | – | 479 | (530) | – | (530) | 479 |
Right-of-use assets | 319 | – | – | – | 319 | – |
Lease Liability | – | – | (277) | – | (277) | – |
Short-term temporary differences | 5,901 | 3,834 | – | – | 5,901 | 3,834 |
Deferred tax on acquisitions | – | – | (1,461) | (203) | (1,461) | (203) |
| TAX (ASSETS)/LIABILITIES | ||||||
BEFORE SET-OFF | 6,220 | 4,313 | (3,444) | (1,210) | 2,776 | 3,103 |
Set-off of tax | (1,073) | (1,210) | 1,073 | 1,210 | – | – |
NET TAX (ASSETS)/LIABILITIES | 5,147 | 3,103 | (2,371) | – | 2,776 | 3,103 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
133
Kainos Annual report 2024
Financial Statements
19. Deferred tax continued
| Accelerated | Short-term | Deferred | |||||
| capital | Share-based | Right-of-use | Lease | temporary | tax on | ||
| allowances | payment | assets | liability | differences | acquisitions | Tot al | |
| (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | |
At 1 April 2022 | (364) | 1,928 | – | – | 2,921 | (203) | 4,282 |
Foreign exchange differences | – | – | – | – | 78 | – | 78 |
Adjustment for prior years | (778) | – | – | – | (366) | – | (1,144) |
Reclassification from corporation tax | – | (312) | – | – | – | – | (312) |
Debit to retained earnings | – | (931) | – | – | – | – | (931) |
(Debit)/credit to profit | 135 | (206) | – | – | 1,201 | – | 1,130 |
At 31 March 2023 | (1,007) | 479 | – | – | 3,834 | (203) | 3,103 |
Foreign exchange differences | – | – | – | – | (6) | – | (6) |
Adjustment for prior years | (150) | – | – | – | 850 | 17 | 717 |
On recognition of lease | – | – | 362 | (362) | – | – | – |
Acquired in business combination | – | – | – | – | – | (1,509) | (1,509) |
Debit to retained earnings | – | (968) | – | – | – | – | (968) |
(Debit)/credit to profit | (19) | (41) | (43) | 85 | 1,223 | 234 | 1,439 |
AT 31 MARCH 2024 | (1,176) | (530) | 319 | (277) | 5,901 | (1,461) | 2,776 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Cash at bank and in hand | 38,593 | 42,431 |
Short-term deposits | 82,965 | 65,871 |
CASH AND CASH EQUIVALENTS | 121,558 | 108,302 |
TREASURY DEPOSITS | 4,403 | – |
TOTAL CASH AND CASH EQUIVALENTS AND TREASURY DEPOSITS | 125,961 | 108,302 |
Kainos Annual report 2024
Financial Statements
134
21. Lease liabilities
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Less than one year | 1,317 | 640 |
One to five years | 3,925 | 835 |
More than 5 years | 1,837 | – |
7,079 | 1,475 | |
Less: unearned interest | (1,181) | (96) |
5,898 | 1,379 | |
| ANALYSED AS: | ||
Non-current | 4,883 | 585 |
Current | 1,015 | 794 |
The Group does not have a significant liquidity risk with regard to its lease liabilities.
Reconciliation of movement of liabilities to cash flows arising from financing activities
| 2024 | 2023 | |
| (£000s) | (£000s) | |
1 April | 1,379 | 3,361 |
New leases | 5,124 | 751 |
Cash flow on principal | (466) | (1,075) |
Cash flow on interest | (320) | (64) |
Interest Expense | 320 | – |
Termination of lease agreements | – | (1,496) |
Non-cash movement | (139) | (98) |
31 MARCH | 5,898 | 1,379 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Trade payables and accruals | 50,062 | 52,348 |
Deferred income | 44,954 | 37,087 |
Current tax liabilities | 7,069 | – |
Other tax and social security | 10,135 | 12,068 |
112,220 | 101,503 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
135
Kainos Annual report 2024
Financial Statements
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Property-related provision | 1,542 | 1,372 |
1,542 | 1,372 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Current | – | 341 |
Non-current | 1,542 | 1,031 |
1,542 | 1,372 |
| Tot al | |
| (£000s) | |
At 1 April 2023 | 1,372 |
Utilisation of provision | (341) |
Additional provision in the year | 511 |
AT 31 MARCH 2024 | 1,542 |
24. Share capital and reserves
| 2024 | 2023 | |
| (£000s) | (£000s) | |
| ISSUED AND FULLY PAID: | ||
| ORDINARY SHARES | ||
Opening balance | 623 | 619 |
Issued during the year | 6 | 4 |
TOTAL SHARE CAPITAL | 629 | 623 |
Kainos Annual report 2024
Financial Statements
136
24. Share capital and reserves continued
25. Share-based payments
Share-based payments
The Group has the following equity-settled share-based payment arrangements:
Kainos Group Performance Share Plan (PSP)
Share options are granted to employees as determined by the Remuneration Committee and will only vest in accordance with
the performance conditions established by the Committee. The options cannot generally be exercised within three years and
have a maximum life of 10 years. The options will be settled by the issue of new shares and there are no cash settlement
alternatives. Options ordinarily are forfeited if the employee leaves the Group before the options vest.
The specific performance conditions relating to the Group Performance Share Plan are described in further detail as part
of the Directors’ Remuneration Report.
Company Share Option Plan (CSOP)
Share options are granted to employees as determined by the Remuneration Committee. The CSOP is a sub-plan of the PSP
and permits the Company to grant CSOP options which have tax advantages pursuant to the provisions of Schedule 4 to the
Income Tax (Earnings & Pensions) Act 2003 (‘Schedule 4’). The options cannot be ordinarily exercised within three years and
have a maximum life of 10 years. Exercise of the options will be settled by the issue of shares and there are no cash
alternatives. Options ordinarily are forfeited if the employee leaves the Group before the options vest.
Save as you Earn (SAYE) Scheme
The Group has an all-employee share plan open to UK employees. Employees who participate enter into a savings contract
under which they agree to save between £5 and £150 per month (or such limit as may be permitted by the tax legislation
governing SAYE schemes from time to time) for three years. Options cannot be ordinarily exercised within three years and must
be exercised within six months of the end of the three-year period. Options ordinarily are forfeited if the employee leaves the
Group before the options vest. There are no cash settlement alternatives.
Republic of Ireland Share Option Scheme
The Group has a share option scheme for employees of Kainos Software Ireland Limited. This scheme utilised the PSP Scheme
to grant options to all eligible employees. Options cannot be ordinarily exercised within three years and must be exercised
within six months of the end of the three-year period. The options will be settled by shares and there are no cash alternatives.
Options ordinarily are forfeited if the employee leaves the Group before the options vest.
UK Share Incentive Plan (SIP)
The Group has established a Share Incentive Plan for UK employees. Under this scheme all eligible employees are awarded a
number of shares determined by length of service of each employee at a specified date for each respective grant. The shares
are held in trust for each employee by Equiniti Share Plan Trustees Limited, which also administers the scheme. A minimum
period of three years is imposed before the employee can withdraw. There are no cash settlement alternatives.
Republic of Ireland Restricted Share Scheme
The Group introduced a Restricted Share Scheme for all eligible employees of Kainos Software Ireland Limited. Under this
scheme all eligible employees were awarded a number of shares determined by length of service of each employee. A minimum
period of five years and one week is imposed before the employee can withdraw any free shares. The shares are held in trust
for the employees until they vest. There are no cash settlement alternatives.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
137
Kainos Annual report 2024
Financial Statements
25. Share-based payments continued
Share-based payments continued
Kainos Group plc Poland Share Plans
In order to replicate the share-based awards available to staff in the UK and Ireland, the Group implemented the Kainos Group
plc Poland Share Plan. The Remuneration Committee may grant Share Options or Conditional Share Awards (CSA) to
employees of the Group’s Polish subsidiary. Share options will not generally be exercisable within three years and have a
maximum life of 3.5 years. Conditional Share Awards may be granted for free or at a purchase price determined by the
Remuneration Committee. Conditional Share Awards will generally be subject to a minimum three-year vesting period. All
options and awards will be satisfied out of newly issued shares and there are no cash settlement alternatives. Options and
awards ordinarily are forfeited if the employee leaves the Group before vesting occurs.
Kainos Group plc US Share Plans
In order to replicate the share-based awards available to staff in the UK and Ireland, the Group implemented the US
Conditional Share Award (CSA) which applies to US employees only. The Remuneration Committee may grant Share Options or
Conditional Share Awards (CSA) to employees of the Group’s US subsidiaries. Share options will not generally be exercisable
within three years and have a maximum life of 3.5 years. Conditional Share Awards may be granted for free or at a purchase
price determined by the Remuneration Committee. Conditional Share Awards will generally be subject to a minimum three-
year vesting period. All options and awards will be satisfied out of newly issued shares and there are no cash settlement
alternatives. Options and awards ordinarily are forfeited if the employee leaves the Group before vesting occurs.
Fair values and awards outstanding
The fair value of shares awarded under the UK SIP scheme and the Republic of Ireland Restricted Share scheme is calculated
using the closing share price on the award date. The total charge is adjusted for attrition and recognised on a straight-line
basis over the three-year vesting period.
For share awards under the PSP, SAYE, CSOP, Republic of Ireland (ROI), US and Poland share option schemes, the fair value has
been measured using the Black-Scholes model. During the year options were granted on 23 June 2023, 17 November 2023 and
20 December 2023 (2023: 28 June 2022, 18 November 2022 and 2 December 2022) under the PSP and CSOP option schemes,
and under the US and Poland CSA schemes. The aggregate of the estimated fair values of the options granted on those dates
is £2.2 million (2023: £4.4 million). The following table lists the key inputs to the model used in the year of grant. In calculating
the fair value, the expected life of the options is based on historical data. Similarly, expected volatility was determined by
calculating the historical volatility of the Group’s share price over a period commensurate with the expected life of the option.
| Granted | Granted | |
| during year | during year | |
| to 31 March | to 31 March | |
| PSP | 2024 | 2023 |
Weighted-average exercise price | £0.01 | £0.01 |
Fair value at grant date | £7.64-£11.62 | £8.92-£10.49 |
Share price at grant | £10.93-£12.73 | £11.29 |
Expected volatility | 47%-48% | 47% |
Expected life (years) | 4.0-5.0 | 4.0 |
Risk-free interest rate | 3.5%-4.6% | 2.1% |
Expected dividends per annum | 2.2% | 1.7% |
| Granted | Granted | |
| during year | during year | |
| to 31 March | to 31 March | |
| CSOP | 2024 | 2023 |
Weighted-average exercise price | £13.14 | £10.81 |
Fair value | £4.43 | £2.69 |
Share price at grant | £12.73 | £11.29 |
Expected volatility | 47% | 47% |
Expected life (years) | 4.0 | 4.0 |
Risk-free interest rate | 4.6% | 2.1% |
Expected dividends per annum | 2.2% | 1.7% |
Kainos Annual report 2024
Financial Statements
138
25. Share-based payments continued
Fair values and awards outstanding continued
| Granted | Granted | |
| during year | during year | |
| to 31 March | to 31 March | |
| Poland CSA | 2024 | 2023 |
Weighted-average exercise price | £0.01 | £0.01 |
Fair value | £9.34 | £14.70 |
Share price at grant | £10.07 | £15.62 |
Expected volatility | 48% | 47% |
Expected life (years) | 3.25 | 3.25 |
Risk-free interest rate | 4.1% | 3.3% |
Expected dividends per annum | 2.2% | 1.7% |
| Granted | Granted | |
| during year | during year | |
| to 31 March | to 31 March | |
| US CSA | 2024 | 2023 |
Weighted-average exercise price | £0.01 | £0.01 |
Fair value | £9.34 | £15.15 |
Share price at grant | £10.07 | £16.10 |
Expected volatility | 48% | 47% |
Expected life (years) | 3.25 | 3.25 |
Risk-free interest rate | 4.1% | 3.3% |
Expected dividends per annum | 2.2% | 1.7% |
| Granted | Granted | |
| during year | during year | |
| to 31 March | to 31 March | |
| UK SAYE | 2024 | 2023 |
Weighted-average exercise price | – | £9.92 |
Fair value | – | £2.86 |
Share price at grant | – | £11.29 |
Expected volatility | – | 47% |
Expected life (years) | – | 3.25 |
Risk-free interest rate | – | 2.1% |
Expected dividends per annum | – | 1.7% |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
139
Kainos Annual report 2024
Financial Statements
25. Share-based payments continued
Fair values and awards outstanding continued
| Granted | Granted | |
| during year | during year | |
| to 31 March | to 31 March | |
| ROI share options | 2024 | 2023 |
Weighted-average exercise price | – | £9.92 |
Fair value | – | £2.86 |
Share price at grant | – | £11.29 |
Expected volatility | – | 47% |
Expected life (years) | – | 3.25 |
Risk-free interest rate | – | 2.1% |
Expected dividends per annum | – | 1.7% |
| Granted | Granted | |
| during year | during year | |
| to 31 March | to 31 March | |
| Poland share options | 2024 | 2023 |
Weighted-average exercise price | – | £9.92 |
Fair value | – | £2.86 |
Share price at grant | – | £11.29 |
Expected volatility | – | 47% |
Expected life (years) | – | 3.25 |
Risk-free interest rate | – | 2.1% |
Expected dividends per annum | – | 1.7% |
Reconciliation of outstanding share options and share awards
Number of share options 2023/2024
| PSP | UK SAYE | CSOP | US | ROI | Poland | Tot al | |
| (000s) | (000s) | (000s) | (000s) | (000s) | (000s) | (000s) | |
Outstanding at 31 March 2023 | 645 | 779 | 291 | 42 | 22 | 379 | 2,158 |
Granted during period | 142 | – | 44 | 42 | – | 54 | 282 |
Exercised during the period | (98) | (319) | (68) | – | (7) | (147) | (639) |
Forfeited during the period | (3) | (53) | (1) | (21) | (4) | (57) | (139) |
OUTSTANDING AT 31 MARCH 2024 | 686 | 407 | 266 | 63 | 11 | 229 | 1,662 |
EXERCISABLE AT THE END OF THE YEAR | 360 | 1 | 157 | – | – | – | 518 |
Weighted average exercise price 2023/2024
| PSP | UK SAYE | CSOP | US | ROI | Poland | |
| £ | £ | £ | £ | £ | £ | |
Outstanding at 31 March 2023 | 0.005 | 8.36 | 5.43 | 0.005 | 8.36 | 5.17 |
Granted during period | 0.005 | – | 13.14 | 0.005 | – | 0.005 |
Exercised during the period | 0.005 | 6.20 | 2.97 | – | 6.20 | 4.27 |
Forfeited during the period | 0.005 | 9.50 | 12.85 | 0.005 | 7.39 | 4.36 |
OUTSTANDING AT 31 MARCH 2024 | 0.005 | 9.91 | 7.41 | 0.005 | 9.92 | 4.68 |
EXERCISABLE AT THE END OF THE YEAR | 0.005 | – | 3.87 | – | – | – |
Kainos Annual report 2024
Financial Statements
140
25. Share-based payments continued
Reconciliation of outstanding share options and share awards continued
Number of share options 2022/2023
| PSP | UK SAYE | CSOP | US | ROI | Poland | Tot al | |
| (000s) | (000s) | (000s) | (000s) | (000s) | (000s) | (000s) | |
Outstanding at 31 March 2022 | 599 | 350 | 284 | – | 10 | 307 | 1,550 |
Granted during period | 104 | 465 | 41 | 43 | 12 | 199 | 864 |
Exercised during the period | (46) | (1) | (27) | – | – | (67) | (141) |
Forfeited during the period | (12) | (35) | (7) | (1) | – | (60) | (115) |
OUTSTANDING AT 31 MARCH 2023 | 645 | 779 | 291 | 42 | 22 | 379 | 2,158 |
EXERCISABLE AT THE END OF THE YEAR | 337 | – | 180 | – | – | – | 517 |
Weighted average exercise price 2022/2023
| PSP | UK SAYE | CSOP | US | ROI | Poland | |
| £ | £ | £ | £ | £ | £ | |
Outstanding at 31 March 2022 | 0.005 | 6.20 | 4.76 | – | 6.20 | 2.56 |
Granted during period | 0.005 | 9.92 | 10.81 | 0.005 | 9.92 | 4.45 |
Exercised during the period | 0.005 | 6.20 | 5.80 | – | – | 0.005 |
Forfeited during the period | 0.005 | 8.39 | 11.15 | 0.005 | – | 4.74 |
OUTSTANDING AT 31 MARCH 2023 | 0.005 | 8.36 | 5.43 | 0.005 | 8.36 | 5.17 |
EXERCISABLE AT THE END OF THE YEAR | 0.005 | – | 2.65 | – | – | – |
The weighted average share price at the date of exercise of share options exercised during the year was £11.78 (2023: £21.99).
The options outstanding at 31 March 2024 had an exercise price in the range of £0.005 to £14.66 (2023: £0.005 to £14.66) and
a weighted-average contractual life of 4.67 years (2023: 6.32 years).
Restricted shares
| UK SIP | ROI | Tot al | |
| (000s) | (000s) | (000s) | |
Outstanding at 31 March 2023 | 1,535 | 24 | 1,559 |
Granted during period | 357 | 6 | 363 |
Released during the period | (133) | (6) | (139) |
Forfeited during the period | (43) | (1) | (44) |
OUTSTANDING AT 31 MARCH 2024 | 1,716 | 23 | 1,739 |
Restricted shares
| UK SIP | ROI | Tot al | |
| (000s) | (000s) | (000s) | |
Outstanding at 31 March 2022 | 1,417 | 25 | 1,442 |
Granted during period | 345 | 5 | 350 |
Released during the period | (155) | (5) | (160) |
Forfeited during the period | (72) | (1) | (73) |
OUTSTANDING AT 31 MARCH 2023 | 1,535 | 24 | 1,559 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
141
Kainos Annual report 2024
Financial Statements
25. Share-based payments continued
Cash-settled share-based payment arrangements
The fair value of the amount payable to employees in respect of share options, which are settled in cash, is recognised as an
expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally
entitled to payment. Based on share price information, the liability is remeasured at each reporting date and at the
settlement date.
Cash-settled awards
| Tot al | |
| (000s) | |
Outstanding at 31 March 2023 | 296 |
Granted during period | 53 |
Released during the period | (26) |
Forfeited during the period | (27) |
OUTSTANDING AT 31 MARCH 2024 | 296 |
During FY24, the fair value of awards on the award date was £0.5 million. At 31 March 2024 the total liability (inclusive of social
security costs) recognised for all cash-settled awards outstanding was £0.6 million (2023: £1.5 million).
A further accrual of £0.8 million (2023: £1.3 million) has been recognised for social security costs in respect of PSP and
unapproved share-option schemes.
Expense recognised in the profit or loss
The Group recognised a total expense of £7.4 million related to share-based payment transactions during the year (2023:
£9.5 million). £7.8 million (2023: £8.2 million) has been recognised as an employee benefit expense in the share-based payment
reserve. Overall a credit of £0.4 million (2023: charge of £1.3 million) has been recognised relating to cash-settled share-based
payment arrangements and social security contributions associated with equity-settled share-based payment arrangements.
Kainos Group plc’s share price reduced from £13.82 at 31 March 2023 to £9.96 at 31 March 2024 resulting in a fair value credit
for cash-settled share-based payment arrangements recognised in the year.
Compensation for post-combination services
Of the total expense recognised above, £1.5 million (2023: £3.2 million) relates to compensation for post-combination
remuneration. In connection with the Group’s acquisitions there are contingent consideration arrangements in place, which are
subject to future service conditions being met and are settled through the allotment of shares. This equity-settled share-based
payment expense is recognised over the service periods based on the grant date fair value.
Kainos Annual report 2024
Financial Statements
142
27. Financial instruments
| Financial | ||||||
| assets at | Other | |||||
| amortised | financial | |||||
| FVPL | cost | liabilities | Tot al | Fair value | ||
| 31 MARCH 2024 | (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | Level |
| FINANCIAL ASSETS MEASURED AT FAIR VALUE: | ||||||
Investments in equity instruments | 1,299 | – | – | 1,299 | 1,299 | 3 |
| FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE: | ||||||
Trade and other receivables | – | 41,832 | – | 41,832 | – | – |
Cash and cash equivalents | – | 121,558 | – | 121,558 | – | – |
Treasury deposits | – | 4,403 | – | 4,403 | – | – |
| FINANCIAL LIABILITIES MEASURED AT FAIR VALUE: | ||||||
Cash-settled share-based payments and share-based social security costs | 1,421 | – | – | 1,421 | 1,421 | 1 |
| FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE: | ||||||
Trade payables | – | – | 1,565 | 1,565 | – | – |
Other tax and social security | – | – | 10,135 | 10,135 | – | – |
| Financial | ||||||
| assets at | Other | |||||
| amortised | financial | |||||
| FVPL | cost | liabilities | Tot al | Fair value | ||
| 31 MARCH 2023 | (£000s) | (£000s) | (£000s) | (£000s) | (£000s) | Level |
| FINANCIAL ASSETS MEASURED AT FAIR VALUE: | ||||||
Investments in equity instruments | 1,299 | – | – | 1,299 | 1,299 | 3 |
| FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE: | ||||||
Trade and other receivables | – | 38,970 | – | 38,970 | – | – |
Cash and cash equivalents | – | 108,302 | – | 108,302 | – | – |
| FINANCIAL LIABILITIES MEASURED AT FAIR VALUE: | ||||||
Cash-settled share-based payments and share-based social security costs | 2,771 | – | – | 2,771 | 2,771 | 1 |
| FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE: | ||||||
Trade payables | – | – | 3,860 | 3,860 | – | – |
Other tax and social security | – | – | 12,068 | 12,068 | – | – |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
143
Kainos Annual report 2024
Financial Statements
27. Financial instruments continued
Liabilities | Assets | |||
| 2024 | 2023 | 2024 | 2023 | |
| (£000s) | (£000s) | (£000s) | (£000s) | |
Polish Złoty | 85 | – | 209 | 48 |
Euro | 5,463 | 146 | 7,947 | 4,375 |
US Dollar | 4,553 | 583 | 2,936 | 537 |
Canadian Dollar | 4 | 1 | 3,791 | 3,300 |
Sterling | – | – | 438 | – |
2024 | 2023 | |
Polish Złoty | 5.038 | 5.312 |
Euro | 1.170 | 1.136 |
US Dollar | 1.263 | 1.238 |
Canadian Dollar | 1.710 | 1.676 |
Kainos Annual report 2024
Financial Statements
144
27. Financial instruments continued
Market risk continued
Foreign currency sensitivity analysis continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Polish Złoty | (1) | – |
Euro | (25) | (42) |
US Dollar | 16 | – |
Canadian Dollar | (37) | (33) |
| Interest rate impact | ||
| 2024 | 2023 | |
| (£000s) | (£000s) | |
1% increase in interest rates | 874 | – |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
145
Kainos Annual report 2024
Financial Statements
27. Financial instruments continued
Credit risk management continued
Trade receivables and accrued income continued
| Expected | Gross carrying | Loss | |
| loss rate | amount | allowance | |
| 31 MARCH 2024 | % | (£000s) | (£000s) |
Accrued income | <1 | 33,962 | 137 |
Not past due | 3 | 26,391 | 890 |
Past due 1-90 days | 2 | 8,796 | 176 |
Past due 91 + | 52 | 1,352 | 705 |
BALANCE AT 31 MARCH 2024 | 70,501 | 1,908 |
| Expected | Gross carrying | Loss | |
| loss rate | amount | allowance | |
| 31 MARCH 2023 | % | (£000s) | (£000s) |
Accrued income | <1 | 38,946 | 138 |
Not past due | 1 | 24,297 | 254 |
Past due 1-90 days | 4 | 11,572 | 489 |
Past due 91 + | 57 | 1,307 | 740 |
BALANCE AT 31 MARCH 2023 | 76,122 | 1,621 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Balance at the beginning of the period | 1,621 | 2,035 |
Remeasurement of loss allowance | 499 | (91) |
Amounts recovered during the year | (212) | (297) |
Amounts written off | – | (26) |
BALANCE AT THE END OF THE PERIOD | 1,908 | 1,621 |
Kainos Annual report 2024
Financial Statements
146
27. Financial instruments continued
Credit risk management continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
United Kingdom & Ireland | 32,612 | 41,277 |
North America | 25,034 | 23,652 |
Central Europe | 10,483 | 9,347 |
Rest of world | 464 | 225 |
68,593 | 74,501 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
147
Kainos Annual report 2024
Financial Statements
27. Financial instruments continued
Liquidity risk management continued
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Short-term employee benefits (emoluments) | 1,204 | 1,165 |
Post-employment benefits (pension contributions) | 9 | – |
Gains on exercise of share options | 9 | – |
Share-based payments charge | 163 | 139 |
1,385 | 1,304 |
| 2024 | 2023 | |
| (£000s) | (£000s) | |
Short-term employee benefits (emoluments) | 912 | 890 |
Gains on exercise of share options | 9 | – |
Share-based payments charge | 163 | 139 |
1,084 | 1,029 |
Kainos Annual report 2024
Financial Statements
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
29. Acquisitions
On 30 June 2023, the Group acquired 100% of the share capital of US-based RapidIT-Cloudbera, Inc. (‘RapidIT-Cloudbera’).
Established in 2017, RapidIT-Cloudbera is the creator of Genie, a Workday-focused automated testing product which has the
ability to rapidly auto-generate test cases, allowing customers to quickly launch their automated testing efforts. Genie is used
by over 100 organisations to streamline their testing activity.
The skills and knowledge of the RapidIT-Cloudbera team will allow us to accelerate our product development, increasing
the functionality of our market-leading automated testing product, Smart Test and enable us to quickly bring new products
to the market.
From 30 June 2023, RapidIT-Cloudbera has contributed revenue of £2.2 million and no profit or loss for the period. If the
acquisition had occurred on 1 April 2023, management estimates that consolidated revenue for the year ended 31 March 2024
would have been £383.1 million and consolidated profit for the period would have been £48.6 million.
The following table summarises the recognised amounts of assets and liabilities assumed at the acquisition date.
| Fair value | |
| (£000s) | |
Cash and cash equivalents | 340 |
Trade and other receivables | 281 |
Intangible assets | 5,569 |
Deferred tax liability | (1,509) |
Trade and other payables | (1,349) |
FAIR VALUE OF NET IDENTIFIABLE ASSETS | 3,332 |
Goodwill | 19,916 |
TOTAL CONSIDERATION | 23,248 |
SATISFIED BY: | (£000s) |
Cash | 23,248 |
TOTAL CONSIDERATION | 23,248 |
| (£000s) | |
Cash consideration | 23,248 |
Less cash and equivalents acquired | (340) |
NET CASH OUTFLOW | 22,908 |
Cash consideration
Our interim results for the six months ended 30 September 2023 reported consideration for this acquisition as £23.7 million.
The consideration payable was pending finalisation of a working capital adjustment which was settled during the second half
of FY24. This resulted in a refund of £0.5 million received from the sellers and as such the initial cash consideration has been
revised.
Goodwill
Goodwill has arisen on the acquisition and reflects the future economic benefits arising from assets that are not capable of
being identified individually and recognised as separate assets. The goodwill reflects the skilled and assembled workforce of
the acquired entity and the anticipated profitability and synergistic benefits arising from the combination for the Workday
Products division. None of the goodwill recognised is expected to be deductible for tax purposes.
Acquisition-related costs
The Group incurred acquisition-related costs of £0.4 million on legal and due diligence costs. These costs have been included
in operating expenses.
149
Kainos Annual report 2024
Financial Statements
29. Acquisitions continued
Compensation for post-combination services
In respect of all acquisitions of the Group, additional compensation for post-combination services of up to £3.3 million
(2023: £3.7 million) will be payable in future periods to March 2026, subject to future service conditions being met. Amounts
relating to compensation for post-combination services are recognised as an expense over the service period. During the year,
a charge of £3.8 million (2023: £4.2 million) has been recognised for compensation for post-combination services in operating
expenses. Of this amount £1.5 million (2023: £3.2 million) relates to share-based payment arrangements and has been credited
to equity.
30. Subsequent events
There have been no significant events subsequent to year end that would require adjustment or disclosure in these
consolidated financial statements.
Kainos Annual report 2024
Financial Statements
150
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
Notes
2024
(£000s)
2023
(£000s)
NON-CURRENT ASSETS
Investments in subsidiaries 4 9,025 6,524
Receivables 5 11,216 8,621
20,241 15,145
CURRENT ASSETS
Receivables 5 2,849 10,799
Prepayments 842 524
Cash at bank and in hand 83,239 55,385
86,930 66,708
Payables: Amounts falling due within one year (14,987) (8,902)
NET CURRENT ASSETS 71,943 57,806
TOTAL ASSETS LESS CURRENT LIABILITIES 92,184 72,951
NET ASSETS 92,184 72,951
CAPITAL AND RESERVES
Share capital 7 629 623
Share premium account 9,419 6,567
Share-based payments reserve 31,228 23,394
Capital reserve 8,820 8,820
Profit and loss account 42,088 33,547
SHAREHOLDERS’ FUNDS 92,184 72,951
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 £39.1 million (2023: £27.9 million).
The financial statements of Kainos Group plc (registered number 09579188) were approved by the Board of Directors and
authorised for issue on 17 May 2024.
They were signed on its behalf by:
Richard McCann
Director
17 May 2024
151
Kainos Annual report 2024
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 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 8,820 33,547 72,951
Profit and total comprehensive income ––––39,057 39,057
Issue of share capital – share options exercised 6 2,852–––2,858
Equity-settled share-based payments – – 7,834 – – 7,834
Deferred tax for equity-settled share-based payments ––––(94) (94)
Dividends ––––(30,422) (30,422)
BALANCE AT 31 MARCH 2024 629 9,419 31,228 8,820 42,088 92,184
COMPANY STATEMENT OF CHANGES IN EQUITY
Kainos Annual report 2024
Financial Statements
152
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 subsidiaries
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
153
Kainos Annual report 2024
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 £39.1 million (2023: £27.9 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 (2023: two).
2024
(£000s)
2023
(£000s)
Wages and salaries 778 865
Social security costs 108 125
Other pension costs 26 24
Share-based payments 125 139
1,037 1,153
Pension amounts for Richard McCann and Brendan Mooney are payments in lieu of pension.
Further information about share-based payments is provided in note 25 to the consolidated financial statements.
4. Investments in subsidiaries
(£000s)
COST AND CARRYING AMOUNT
On 1 April 2023 6,524
Additions 2,500
AT 31 MARCH 2024 9,025
During the year, the Company made an investment of £2.5 million in the Kainos cell of Mangrove Insurance Guernsey PCC
Limited. Further information is located in notes 3, 16, 20 and 27 of these financial statements.
Details of the Group’s subsidiaries at 31 March 2024 are included in note 16 of the consolidated financial statements.
5. Receivables
2024
(£000s)
2023
(£000s)
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
Amounts owed from Group undertakings 11,099 8,415
Deferred tax asset 117 206
11,216 8,621
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Amounts owed from Group undertakings 2,817 10,723
Tax receivable 32 –
Other receivables – 76
2,849 10,799
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.
Kainos Annual report 2024
Financial Statements
154
6. Payables: Amounts falling due within one year
2024
(£000s)
2023
(£000s)
Trade creditors and accruals 1,178 1,326
Bank overdraft – 7,325
Amounts owed to Group undertakings 13,770 214
Other tax and social security 39 37
14,987 8,902
Bank overdraft amount as at 31 March 2023 related 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 24 of the consolidated financial statements.
8. Distributable reserves
The Company’s distributable reserves as at 31 March 2024 total £63.8 million (2023: £45.6 million).
9. Commitments
As at 31 March 2024, the Company has no commitments.
As at 31 March 2023, the Company had an obligation, as part of the Group’s insurance arrangements, 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.
Further information regarding the Group’s insurance cell arrangements is detailed in note 27 of the consolidated
financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
155
Kainos Annual report 2024
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). Our adjusted results in the period
also exclude one-off gains recognised on sale of property,
plant and equipment and changes in fair value of our
investment property.
Adjusted profit margin: adjusted profit as a percentage of
revenue for the period.
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 CO2 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.
Existing customer revenue: total revenue recognised from
customers in the current period who were also customers in
the preceding year.
Net Promoter Score (NPS): a metric that organisations use to
measure customer loyalty toward their brand, product or
service, and can range from -100 to +100. Bain & Co, the
creators of the metric, held that a score above 0 is good; 20+
is favourable; 50+ is excellent and 80+ is world class.
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
customers.
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): a target for reducing
greenhouse gases and CO
2
emissions which is aligned with
the global effort to limit global warming to 1.5
O
C.
DEFINITION OF TERMS
Kainos Annual report 2024
Financial Statements
156
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:
shareholdersenquiries@linkgroup.co.uk
COMPANY INFORMATION
Designed and produced by www.farraday.com
Kainos plc’s commitment to environmental issues is reflected in this Annual Report,
which has been printed on Arena Smooth Extra White which is an FSC® material.
This document was printed by Maxim using its carbon neutral built indigo 7900,
which minimises the impact of manufacture on the environment. Maxim is also a
member of the carbon capture programme run by the Woodland Trust, which
offsets the carbon cost of paper by planting trees. 99% of paper waste is also
diverted from landfill and recycled.
kainos.com
Follow our story:
@KainosSoftware
Search 'Kainos'
Search 'Kainos'