Belfast firm Kainos gives investors an unwanted surprise

When Belfast software company Kainos announced its annual results in May, they were so robust that the company’s share price soared to a high of nearly £12.80 (€11.55), having traded down about £9 only a month before.
However, anyone expecting its revenues — or its share price — to leap similarly for the current fiscal year got a rude awakening last week when the company said it would likely miss the market guidance for this year.
The market had been expecting a healthy jump in both sales and profits for this year, following on from sales of £382.4 million in 2023 and a profit of £77.2 million.
In its statement, Kainos — which has a partnership with US software giant Workday — said that “due to the tougher trading environment in services in the financial year to date, expects only a small increase in overall revenues, which will be below current market consensus forecasts”.
Analysts expected an average of about £415.5 million in overall revenue, with an adjusted pretax profit of about £79.1 million.
While the company still expects “to deliver adjusted [profit before tax] in line with current market consensus forecasts”, its revenue growth will be significantly below that.
It appears that some of its divisions aren’t thriving as well as others.
The company said in its digital services division there had been “sustained demand from our public sector clients offset by some delays around project mobilisation”, while its healthcare revenues continued to grow.
There was a weakness in demand from commercial clients, it said, but this had been previously flagged to the markets. Overall there had been a “subdued” start to the year.
Things seemed less rosy in its partnership with Workday Services, where it said that the “win rate remained robust” but that “contract wins and values have been lower than in previous periods, and there has been more aggressive pricing amongst partners”. Taken together, it said, “this has impacted our divisional performance in the short term”.
Since the announcement, Kainos’s shares have slumped again and were trading at about £9.30 for most of the week.
Investors will be paying very close attention on November 11th, when the company publishes its half-year results, when the full details of that trading performance can be properly analysed.