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Near-term uncertainty doesn’t shake confidence in IT transformation firm
Thursday 30 Apr 2020 Author: Steven Frazer

KAINOS (KNOS) 677p  

Loss to date: 5.7%

Original entry point: Buy at 718p, 19 December 2019


Given a primarily UK Government and healthcare customer base, Kainos (KNOS) is in a considerably better position than other more enterprise-focused IT consultancy businesses.

But while public sector digital transformation budgets haven’t necessarily been cut, it will be interesting to see if the type of projects are changing, from big-ticket digital transformation infrastructure to more immediate enabling solutions around remote working, security, data optimisation and cloud delivery.

What that might mean for the company’s previously racing and lucrative Workday practice remains to be seen, although there has been precious little negative evidence to date.

Sensible cost and cash saving measures have been put in place, including axing the final dividend (saving £8m) and the executive team taking pay cuts of between 50% and 100% this year. The balance sheet remains bulletproof with more than £40m of cash and no debt.

We should get information about future earnings expectations when 2020 results are published on 26 May.


SHARES SAYS: Analysts widely see Kainos as being well positioned for the recovery when it comes. We agree, so keep buying the shares.

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