Kainos Shares Plunge as Company Cuts Full-Year Revenue Expectations

Kainos Group (LON: KNOS), a UK-based IT provider, saw its share price plummet by 14.5% on Thursday after the company released a trading update, lowering its full-year revenue expectations.

Kainos shares are currently trading around the 732p per share mark, their lowest level since June 2020.

While the company's Workday Products division continues to perform strongly, it said its Digital Services and Workday Services divisions have been impacted by the challenging macroeconomic environment and client decision-making delays.

Given the challenges, Kainos said it has moderated its expectations for the second half of the year and now expects that for the year ending March 31, 2025, it will deliver revenues “moderately below current market consensus with the majority of the reduction flowing through to adjusted PBT.”

In particular, the Digital Services division is said to have experienced delays in public sector client decision-making, which has been heightened by the recent change in government and the upcoming budget announcement.

Kainos explained that although the company anticipates increased activity in the coming weeks, it remains dependent on timely decisions from clients.

The Workday Services division has also faced challenges, with a decline in revenue over the past six months due to fewer and smaller new contracts.

“As outlined in our September Trading Statement, our Workday Services division has continued to win new contracts, however, the number and value of these new contracts have been lower than in previous periods and has resulted in a decline in revenue during the last six months,” the company explained.

While Kainos expects increased activity in the second half of the year, it is taking a more cautious approach to timing.

To counter the impact of the challenges, Kainos is implementing cost-cutting measures, including reducing discretionary spending and minimizing the use of contractors.

The company is also reallocating staff to its high-growth areas, such as Workday Products and the Healthcare sector within Digital Services.

Despite the downward revision to its full-year outlook, Kainos remains optimistic about its long-term prospects. The company believes it is well-positioned in its core markets, which offer significant growth opportunities across all its divisions.

Kainos intends to initiate a share buyback program, which it will announce alongside its interim results on November 11.