Kainos Group

Website: Kainos Group
Index: FTSE 250
EPIC: KNOS
Supersector: Technology
Sector: Software and Computer Services
Subsector: Software
Market Cap: £1.27B
Payout Frequency: Semi-Annual

Kainos Group Dividend Analysis and Summary

Key Dividend Details

Interim dividend: 9.8p per share (H1 FY26), up +5% year-on-year (H1 FY25: 9.3p).
Ex-dividend date: 20/11/2025
Record date: 21/11/2025
Payment date: 12/12/2025
Recent final dividend (FY25): 19.1p, paid 24/10/2025.
Earnings cover (interim vs H1 earnings):
- Against adjusted diluted EPS of 18.9p: c. 1.9x cover.
- Against statutory diluted EPS of 16.7p: c. 1.7x cover.

Short Financial Context

H1 revenue: £196.1m (+7%).
Adjusted PBT: £32.0m (-16%); margin down to 16% (from 21%).
Adjusted diluted EPS: 18.9p (-16%).
Cash (incl. treasury deposits): £105.5m; no debt. Cash conversion: 48% (vs 75% LY) due to restructuring payments and working capital build.
Bookings: +27% to £227.9m; contracted backlog: £396.9m (+12%); Product ARR: £77.5m (+19%).

Capital Returns and Allocation

Progressive dividend policy reiterated; interim raised despite lower earnings.
Share buybacks:
- Completed/ongoing in FY25/H1 FY26: total £57.8m returned to date; 3.95m shares cancelled.
- New programme announced: up to £30.0m, commencing after 19/11/2025, over six months.
Other commitments: remaining £12.4m spend under Workday partnership; HQ capex commitments £34.3m; Davis Pier acquisition completed.

Analysis: Sustainability and Growth Trajectory

Sustainability: Interim dividend is covered c. 1.7–1.9x by H1 EPS. While coverage has tightened due to a 16% drop in profits and lower cash conversion, the balance sheet remains robust (net cash £105.5m, no debt) and the business is typically cash generative.
Growth signals: Bookings (+27%), backlog (+12%) and Product ARR (+19%) support forward revenue visibility. Management maintains FY26 adjusted PBT guidance (in line with consensus), suggesting no near-term pressure to cut the dividend.
Capital allocation: Concurrent buybacks and a progressive dividend indicate confidence. Share cancellations reduce the future cash cost of dividends per share, marginally supporting growth in DPS even if absolute cash outflows are managed.
Near-term headwinds: Margin compression (16% vs 21%) from higher partnership fees, NI costs, and contractor mix, plus temporarily weaker cash conversion, raise the payout ratio versus earnings. However, management expects some cost normalisation (replacing contractors) into FY27.

Structural Changes and Commentary with Dividend Implications

M&A: Acquisition of Davis Pier (Canada) broadens North American footprint; modest initial earnings contribution but strategically supportive of growth, potentially enhancing medium-term dividend capacity.
Share buybacks and cancellations: Material reduction in share count supports per-share dividend metrics.
Strategic partnership: Exclusive Workday resell arrangement for the Pay Transparency Analyzer could accelerate ARR and mix toward higher-quality recurring revenue, supportive for long-term dividend resilience.
Capex: New Belfast HQ build (commitments £34.3m) is a non-trivial call on cash but manageable given net cash and operating cash flow.

Risks and Flags to Dividend Stability

Operational margin pressure and higher fixed partnership fees (c. £7.8m p.a.), if not offset by growth and cost normalisation.
Lower cash conversion in H1 (48%) due to restructuring and working capital; sustained weakness would constrain free cash flow available for both dividends and buybacks.
Dependence on partner ecosystems (notably Workday) and associated execution/relationship risk.
Public sector exposure and macro/policy risk (e.g., NHS restructuring), FX movements, and talent market tightness.
Competing capital uses (M&A, HQ capex, buybacks) require continued discipline to avoid crowding out dividend growth if trading softens.

Dividends Used in Calculation:

Ex-Dividend Date	Payment Date	Type	Amount	Currency
02/10/2025	24/10/2025	Final	19.10p	GBX
20/11/2025	12/12/2025	Interim	9.8000p	GBX

Total (Annual Dividends Per Share): 28.90p

Dividend Yield = Annual Dividends Per Share (28.90p) ÷ Share Price (1066p) = 2.71%

Ex Dividend Date	Payment Date	Type	Amount	Currency
20/11/2025	12/12/2025	Interim	9.8000p	GBX
02/10/2025	24/10/2025	Final	19.10p	GBX
21/11/2024	13/12/2024	Interim	9.30p	GBX
03/10/2024	25/10/2024	Final	19.10p	GBX
23/11/2023	15/12/2023	Interim	8.20p	GBX
28/09/2023	20/10/2023	Final	16.10p	GBX
24/11/2022	16/12/2022	Interim	7.80p	GBX
06/10/2022	28/10/2022	Final	15.10p	GBX
25/11/2021	24/12/2021	Interim	7.10p	GBX
30/09/2021	29/10/2021	Final	15.10p	GBX
26/11/2020	18/12/2020	Interim	6.40p	GBX
06/08/2020	04/09/2020	Special	6.70p	GBX
28/11/2019	20/12/2019	Interim	3.50p	GBX
26/09/2019	25/10/2019	Final	6.50p	GBX
06/12/2018	28/12/2018	Interim	2.80p	GBX
20/09/2018	19/10/2018	Final	4.60p	GBX
07/12/2017	29/12/2017	Interim	2.00p	GBX
21/09/2017	20/10/2017	Final	4.40p	GBX
08/12/2016	30/12/2016	Interim	1.90p	GBX
29/09/2016	21/10/2016	Final	4.20p	GBX
03/12/2015	08/01/2016	Interim	1.80p	GBX

Year	Interim	Final	Special	Currency	Total	Change
2024	9.300	19.100		GBX	28.400	16.870
2023	8.200	16.100		GBX	24.300	6.110
2022	7.800	15.100		GBX	22.900	3.150
2021	7.100	15.100		GBX	22.200	69.460
2020	6.400		6.700	GBX	13.100	31.000
2019	3.500	6.500		GBX	10.000	35.130
2018	2.800	4.600		GBX	7.400	15.620
2017	2.000	4.400		GBX	6.400	4.910
2016	1.900	4.200		GBX	6.100	238.880
2015	1.800			GBX	1.800

Number of Shares:

Payment	Paid	Amount
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