Kainos FY25: A Tale of Two Halves (and a Glimpse of the Future)
If Charles Dickens analysed tech stocks, he might describe Kainos’ latest results as “the best of times and the worst of times” – a year where double-digit growth in AI and Workday Products collided with election-induced paralysis and services sector headwinds. Let’s unpack what matters for investors.
The Numbers: Less “Growth Stock”, More “Reset Year”
The headline figures make sober reading:
- 📉 Revenue down 4% to £367.2m
- 📉 Adjusted pre-tax profit -15% to £65.6m
- 📉 Services divisions dragging: Digital Services -7%, Workday Services -12%
But look closer and you’ll find green shoots:
- 📈 Workday Products revenue +24% to £71.3m
- 📈 Product ARR +20% to £72.6m (nearing £100m 2026 target)
- 📈 Healthcare sector growth +14% to £50.6m
The Elephant in the Server Room: Restructuring
That 7% headcount reduction (190 roles) wasn’t just cost-cutting theatre. Management’s playing 4D chess here:
- £19m savings – but £12.7m being reinvested in AI, product dev, and international expansion
- Focus shifting from “bums on seats” services to IP-driven products
- Glassdoor ranking actually IMPROVED to 14th best UK workplace post-cuts
Workday Products – The New Growth Engine?
This division’s becoming the crown jewel:
- 3 of 20 AI solutions on Workday Marketplace
- 5th product launch (pay equality tools) coming late 2025
- “Built on Workday” partnership could be game-changer – incentivises Workday’s own sales team to push Kainos products
AI: From Science Project to Revenue Driver
£41.1m AI revenue (+61% YoY) isn’t just vanity metrics:
- 250+ AI professionals now embedded across teams
- Microsoft AI Centre of Excellence launched
- Real-world use cases: UN migration tracking, HM Land Registry doc analysis
But here’s the kicker – AI now represents 21% of Digital Services revenue. This isn’t R&D spend – it’s commercialisation.
Geopolitical Headwinds & Silver Linings
The UK election hiatus hurt public sector deals, but:
- Contracted backlog up 3% to £368.2m
- International revenue now 41% of total
- First APAC wins in Australia/NZ signal global ambitions
Management’s Balancing Act
CEO Brendan Mooney’s walking a tightrope between:
- 🔄 Reinvesting vs. returning capital (£30m buyback completed, another £30m planned)
- 🌍 UK focus vs. international expansion (Canada up 71% to £8.9m)
- 🤖 Services margins vs. product-led growth
The Verdict: Cautious Optimism with Training Wheels
Kainos isn’t out of the woods yet. The 12.7x EV/EBITDA multiple (vs sector avg 15x) suggests the market’s pricing in continued services sector pain. But between:
- ⚡ AI commercialisation accelerating
- 🛠️ Workday Products’ annuity-style revenue
- 🇪🇺 EU Pay Directive creating regulatory tailwinds
…there’s a path to regaining growth stock status. Just don’t expect a straight line recovery.
The real question for investors: Is this a legacy IT services firm in decline, or a SaaS/product business in gestation? FY26’s £100m ARR milestone could be the answer.
