Kainos : 2023 Annual Report

TRUE PARTNERS CHANGE THE WORLD TOGETHER

2023 ANNUAL REPORT

WE ARE A UK-HEADQUARTERED IT PROVIDER WITH EXPERTISE ACROSS THREE DIVISIONS:

DIGITAL SERVICES, WORKDAY SERVICES, AND WORKDAY PRODUCTS.

Digital Services develops and supports custom digital service platforms for public sector, commercial, and healthcare customers. Our solutions transform the delivery of these services, ensuring they are secure, accessible, and cost-effective, and provide better outcomes for users.

Workday Services specialises in the deployment of Workday, Inc.'s Finance, HR and Planning products to leading organisations across Europe and North America. We are one of Workday's most respected partners, experienced in complex deployment and trusted by our customers to launch, test, expand, and support their Workday systems.

Workday Products develops products that complement Workday. Our Smart product suite, including Smart Test (for automated testing), Smart Audit (for compliance monitoring), and Smart Shield (for data masking), are used by more than 350 customers globally to safeguard their Workday systems.

Our people are central to our success. We employ more than 2,900 people in 22 countries across Europe and the Americas.

Kainos is listed on the London Stock Exchange (LSE: KNOS).

For further information, please visit

www.kainos.com

CONTENTS

Strategic report

1. Financial highlights
2. Operational highlights

1. Kainos at a glance

1. Chief Executive Officer's statement

1. Our markets

1. Our business model

1. Our strategy

1. Operational review

1. Our environmental, social and governance (ESG) commitments

1. Financial review

1. Key Performance Indicators (KPIs)

1. Risk factors and uncertainties

1. Viability and non-financial information statements

Corporate governance

60 Director's biographies

1. Corporate Governance Report

1. Nominations Committee Report

1. Audit Committee Report

1. Director's Remuneration Report

1. Annual Report on Remuneration

1. Directors Report

Financial statements

98 Independent Auditor's Report to the members of Kainos Group plc

105 Consolidated income statement

1. Consolidated statement of compre- hensive income
2. Consolidated statement of financial position
3. Consolidated statement of changes in equity
4. Consolidated statement of cash flows
5. Notes to the consolidated financial statements

151 Company statement of financial position

152 Company statement of changes in equity

153 Notes to the Company financial statements

156 Definition of terms

156 Company information

Kainos Annual report 2023	01

FINANCIAL HIGHLIGHTS

"WE HAVE RECORDED OUR 13TH CONSECUTIVE YEAR OF GROWTH ACROSS A WIDE RANGE OF KEY METRICS. OUR VERY STRONG BUSINESS PERFORMANCE REFLECTS ROBUST UNDERLYING MARKET DEMAND, HIGH LEVELS OF CUSTOMER ENGAGEMENT AND THE ONGOING COMMITMENT OF OUR COLLEAGUES."

£374.8	Change +24%	£47.9	Change +40%
Revenue (m)		Product Annual Recurring Revenue (ARR) (m)
2022: £302.6m		2022: £34.3m
£54.3 Change +18%	£322.9 Change +24%
Statutory profit before tax (m)		Contract backlog (m)
2022: £46.0m		2022: £259.7m
£67.6	Change +15%	33.1p	Change +16%
Adjusted pre-tax profit (m)		Diluted earnings per share (pence)
2022: £58.8m		2022: 28.5p

£108.3 Change +41%

Cash (m) 2022: £76.6m

£427.8 Change by +22%

Bookings (m) 2022: £349.8m

42.5p Change +12%

Adjusted diluted earnings per share

2022: 38.1p

23.9p Change by +8%

Total dividend per share

2022: 22.2p

02 STRATEGIC REPORT

Kainos Annual report 2023

OPERATIONAL HIGHLIGHTS

+51%

increase in revenue for Commercial

Commercial sector customers now generate half our revenues.

Commercial	Healthcare
revenues are up	revenues, as
51% to £186.4	anticipated, have
million (2022:	reduced by 26% to
£123.8 million),	£50.4 million (2022:
representing 50%	£67.9 million),
of total revenue.	which is 13% of
	total revenue.
Public sector
revenues up 24%
to £138.0 million
(2022: £111.0
million) or 37%
of revenue.

88%

employee retention

We continue to grow a global, talented and engaged team.

We now have 2,990 people (2022: 2,692) based across 22 countries.

Our employee retention has increased to 88% (2022: 86%), and engagement levels remain high, measuring 81% on our internal surveys, and we were again awarded '50 Best Places To Work in the UK' by Glassdoor.

For more information on

our people see pages 32 to 40

+12%

increase in customer numbers

Excellent customer service drives customer satisfaction and retention, underpinning revenue growth.

Customer
approval rating(1)
remains high at	Customer numbers
99% (2022: 98%).	increased to 821
	(2022: 731), an
	increase of 12%.
Existing customer
revenue increased
by 26% to £337.6
million (2022:
£267.7 million),
which represents
a Net Revenue
Retention of 126%.

For more information on our customers see page 18

1. Data from all completed customer surveys in the year. There are five possible designations: 'Poor', 'Satisfactory', 'Good', 'Very Good' or 'Excellent'; the rating reflects the percentage of customers that rate our performance 'Good' or better.

+52%

increase in international growth

We continue to grow as a global business with over one-third of revenues generated internationally.

Very strong international growth, up 52% to £132.0 million (2022: £87.0 million), and now representing 35% of total revenue.

Kainos Annual report 2023	03

2025

on track to achieve carbon net zero

We continue with our ambition to be a responsible organisation.

We retained our	We hosted over
carbon neutral	1,800 young people
status in 2023 and	on our outreach
remain on track to	programmes,
achieve carbon net	including targeted
zero by 2025.	programmes
	aimed at improving
	gender diversity,
Our gender	supporting social
mobility and for
balance improved,
those students
with the proportion
with special
of women in Kainos
educational needs.
increasing to
34% (2022: 33%),
well above the
industry average
of 22%(2); and we
remain committed
to further
improvement.

(2) BCS diversity report 2022: Women in IT.

+49%

increase in revenue for Workday Services

We continue to be the leading pan-European Workday specialist and during the year we were appointed Workday Phase 1 Prime partner in the

US market.

Workday Services recorded very strong revenue growth of 49% (41% organic) to £105.7 million (2022: £70.9 million).

Our international expansion continues with North America now representing over half of Workday Services revenues at £55.9 million (2022: £30.4 million) an increase of 84%.

For more information on Workday

Services performance see page 19

+12%

increase in revenue for Digital Services

In Digital Services, we continue to deliver significant digital transformation programmes across the public sector, commercial sector and healthcare.

This extensive project portfolio has driven strong revenue growth of 12%, with Digital Services revenues increasing to £224.4 million (2022: £199.8 million).

Customer demand remains strong as digital transformation continues to be a business and political priority.

For more information on Digital Services performance see pages 18 to 19

+40%

increase in revenue for Workday Products

Our Workday-related products, Smart Test, Smart Audit and Smart Shield delivered very strong growth, and we remain on track to achieve our target of

£100 million ARR by 2026.

Workday Products	We continued to
revenues grew	invest in our
40% to £44.7	Workday
million (2022:	Products,
£31.9 million) and	increasing
ARR increased by	research &
40% to £47.9	development
million (2022:	expenditure by
£34.3 million).	52%, to £9.1
	million (2022: £6.0
	million) and sales
	& marketing
	spend increased
	135% to £10.8
	million (2022:
	£4.6 million).

For more information on Workday

Products performance see page 20