Profits up 14% to £77m at Belfast IT group Kainos despite “subdued growth environment”

Belfast-based IT group Kainos has reported a 14% annual uplift in its adjusted pre-tax profit to £77.2 million, despite what the company said had been “a more subdued growth environment” in the past year.

The London-listed tech firm’s share price rose sharply on Monday after it reported 2% increase in revenue to £382.4m for the year to March 31 2024, representing its 14th consecutive year of growth.

It saw Kainos’ share value largely recover from a sharp slump in November 2023 in response to its half-year report.

Russell Sloan, who succeeded Brendan Mooney as group CEO on September 21 last year, said the full-year financial performance reflected “disciplined execution in the current macro-economic climate”.

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He added: “We have been focused on our operational performance, maintaining the appropriate balance between growth, international expansion, investment for the future and profitability.”

Despite the headline performance, Kainos’ biggest division, digital services, saw its annual revenues fall 5% to £213.1m, largely the result of a 19% fall in commercial revenue, due to financial services clients in particular cutting back on spending.

“It’s an economic cycle, it will recover at some point,” said Mr Sloan.

Healthcare revenue was also down by 11%, as pandemic-related spending eased last year.

Digital transformation contracts for government and public sector was worth around £138m to the Belfast company last year.

Kainos’ Workday products and Workday services divisions also performed well in 2023/24, with the former growing 28% year-on-year.

Workday is a suite of software for managing finances and human resources.

The international side of the Kainos business is also growing, with revenues up 13% year-on-year to £149.8m.

The company now has 14 offices worldwide, employing 2,995 staff.

While the workforce total is only marginally up on last year’s figure, the company said it had cut the number of contractors it employs by 80% (from 209 to 42), and focused on recruiting more entry level staff.

Tech firms traditionally source more expensive contractors when they need to ramp up work quickly.

Russell Sloan said the company’s long-term focus remains getting people in at an early stage in their career and allowing them develop through the organisation.

“We prefer to work with our own staff, I think it’s better quality, certainly a better cost base.”

Kainos also added 78 people from India to its workforce after acquiring RapidIT-Cloudbera in July 2023.

The slight change in the mix of staff resulted in a 1% decrease in the average salary cost last year.

Kainos also revealed staff retention levels increased from 88% to 93% last year.

Mr Sloan said it reflected a broader trend in the job market, where people are being more cautious about moving jobs.

The Kainos CEO confirmed the tech group is aiming to move into its new Belfast headquarters in early 2027.

Planning approval for its new high-rise office tower on Dublin Road was granted last month.

“It’s really exciting. I think it will be fabulous for that area of Belfast.”