Kainos Group Regulatory News (KNOS)

ANNOUNCEMENT

16 March 2016

Kainos Group plc

("Kainos" or "the Company")

Trading Update and transition to Evolve SaaS delivery model

Company performance in-line with expectations for year ending 31 March 2016

Kainos Group plc (LSE:KNOS), a leading UK-based provider of IT, consulting and software solutions, today issues a trading update for the year ending 31 March 2016. The Board expects results for the full year to be in-line with market expectations.

Current Trading

In the public sector, Kainos continues to see an improvement in market conditions. This is expected to result in a further gradual increase in opportunities across government departments such as the Ministry of Justice, where Kainos is providing support for an ambitious reform programme, and at the Office of National Statistics (ONS), where the Company has recently been awarded a new contract to work jointly with the client to provide comprehensive registers to improve the quality and cost effectiveness of the 2021 UK census. The Company remains optimistic around the increasing drive for digitisation in the NHS and other government departments and believes that its Digital Services and Evolve divisions are well-placed to benefit from these positive market dynamics.

Outside government, the Company is encouraged by opportunities in its Evolve and WorkSmart divisions, particularly in the US and mainland Europe, where it has established offices in Boston and Amsterdam. The Company's WorkSmart division is experiencing a growing pipeline of opportunities for both its services implementation business, largely centred in the UK and mainland Europe, and its SaaS-based automated testing product, Kainos Smart. At March 7, the Company had 56 customers using Kainos Smart, including Shire Pharmaceuticals and Mizuho Bank, and has recently won its first mainland European prime engagement contract in the Netherlands.

Transition to Evolve SaaS delivery model

In Evolve, customers are showing a significantly greater interest in a SaaS delivery model rather than in the perpetual licence model currently offered. Recent SaaS wins include InTouch Health, a leading provider of telehealth solutions, which as separately announced today signed a five-year agreement to deploy the Evolve Integrated Care SaaS platform to support telehealth applications in over 1,500 hospitals in the US and Europe, and the recently announced partnership with Cirdan Imaging Limited, a privately-owned supplier of medical diagnostic hardware and software, which in February licenced the Evolve SaaS product for five years. In a landmark deal in the UK, Kainos Evolve has also been selected as a preferred supplier to provide the Evolve Integrated Care platform to a major Clinical Commissioning Group (CCG).

Such SaaS contracts provide Kainos with greater revenue visibility and more durable, longer-term client relationships. To capitalise on these and similar opportunities, the Company plans to invest further in both product development and sales and marketing. These two initiatives, particularly the transition to SaaS, while improving the quality of Evolve's future earnings, are however likely to have a short-term impact on Evolve's revenue, profits and cash generation in the financial year ending 31 March 2017. The Directors believe this change to the Evolve delivery model is in the best interests of the Company in maximising Evolve's market penetration.

The Company has a strong balance sheet with strong reserves, no debt and strong cash generation, as well as a growing level of recurring revenue. Recruitment remains strong, with 39 people joining Kainos in January alone, and the Company's position rose for the sixth consecutive year to 37th place in the 'Sunday Times Best Companies to Work For'.

Investor/analyst event

Kainos will hold a Capital Markets Day for investors and analysts on Tuesday 19 April 2016 to explore in more detail the drivers of the Company's current and future success. 

-ENDS-

For further information, please contact:

Kainos via FTI Consulting LLP

Brendan Mooney, Chief Executive Officer

Brian Gannon, SVP Corporate Development

Investec Bank plc +44 20 7597 0000

Dominic Emery/Sebastian Lawrence

Patrick Robb/Matt Lewis

FTI Consulting LLP +44 20 3727 1000

Matt Dixon/Chris Lane

About Kainos

Kainos is a UK-based provider of IT services, consulting and software solutions. The Group specialises across multiple sectors in the development of digital technology solutions, including software design and agile software development. The company's Evolve Electronic Medical Records (EMR) product provides a market-leading comprehensive suite of digital services to healthcare providers such as hospitals and community care organisations. Kainos has also developed an automated testing product, Smart, to complement its Workday implementation services.

Kainos Group plc (KNOS) is listed on the main market of the London Stock Exchange. At 30 December 2015, it had almost 800 staff working in eight offices in the USA, UK, Ireland, Poland and the Netherlands.

For further information please visit the company website: https://www.kainos.com/