Kainos Group plc (KNOS) Earnings Call Transcript & Summary

Good morning, everyone. Richard and I are here in Belfast. It's a lovely, a terminal morning here in Belfast, and we're delighted to welcome you to the presentation to discuss our 6-month performance to the end of 30th of September 2025. So thank you very much for making the time. I know we've been communicating quite a lot over the last little while. We had a trading update in September, Capital Markets event 2 weeks ago. So I thank you for making the time to join us here again this morning. So a couple of quick housekeeping points. The presentation from Rich and I will be roughly 35 minutes. During the presentation, your connection will be muted. At the end of the presentation, FTI will moderate the Q&A section. And we're recording this broadcast, and we will publish it to our website either later this evening or tomorrow morning. So again, thank you very much for joining us today. In terms of the structure, you'll be very familiar with this over the last 10 years. I'll give a quick business overview. Richard will dive into our financial performance. I'll then take the opportunity to talk about each of our divisions in turn, and we'll finish off with our session about looking ahead. We use this slide a lot. Richard used it a couple of weeks ago at the Capital Markets event. But for us, it really just kind of emphasizes a number of key points. So the point number one is that our divisions operate in great markets. Those markets that we operate in are large and they're growing. They're international in terms of the scope, and they support us achieving strong margins in those markets. And for us, we're really well established in those markets. So we're really pleased to be in those kind of really substantial markets. The chart, I think, also tell a story of the challenges of last year, fiscal '25. And as you'll know from the results that we published this morning and today's conversation is very much about a return to growth. So we work with some amazing organizations across the world. We're very proud of the work that we do for them and the long-term nature of our relationships as well. So we work with over 1,100 customers from across the globe. And I do mean globe, over half of our customers are based outside the U.K. As we do with every update, we add a few more of the new customers to this slide. You will probably need no introduction to Skyscanner or Spotify. The U.K. Health Security Agency is charged with protecting the U.K. from infectious diseases and other health threats. We've added Trimble, an 11,000-person technology company based in Colorado, and we've also added in the government of the province of Nova Scotia, where we're doing quite a lot of work as well. In terms of looking at the highlights for the last 6 months, at the Capital Markets Day 2 weeks ago, we were able to give a clear message about our return to growth. And today, we can really share the detail behind that message as well. So as I look at the last 6 months, I think the team have just delivered an excellent result and to pull out some of the relevant facts. Our sales booking up 27% to over GBP 220 million. That's a record sales period for us. And that sales performance has also delivered a record revenue performance at GBP 196 million over the last 6 months. It has also delivered a strong backlog figure as well. That gives us great visibility, not just for H2, but beyond that period of time as well. And for us, again, a clear message from today, we believe the momentum we've established in the first half of this year will follow into the second half as well. So jumping down from the headlines. In terms of that sales performance, it's across all 3 divisions. Digital Services up 13%. Workday services up 35%, although it should be noted that last year's sales booking in H1 were low. So we should view the bookings in this set of results as us returning to normal. And Workday products recorded a 57% increase in sales. So that is a correct figure. But for us, the more appropriate, more useful figure is to look at the ARR increase, which saw a 19% improvement. This sales performance increased revenue across all 3 divisions. You can see the kind of changes on the chart on the left-hand side. And later this month, we'll be launching our fifth product, Pay Transparency. That will happen next week at the EMEA Rising, which is Workday's European customer event. And we see the launch of Pay Transparency as kind of further support for our 100 million and 200 million ARR targets. We've had additional costs in H1. Richard will talk in more detail about those, but National Insurance, our full year cost for Built on Workday, and especially the increased use of contractors have all kind of impacted our profit performance in the first half, but we're maintaining our profit guidance for the full year. So we see a sequential improvement H1 versus H2, and we're expecting a strong performance in H2 of this year as well. And finally, we've increased the dividend in today's announcement. And over the past 12 months, we've returned GBP 58 million in cash to shareholders through 2 buyback programs, and you will note from this morning's announcement that we are about to undertake a third one following the same parameters. So in terms of results we've shared today, for us, we think it's just a really strong set of results, really excellent performance by the team. So each of these charts tells an important story about our business, the durability of our revenues, the balance across sectors and the global nature of our business. On the left is the breakdown of our existing client revenue versus new client revenue and to have 85% of our revenues coming from existing clients is brilliant. It gives us really strong visibility and predictability into the future. We were able to generate that level of repeat business, and we think it can be higher, but we can generate that level of repeat business because of the value we deliver to our customers and the excellent customer service that we also are able to achieve. And as we add new customers, we unlock longer-term opportunities there as well. And for those of you not familiar with Net Promoter score, can I just really emphasize a Net Promoter score of 70 is just simply an excellent result. In the middle, we have the sector of balance. And I think balance really is the correct word to use here. That's a balance across sectors, private, public and health care, but also across the clients as well. We work with over 1,100 customers across our business. And in the chart on the right, we break down revenues across regions. The standard region over the last 6 months was North America growing by 19% over that 6-month period, and it's now over 1/3 of our revenues. And I have to say, I think it's amazing that over 1/3 of our revenues now come from North America. That North American business is really across all 3 divisions, so Workday services, Workday Products and Digital Services, and we expect that trend to continue. And overall, 43% of our revenues now come from outside the U.K. And at our current pace, the majority of our revenues will be outside of the U.K. in the next couple of years. The driving force in our business is our people and their energy, their expertise and their experience. So our staff numbers have increased strongly over the past 6 months, up 9% since the end of last financial year. Of that increase, 119 people joined via David Pier. 80 have been recruited as contract staff and 68 have joined as permanent staff. And for us, we've talked about this in our results release earlier. This really underscores the different dynamics of hiring in the current market. Contract staff are available typically in a 3- or 4-week period, but it takes up to 5 months for a permanent member of staff to join the organization. As you can see, in terms of location, the Americas workforce is now the second largest across the group. And in what has been a challenging year for our colleagues, lots of change over the course of the last 12 months, we have to say we're really grateful for the support they continue to show the organization and our engagement remains high as demonstrated by our high retention and our favorable scores on internal surveys and on platforms such as Glassdoor. We are very conscious of our responsibilities as an organization, and we have aligned our activities to the United Nations Sustainability Development Goals. We continue to be carbon neutral as an organization, and we're making progress towards our carbon net zero target. We are improving the gender balance within Kainos, increasing 1% over the last year. So it is slow but steady progress. And during the last few months, we've also been recognized as a Disability Confident Leader, the U.K.'s highest level and placing us in the top 3% of employers across the entire U.K. And finally, to highlight our long-standing apprenticeship program, Earn as you Learn now in its 12th year, that's really aimed at supporting those young people for whom full-time university education is not the right next step, where that's because of affordability, their learning style or other personal circumstances. And it is a testament to the young people on the program that most of them achieve a First Class Honors in computer science through a mix of working in Kainos and part-time study. Richard?

Thanks, Brendan. If we go on to the first slide, the group income statement. I'll start with Digital Services and particularly revenue. It's the first time that we've decided to separate out Americas revenue within Digital Services. The rationale behind this is that while it's only about 8% of digital services revenue in H1, it grew by 150% over the comparator period. This was all virtually all organic. We did the acquisition of Davis Pier, but that closed on the 19th of September. So there are about 11 days of Davis Pier revenue in there, so effectively negligible. We expect Davis Pier to contribute about GBP 6 million in H2, and we expect a run rate, therefore, of approximately GBP 28 million for a full year from the combined Americas business within Digital Services. So it's becoming material. Previously, this revenue was classed as either public sector, commercial or health care, and it was included within those sectors, and we've restated those as well. All the figures I'll use while discussing this are the restated figures as comparators. Using those restated figures with Americas revenue stripped out, public sector was relatively steady, slightly down with a 3% decline. Commercial, again, very disappointing, fell further 39%. This now represents only 6% of digital services revenue and just over 3% of group revenue. Healthcare continued its very strong growth, up 33% over last year in revenue terms. If we move on to gross margin. Digital Services gross margin fell 2.6% from H1 last year, but was up about 2% sequentially on H2. First thing to point out, obviously, is employer's NIC rises that has a major impact on gross margins of virtually every business in the U.K. Utilization, however, was up about 6%, and that's part of the growth in the business that Brendan referred to earlier. The other factor in gross margins he also alluded to was the fact that we have increased our level of contractors over that period of time. For the group as a whole, that's gone from 51 in September last year to about 139 on 30th September this year. He also mentioned partners as well, which is another factor I'll touch on. We've always used contractors in this part of the cycle. As you know, it's not a preferred model, but it is something that we need to do when we need to ramp up quickly. Although it depresses margins, it's a necessary evil, if I can use that term. In terms of partners, we have had a number of projects, 2 large projects, in particular, where we're required to deliver through the use of partner. Although this depresses margins, in a way, it's something of a testament to our growth as a business. 6 or 7 years ago, we were the junior partner in those relationships. Now we're the lead partner. Direct expenses in Digital Services increased 22% over H1 last year, about 16% of that related to bonus increase. Obviously, we had a poor year last year and have much better sales this year and that impacts on bonuses. Contribution for Digital Services margin fell about 4%. That's a result of what I've talked about before, partners, contractors, bonuses, all of those things relate to the increased activity in the division. It's always disappointing to see a reduced contribution. It is somewhat typical of this part of the cycle. It's a bit like an Elton John song. Bernie Taupin writes the lyrics. That's a bit equivalent to winning bids. The music comes second, that comes from Elton John. that's equivalent to displacing contractors, managing utilization, promoting junior staff. Now I'm not saying our delivery managers, operations staff, divisional leaders were glitzy suits and big glasses, but they do have a track record of good tunes in this area. Moving on to Workday Services. Overall revenue was up 4%. About 2% of that would have been higher in constant currency, so it would have been approximately 6% in constant currency. But a bit under 2% of that growth related to a shift of the implementation revenue for Employee Document Management. New products are always implemented by the products team. That allows for fast feedback to the product development team in terms of improvements. But as implementation scales, it needs to move to a services business that's set up for that scaling. As you would expect, EDM implementation has very poor margins at this point in the product development and upskilling cycle. Overall, in Workday Services, growth in revenue from the Americas and from Australia was offset to some extent by a decline in EMEA. Gross margin dropped by about 4% from H1 last year, and approximately half of that reduction came from the transfer of EDM implementation. Direct expenses were up only 1% and the overall effect on contribution was the contribution was down about 13% on H1 last year, but was up 28% sequentially on H2. If I move on to Workday Products, revenue grew by 14% over H1 last year. But in constant currency, the growth was 19%, which is a more reasonable way to look at the business given how much of this business is denominated in U.S. dollars. As Brendan mentioned, Pay Transparency Analyzer was launched in the period, it made a negligible contribution to revenue as you would expect. Gross margins remained stable at about 78%, but that's somewhat flattered by the transfer out of EDM services. So it's the reverse of the Workday Services impact. And on a like-for-like basis, the fall was approximately 2%. I've always said that I'm happy to sacrifice gross margins for new product introductions, and that's what's happened this year. Direct expenses increased by 23% over the same period last year. The biggest element of the increase was GBP 2.6 million for Built on Workday because Built on Workday was signed at the end of July last year. So there was 2 months in that comparative period, 6 months now. That represented about 16% of the 23% increase. We continue to invest in product development. And as I never failed to remind you, we continue to expense product development to the P&L. Contribution for Workday products was 28%. I will note that if we had fully capitalized product development and depreciated over, say, 5 years, contribution would have been about 4% higher. In terms of central overheads, we include finance income and depreciation in this slide alongside central overheads. Central overheads and depreciation increased about 8%, but finance income fell substantially. It fell about 30%, 2 elements. One, lower interest rates in the market. And second, share buybacks reduced cash balances. The effective tax rate increased slightly, and that's because a greater proportion of our business now comes from the United States. If I move on to the balance sheet and cash flow. So fixed assets increased largely due to expenditure on the Belfast office, which we now call One Bankmore. For H1, this was about GBP 2 million of expenditure. For H2, the forecast is about GBP 8 million as construction ramps up. For next year, the estimate is closer to GBP 20 million for the full year. Goodwill and intangibles increased as a result of the Davis Pier acquisition. The structure of this deal was similar to previous deals, 30% of the cost of this was paid in Kainos shares. 30% is also held back for staff staying with Kainos over 3 years. We want to integrate this business. We don't want to create perverse incentives. And although IFRS say that, that 30% has to be expensed, and therefore, that's what we will do. To me, it is part of the cost of buying what we think is a great business. In terms of lock-in days, what we call trade debtors and WIP combined, that increased to 67 days from 57 days this time last year. That was a tough comp, mid-60s is fairly typical in our business. Other liabilities rose as a result of higher trade creditors. That's partially to do with having higher levels of contractors, higher bonus accrual, and we've been required by IFRS to accrue GBP 9.4 million for share buyback not completed at the 30th of September. Moving on to the cash flow. Our cash conversion was 48%, which is well down on last year at 75%. Cash conversion is always lower in H1. We typically do target around 75% in H1. There are 3 reasons for it being well below that target. One, we took a P&L charge for restructuring in March last year. We paid that cash in April and May, so it's in the H1 cash figures. That has an impact of about 13% on the cash conversion figure. Second factor is the return to growth requires more working capital. At a guess, that's probably about another 5% impact on the cash conversion figure. The final factor, we just did a bad job on cash collection. We need to improve that at year-end. But cash collection is always difficult when people are focusing on sales growth. To be honest, if I had to choose, I would focus on the sales growth. If we move on to the -- to slide then on capital allocation strategy. Talking broadly about this and the principles we apply. The first thing we want to do is be able to grow the business organically. Both services and products are cash generative, and we've always been able to grow the products business from cash flow. The bigger constraint has always been staff, and we would be happily prepared to invest cash if necessary and opportunities were available. We've done targeted acquisitions such as Davis Pier. We would consider that again if we find something as good as Davis Pier, but those sorts of things come up rarely, and we will always be disciplined about acquisition execution. We think we need somewhere about GBP 20 million to GBP 25 million as a cushion for working capital shocks, and we're clearly well, well above that. We've always had a progressive dividend other than in the early days of COVID, but we intend to maintain that dividend growth this year. Within these principles, we've identified again the ability to return value to shareholders. We review the return on capital calculation every 6 months. And clearly, that calculation is a bit different at a share price of GBP 9.30 rather than one of GBP 7.30. We are going to renew our share buyback for another 6 months. And we're happy to be able to return cash to shareholders in lots of different forms. Brendan?

Richard, thank you very much. And diving into the digital performance and picking up on Workday Products. I mean, again, it's just another excellent performance by the team. And I use the word another advisedly. The chart on the right-hand side of the slide here really just talks about that consistent progressive pattern of growth over the last 9 reporting periods and indeed, that pattern is well beyond just on this graph. But moving away from the kind of the last 5 years and switching our attention to the last 6 months. As always, ARR is the key metric for us, up 19%, and we continue to make good progress towards our 100 million ARR target by the end of 2026, and our 200 million ARR target by the end of 2030. Across the products, they all performed really well. Smart Test continues to represent about 2/3 of total revenue for the division, but audits and EDM are both growing quickly, 43% and 64%, respectively. And as we've said in the past, EDM, our fourth product has been our fastest-growing product ever. So that's a record that may well be smashed by our Pay Transparency module, which launches next week at EMEA Rising, which is Workday's European customer conference. So for those of you not familiar with Pay Transparency, what does our module do. So it's designed to support employers to handle the upcoming requirements for the EU Pay Transparency directive. And again, for those not familiar, there are 2 important deadlines. The first is June of 2026 when the directive needs to be written into law in each of the member countries. And from June 2026, every employee can ask their employer regardless of size of employer for comparative pay information so they can understand how they are paid versus other employees who undertake similar work. And they can also ask for the gender distribution of that information. So once an employee makes that request, that information needs to be provided in a relatively short period of time. It's likely to span between 15 and 45 days, and that will depend on each country and how they write that legislation. So for instance, the Netherlands is expected to be 15 days. Spain is expected to be 45 days in terms of response time. 30 days is seen as probably most likely to be the norm. That's deadline number one. Then from June 2027, employers are required to publicly publish their gender pay gap information. So this is a mandatory requirement and it affects all employers with more than 250 employees in the country, and it impacts those organizations regardless of where their headquarters are based. In terms of Pay Transparency, we have signed a resale contract with Workday, and they will exclusively sell Pay Transparency to their customer base. So to be super clear on this chaos, we'll not be selling this product independently, it will all be done through Workday. So we're really excited about this deeper relationship with Workday, and we're really excited that the entire Workday sales organization will be selling our product. But this arrangement does make it more difficult for us to forecast. For all other 4 products we've had, we've had a launch process, a pipeline build, marketing activity, engagement activity. In the case of Pay Transparency, it is Workday that are running this entire process. And sitting on the sidelines, I have to say Workday have been super impressive in their launch activities, but it will be really kind of next week whenever we are at EMEA Rising, we begin to get a sense of how this product is resonating with a wider Workday market base. And to reflect that kind of increased opportunity, we've updated the market size figures on the bottom right of the screen to include an additional GBP 150 million of opportunity linked to Pay Transparency. So I think that we've been conservative in applying this estimate. We're really focused on those organizations or the market opportunity around EU-headquartered organizations. Let's say, the legislation does impact every single organization that operates in the European Union, not just those that are headquartered there, but we have no idea at this point in time how U.S. companies might view this legislation. So as we become clear to that, we may well increase the market size. And as Richard has mentioned already, we do expense all of our R&D investment to the P&L, and we will continue to do so going forward. I mentioned on the previous slide, Clear Skies, but didn't really spend time on explaining what it is. Clear Skies is a program that is run by Workday. So Workday and the organization are very focused on building functionality into the platform that supports all or the majority of their customer base. So they want to avoid building regional or industry-specific functionality. So Clear Skies is that partner program, which clearly identifies 3 areas of innovation. So on the chart, that dark blue is referred to as the no fly zone. This is where Workday themselves are currently innovating and they do not need any help from partners in this space. The next segment, the light blue is referred to as fly at risk. So while there may be no near-term kind of plans from Workday, they are likely to innovate in this part of the market in the future. And finally, the large white space is the Clear Sky and that's where Workday want to see partners innovate, and they will help curate and give advice about the application areas to partners. And that curation activity is really important, both for the advice they offer because they get to see all of their customers and the customer needs, but also because they'll be clear that these are areas they're not planning to innovate themselves. So an example of this happening in real life really is Pay Transparency. About 12 months ago, Workday approached us pointing out that a number of their customers, an increasing number of their customers were asking about how would Workday support the EU Pay Transparency Directive. And it's an obvious question for their customers to ask because about 70% of the information required to respond to those requests is actually contained inside Workday. So Workday's assessment of these conversations was that this was a regional requirement and not part of their core road map and there was an opportunity for a partner to build that. And so they approached us. And after us evaluating the idea, we said, yes. So it's really just a perfect example of how this process works. So over the last few months, Workday's product teams have been talking to us with the requests they've seen from across their entire customer base, and they've identified a number of those as Clear Sky opportunities. They have presented us with 10 ideas, of which we have shortlisted 5 for further evaluation. And from that short list, we are likely to pick a number of areas, most probably linked or adjacent to our existing product stack. So that's what Clear Sky is and for us, a really interesting and really exciting kind of development in the Workday product opportunity. The technology company, Genesys is a great case study for us as they now use all 4 of our existing products. So back in March 2023, they took Smart Test, in March 2024, Smart Audit. In August of 2024, they took EDM and in September of the same year, they took Smart Shield. So it's a great study for us, but it's also a great one for Genesys as well when you look at the benefits they have gained from using our software. The use of Smart Test automation has allowed Genesys to save 20 weeks of testing during Workday's twice yearly product updates. And using Smart Test automation on a weekly basis has allowed Genesys to redeploy 8 of their team to value-add projects. And freeing that team up from mind on testing has allowed them to make 820 business-focused changes to the Workday platform to better support where Genesys are going as a business. Using Smart Shield, Genesys calculate they have reduced their risk of data breach through Workday by up to 80%. And finally, with Smart Audit and our in-built SOX-ready controls and they've drawn praise from their auditors. EDM goes live later this month, and we expect to be able to talk about the savings and benefits that Workday -- sorry, that Genesys get from using our software there as well. In terms of Workday Services, to repeat a comment I've made several times in the call today, just a really excellent performance by the team. Yes, it is an easier performance in terms of easier comparison compared to last year's performance, but still a really excellent performance. And for us, it's really a case of focus, which customers and which opportunities work best for us. So for instance, some customers prefer a staff augmentation model. That's a perfectly valid choice for them to make, but it's not a great fit for us. We are able to best demonstrate our value in project-based assignments. So we're now choosing to compete on those deals as opposed to staff augmentation opportunities. That focus means that we have continued to be effective in competing against that higher number of partners. And that same focus has allowed us to improve rates, up 3% H1 to H1, but up 5% sequentially over H2 last year. Our core markets in the U.S. is working really well. So expanding well. It's a bigger market with bigger customers. So that return to growth is further advanced compared to where we are in Europe. In terms of looking internationally, we're well established in Australia. We're delivering projects in New Zealand and Brazil, amongst other areas. And that final point we surfaced really back at the Capital Markets event 2 weeks ago as well, there is a growing opportunity for us to deliver consulting services linked to Employee Document Management and to Pay Transparency. So historically, our first 3 products, Smart Test, Smart Audit and Smart Shield had virtually no professional services. That's not the case for EDM and Pay Transparency, where there are significant consulting services opportunities alongside the product sale. So the ratio we use internally for our planning is that we should be getting 0.7 sorry, the ratio of 0.7:1 if you think about consulting opportunities to ARR -- sorry, ACV. And then think about kind of the figures that Richard mentioned, we've transferred across 1.2 million of EDM services into H1 of this year from Workday Products, and we see our Workday Services account delivering those engagements going forward. Leonardo Hotels are one of the fastest-growing hospitality brands in Europe, operating over 300 properties in 21 different countries, and about 60 of those properties are located here in the U.K. and Ireland. So Phase 1 of this project focused very much on that U.K. and Ireland footprint. That's about 5,000 of the team members across Leonardo Hotels. By deploying Workday HCM payroll and the HCM platform itself, Leonardo Hotels, we were able to move from 13 different systems onto a single system. That also created, as we see across many of our Workday deployments, the opportunity for much more self-service for their workforce. That's reducing the administrative burden of transactions such as work scheduling, such as absence management or updates to personal information. In the past, many of those changes will have to be handled by a manager of the staff member or will be done by a central services function. In Digital Services, again, a very strong sales performance over the last 6 months. We mentioned before that if you add up the value of the major contracts that are in the public domain, then you'll know that we have signed over GBP 200 million of additional contracts since the start of this financial year. Some of those contracts have translated into H1 revenue, but really will be H2 before we see these projects properly mobilized. So we're expecting a really strong H2 performance. That sales performance across digital services has also seen a record backlog for digital services. So not only a record backlog for the company, but also a record backlog here in Digital Services. And jumping across the various parts of the business. In public sector, it remains a really busy market. There is significant opportunity in that market. It is still challenging. It would be wrong to say anything else, but we think it's much more predictable than it has been over the last 18 months. We now know what's likely to happen as opposed to being unsure in previous periods. We've mentioned that strong kind of win rate in terms of those GBP 200 million contracts. About half of that is in the public sector. Some of that has mobilized, but the majority of it will mobilize in H2. So we will see a slight lag in terms of revenues. In the health sector, we operate across 50 different customers, so much more kind of varied picture than perhaps we've described in the past. So we are seeing continued momentum across that customer base. We're not seeing any disruption from the transfer of responsibilities from NHS England back into the Department of Health. And the majority of our projects inside health care have now mobilized, so the prevention projects, adult and seasonal vaccination projects and the ones around population health management. And when we talk about North America, we really mean Canada, but it's a small but fast-growing part of our business. It grew over 130% organically, slightly higher if you include the Davis Pier revenues as well. And when we look at the Canadian market, we're seeing the same modernization trends in Canada as we observed 10 years ago in the U.K. And we're able to bring together our experience in the U.K., combine that with the local expertise of Davis Pier, and we're obviously super excited about the combined opportunities, not just in Nova Scotia, where we've got a really strong footprint already, but across other provinces in Canada, Ontario and Alberta are our immediate next steps. If you'd like to hear much more about our health sector business and about Canada, the recording from our Capital Markets event is now available on our Investors website. So we dive into detail about the opportunity in both those areas. So each segment is about 30 minutes long, so we cover a lot of details, so really worth your while if you want to understand a bit more about why we're so excited about the opportunity for both of those. And in commercial sector, we have switched to focus on supporting existing clients rather than pursuing growth in the near term. So that decision has allowed us to progress the opportunities we talked about across public sector, across the health sector and in Canada. So we're still kind of really interested in the U.K. commercial sector. It's an important opportunity for us, but we will look to see how we harness those growth opportunities in fiscal '27 rather than in this year. And hopefully, over the course of the last few minutes, we really kind of conveyed what we think is a really important message today is that digital services is back in growth mode. I think it's obvious from the KPIs we talked about as well. But hopefully, the graph on the right-hand side does underscore that sequential progress we're making across fiscal '25 now into fiscal '26. You've heard me talk often about the passport service, the customer-facing part of that, so being able to apply for a new passport. We actually have 3 kind of main contracts with the home office who overall own the passport service. The first one is the one I've mentioned, building and improving the passport service. The second is about building and improving services linked with birth, death and marriages. Both those together are known as the customer-facing products, and we have lead responsibility in both those. But the third contract actually is a larger contract, which is this one here, the case today talks about. This is known as the data products family or contract. And this is where we are responsible for migrating passport information from a series of legacy systems onto a single cloud platform. So it's about migrating 30 years of passport records, billion passport records in total, that's every passport, every application, every lost or stolen passport, every recovered passport as well and includes not just citizens living in the U.K., but also for the crowd dependencies and for Gibraltar as well. So that migration of all that information has delivered huge operational savings for the home office, allowing the retirement of a series of legacy systems, which collectively cost over GBP 3 million per month to operate and now operating on a single lower-cost cloud platform. That new service reduces the complexity for the passport services team, but also provides significant simplification for the 8 other government departments who use the passport data to verify the identity of citizens using their online services known broadly as One Login. So I say we don't often talk about it, but it's the single biggest home office contract that we have. In terms of AI, we continue to make excellent progress on our AI journey, thinking first about the sales activity on the right-hand side here of the screen. We've secured 48 new projects over the course of the last 6 months. We've seen our revenues increase by just over 6% over that period of time as well. And many of the trends we talked about in May and in previous updates kind of still exist today. So we see our customers doing lots of experimentation. A few projects are making up from an experimentation phase into production phase. And I would say that customer data continues to be the major inhibitor to those can move from experimentation to production. Generic models are not delivering sufficient value for our customers and customers are working on their data quality to be able to plug in specific models onto their data to get better value. That is a long-term challenge for them. We also say that customers are deploying AI to solve singular very specific problems and not looking for a transformational approach, just looking to fix a specific problem or perhaps a bottleneck. And Leeds City Council is a good example of this where they have deployed a chatbot to provide information, signposting people to -- signposting people to financial information for those who are in financial distress. So that's a very specific example of deploying an AI-enabled chatbot into production to solve that one single challenge that they're experiencing. Looking across the U.K. public sector, we remain a major supplier to government for AI services. The recently updated Tussell Report, which was updated last week, places us #4 by value of contracts over the last 6 years. Microsoft and Palantir are ahead of us and Capgemini, Deloitte and IBM are behind us in the rankings. The latest wins that we've talked about, there was 48 new projects just to add to our growing track record in this space. We've now done over 300 projects across government. The photograph there on the screen is our team alongside members of the UN International Organization for Migration, collecting an award at the National AI Awards a couple of weeks ago. That was for the joint project around detecting travel document fraud. In terms of how we're using AI internally, we now have it deployed across 65% of our development teams, slightly lower in terms of Workday consulting. So we, again, see that trend continuing over the next number of months. Some of our clients still request that we don't use AI tools in terms of how we build that solution, that's becoming a decreasing number of clients. So in terms of today's update, there's really 2 messages that we were looking to convey. The first is we've talked a lot about that sales performance. That's a brilliant result by the team. But it's also clear for us that more profit is required as part of that. Those contracts are turning into projects. Those projects are turning into revenues. We need to turn that revenue into profit as well. But as Richard has mentioned, we're really just at that inefficient phase of the growth cycle, increased hiring, use of contractors, using staff from third-party organizations. A lower number of graduates is feeding into that cost mix. So it will take some time for us to build our capacity to displace those higher costs. And we've mentioned repeatedly, it will be fiscal '27 before you see our revenue growth drop-through to the bottom line. Second, I really want to highlight that we are back in growth mode across all 3 of our divisions. So in Digital Services, we remain really excited about the opportunity in the U.K. in the public sector. We see growing contract sizes. We see our ability to be a credible supplier for those larger contracts as well. On the same vein, there's a really significant opportunity in the U.K. health sector, and we continue to be a highly trusted supplier in the sector. In bringing our digital services team in Canada together with Davis Pier, we are combining 2 high-growth, high-performing teams, and we are, I'd say, really excited about the opportunity to keep moving up -- moving at pace across government in Canada. And finally, I've mentioned already, we believe that we can be a really relevant supplier in the U.K. commercial sector. That's not a fiscal '26 priority for us. It's something we're going to look at in terms of next year, but it's definitely on our radar. In Workday Services, we are focused on driving growth in our core American, so U.S., Canada and European markets. We see growth opportunity in both in APAC and Latin America, and we have seen early progress in those markets. And one of the areas we've taken time to highlight today and in our Capital Markets event is really just the opportunity for us to deliver consulting services linked to our own products. In order to maximize the opportunity for Workday products, we are going to open up that consulting opportunity to other partners. But even with that additional competition, we are uniquely placed to deliver those consulting services. And we like how that kind of changes our model. So for us now, it's the growth opportunity is linked to both Workday Inc.'s performance, but also now in terms of our own product performance as well. So we like that kind of mix that we have, that greater flexibility and control over our revenues for Workday services. And in terms of Workday products, we remain firmly on track for our GBP 100 million ARR target by end of calendar 2026 and on track for our GBP 200 million ARR target by the end of calendar 2030. Pay Transparency is an important product in its own right. It's got a legal imperative that requires employers to be mobilized by June of next year. We're seeing lots of activity, but it's still too early for us to forecast what the adoption might be across that customer base. Pay Transparency in addition to the near-term opportunity it offers us is also really interesting because of the arrangement we have with Workday. So having our software sold by Workday under a resale model is just a great way to see how we might be able to adapt and flex and deepen our relationship with Workday over time. And finally, hopefully, we've conveyed the excitement we feel around the Clear Skies program in Workday, where Workday have shared their view of areas for product development and what they're leaving for partners to develop. So we see several new product opportunities from our early conversations with Workday. And over the next few weeks, hope to completely evaluate those and make some decisions about further investment and further growth in our Workday products portfolio. So really to finish off before I hand back to our colleagues at FTI. I mean we are delighted clearly to be back in growth mode and genuinely excited for the next few years. We have work to do about turning our growth into profitability. That's something we've proven that we've got great skill in the past and looking forward to doing that over the months ahead. So I'm going to stop sharing, and I'm going to pass over to our colleagues at FTI to do the Q&A.