Kainos Group Reports 7% Revenue Growth in H1 2025, Announces £30m Share Buyback

Importantly, just after the period end, Workday chose Kainos’ new Pay Transparency product for an exclusive resell – “Pay Transparency Analyzer powered by Kainos”. With EU pay disclosure rules from June 2026, this is a timely, scaled channel for growth with potentially attractive unit economics.

• Customer base: more than 600, with around 40% now taking two or more products.
• Investment continues: R&D £8.6 million (+12%, all expensed) and sales & marketing £10.0 million (+61%), including partnership costs.
• Backlog up 27% to £160.3 million – solid revenue visibility.

My take: this remains the structural equity story. ARR growth, higher gross margins (77.7%), and Workday’s distribution give Kainos a long runway. Execution against the £100 million 2026 ARR target is the near-term yardstick.

Digital Services: healthcare leads, North America accelerates

Digital Services revenue rose 6% to £103.5 million. The mix tells the story:

• Healthcare jumped 33% to £29.6 million, aided by wins with NHS England.
• Public sector dipped 3% to £59.7 million, but Kainos booked chunky wins, including a four-year DVSA contract worth up to £73 million and new Home Office work. Management expects “meaningful” H2 growth.
• Commercial was deliberately deprioritised and fell 39% to £6.4 million.
• North America revenue surged 152% to £7.8 million, helped by momentum in Canada and the acquisition of Davis Pier (120 colleagues) on 15 September 2025.

Digital Services’ gross margin eased to 35.8% from 38.4%, reflecting a higher share of partnered engagements which typically carry lower margins. That is a watch item, but the order book points to better scale in H2.

Workday Services: back to growth, pipeline strengthening

Workday Services revenue increased 4% to £53.4 million as the Americas recovered faster than EMEA. Bookings were strong at £54.0 million (+35%) and the period-end backlog was £62.1 million.

The business remains the leading Workday consulting specialist in Europe and seventh globally by certified consultant numbers, with expansion in Australia, New Zealand and early moves in Latin America. Margin pressure from pricing is still evident (49.8% gross margin versus 54.0% last year) but improving versus H2 25.

Cash, dividends and buybacks: disciplined returns, lower conversion

Kainos finished the half with £105.5 million of cash and no debt after returning £28.2 million via buybacks, starting construction of a new Belfast HQ, and acquiring Davis Pier. Cash conversion was 48% (75% last year), held back by restructuring cash paid from FY25 and a working capital rebuild as revenue returned to growth.

• Interim dividend: 9.8p per share, up 5%.
• New buyback: £30.0 million to follow the current programme from 19 November, to be executed over six months.
• Since H1 25, £50.8 million has been returned through buybacks, with 3,952,667 shares cancelled in the period.

Opinion: the balance sheet remains robust even after returns. The lower cash conversion is explainable, but investors will want to see it normalise as H2 deliveries land.

Customer metrics and AI traction add resilience

Customer satisfaction stayed high with a Net Promoter Score of 70 (58). Existing customers delivered £166.6 million of revenue, up 12%, and total customers rose to 1,169. That stickiness matters when macro is choppy.

AI-related revenues increased 6% to £15.3 million, with over 65% of Digital Services teams enabled on AI tooling. Kainos now has three AI solutions in the Workday Marketplace and launched its first Agentic AI solution on the Workday Agent Marketplace, plus a Microsoft AI Centre of Excellence pushing agentic technologies. It is still early, but the partnerships and reference wins position Kainos well.

Outlook: revenue growth set to accelerate, profit discipline stays “prudent”

Management expects all three divisions to grow revenue in H2 26. Workday Products should continue its ARR progress, Digital Services should see a step-up as H1 wins deliver, and Workday Services is set for further improvement as Europe and North America recover and APAC/LatAm scale.

Profit guidance is intentionally cautious, with adjusted PBT expected to be in line with consensus. The main swing factors are contractor unwind, pricing in Workday Services, and the pace of EU Pay Transparency adoption through Workday’s channel.

What I like, what worries me

Positives

• Sales momentum: bookings up 27% and backlog up 12% give strong H2 visibility.
• Workday Products engine: 19% ARR growth, 77.7% gross margin, and the exclusive Workday resell for Pay Transparency.
• Public and healthcare exposure: sticky spend, plus tangible contract wins such as DVSA.
• Disciplined capital allocation: rising dividend and another £30.0 million buyback backed by a debt-free balance sheet.

Watch items

• Margins: contractor mix, partnership fees and rate pressure pulled margins down. Execution on hiring and pricing is key.
• Cash conversion: 48% this half; improvement in H2 would reassure.
• Commercial sector softness: deprioritised for now, so growth leans on public, healthcare and Workday ecosystems.

Bottom line

This is a classic “investing through the cycle” update. Kainos traded through cost headwinds to grow revenue, stacked up new work, and kept guidance steady – while handing shareholders more cash via a higher dividend and another buyback. If the company converts the order book cleanly in H2 and maintains ARR momentum, the investment case tilts back towards margin rebuild in FY27 and compounding subscription growth from Workday Products.

For now, watch the cadence of Pay Transparency sales through Workday, the healthcare programme ramp in the UK, and cash conversion as deliveries accelerate.