Interim Results

19 September 2023

Northcoders Group PLC

('Northcoders' or the 'Group' or 'Company')

Interim Results

Group continues to grow despite challenging macro environment

with record demand for consumer training bootcamps

Northcoders (AIM:CODE), an independent provider of training programmes for software coding, announces its results for the six months ended 30 June 2023 ('H1 2023' or the 'Period').

Financial Highlights

·        Revenue grew to £3.5 million (H1 2022: £2.4million), an increase of 46%

·        Record demand for consumer bootcamp training, delivering revenues in H1 2023 of £2.8 million (H1 2022: £1.7 million) driven by geographical expansion and entry into new disciplines

·        Gross profit increased 32% to £2.2 million (H1 2022: £1.7 million) with a gross margin of 63% generated by continued investment into internal efficiencies and software

·        Underlying adjusted EBITDA of £0.04 million (H1 2022: £0.42 million) in line with management expectations following investments into Business Solutions and Tech Returners

·        The Group's core business, Consumer Training Bootcamps, achieved adjusted EBITDA of £0.5 million showing ongoing growth in profitability

·        Loss after tax of £0.2 million (Profit after tax H1 2022: £0.2 million), delivering adjusted EPS of (2.07) pence (H1 2022: 4.59 pence)

·        Strong balance sheet with cash of £2.04 million (H1 2022: £1.04 million) and net assets at the Period end of £5.5 million (H1 2022: £2.4 million)

Operating Highlights

·          Positive growth in demand with record Consumer Training Bootcamp course applications, more than doubling to 7,107 in the Period (H1 2022: 3,494)

·          Q3 2023 has again seen record applications, now standing at over 10,000

·          Continued to secure Government funding for consumer Skills Bootcamps, achieving a successful Department for Education Skills Bootcamps bid giving a further £4.5 million revenue visibility for H2-2023 and FY-2024

·          Strategy for geographical expansion continues to progress with over 45% of the Company's Training Bootcamp learners now based outside of Manchester and Leeds, a significant change from the Group's position at IPO two years ago

·          In February 2023 the Group acquired Tech Returners Limited, which has now been fully integrated into the Business Solutions division, with the pipeline now including several large corporate businesses

§ As part of Tech Returners brand offering, ReFrame, the North's largest conference dedicated to Women in Technology has been launched in London and through marketing and PR is creating significant corporate brand awareness in the London region

·          Business Solutions division signed its first public sector contract with a significant central Government department which is due to commence in Q4 2023

·          Investment and roll out of nCore platform on track for use across the Group in 2024, improving efficiency and supporting gross margin growth

·          New technology training courses continue to expand

·          The Data Engineering discipline is performing strongly with further investment having been made into course delivery.  The Group is now benefitting from significant cohorts of learners each quarter

·          Launched a third discipline within the Consumer Training Bootcamp division, Cloud Engineering.  The first cohort launched in March 2023

Current trading and outlook

Despite the strategic momentum achieved in H1 2023 which ended in line with management's expectations, the current financial year is presenting several market challenges for the Group's Business Solutions division. FY23 was and still is expected to be a second half weighted year but the outturn is uncertain due to the prevailing headwinds encountered by the technology market. Budget constraints, workforce reductions and recruitment freezes have led to many corporate clients delaying and deferring budget commitment to Northcoders' Academy, Your Return to Tech and Consultancy programmes.

In particular, one client is undergoing a substantial business reorganisation leading to a division closure. As a result, their immediate demands for our services have diminished below the £0.75 million we had been expecting with the quantum now being uncertain. We are actively collaborating with them during this transitional phase and remain optimistic about the possibility of future work and contract fulfilment, as the client has expressed a keen interest in continuing our partnership.

As a result of this contract, and the more cautious technology training market conditions, the Group now expects revenue and profits for the year as a whole to be significantly below current expectations. With its strong balance sheet, the Board remains confident in Northcoders' ability to continue to deliver significant growth as it delivers its strategy and continues to build its reputation as a leading technology training provider in the UK.  The Company continues to work with blue chip corporates and now public bodies, as both hiring partners and customers, to improve the UK's technology gap with digital transformation remaining a priority.

Chris Hill, Chief Executive Officer of Northcoders, said: "Our performance to date reaffirms our commitment to addressing the UK's digital skills gap as a leading technology training provider.  H1 2023 saw the Group's revenue increase to £3.5 million, a 46% increase compared to the same period last year, driven by high demand for consumer bootcamp training, generating £2.8 million in revenue, up 65% on H1 2022 performance.

"Northcoders' strategic acquisition of Tech Returners in February has already yielded positive results, engaging several major corporate clients. The launch of ReFrame, the North's largest Women in Technology conference in London, has significantly boosted the Group's corporate brand awareness.  Demand for technology training beyond the original Coding courses continues to increase, including for the Group's Data Engineering services, as well as Cloud Engineering tuition having launched successfully.  The Business Solutions division signed its inaugural contract with a central government department project set for Q4 2023.

"As outlined at the Trading Update in July, the market continues to be challenging, with budget constraints, workforce reductions, and recruitment freezes affecting the Business Solutions division, which means our growth in the short term is expected to be slower than previously expected.  Nonetheless, Northcoders remains a key enabler of growth and innovation and we are resolute in our pursuit of evolving to meet technology's ever-changing demands, confidently providing sustainable long-term growth for all our stakeholders."

Analyst meeting and Investor Meet Company presentation

A virtual meeting for sell-side analysts will be held at 9.30 a.m. today, 19 September 2023.  Please contact Buchanan via northcoders@buchanan.uk.com if you wish to join the meeting.

Northcoders will be also be presenting via the Investor Meet Company platform today, 19 September 2023 at 6 p.m. (BST).  The meeting will be hosted by Chris Hill (CEO) and Charlotte Prior (CFO), and there will be an opportunity for Q&A at the end of the session.  Questions can be submitted pre-event via the Investor Meet Company dashboard up until 9.00 a.m. the day before the meeting or at any time during the live presentation.  To sign up to the Northcoders Group presentation via Investor Meet Company please click the following link:

https://www.investormeetcompany.com/northcoders-group-plc/register-investor.

This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

For further enquiries:

Notes to Editors

Northcoders is a market leading provider of technology training for businesses and individuals with courses in, Software Engineering, Data Engineering and Cloud Engineering.  Founded in 2015, the Group's business model operates a hybrid structure with a flagship site in Manchester and other sites in Leeds, Birmingham and Newcastle supported by a proven digital offering to support its students across the UK.

Powered by IP rich technology, Northcoders offers boot camp courses to individuals from a range of backgrounds, delivered through virtual and physical learning.  The Group also works with blue chip corporates across multiple sectors to help them to achieve their digital requirements, with teams as a service and to supply innovative solutions for the upskilling and reskilling of employees. With a keen focus of inclusivity, diversity and quality at its core, Northcoders aims to address the digital skills gap in the UK to meet the increasing demand for digital specialists at all levels, from businesses and public agencies.  Northcoders was admitted to trading on AIM in July 2021 with the ticker CODE.L.  For additional information please visit investors.northcodersgroup.com.

Introduction

The Board are pleased to present the Group's results for the six months ended 30 June 2023 ('H1 2023').  First and foremost, it is pleasing to report a significant increase in demand for the Training Bootcamp courses during H1 2023.  The number of applications more than doubled to an impressive 7,107, compared to 3,494 in H1 2022.  This growth underscores Northcoders' reputation for delivering high-quality tech education.

The Group continues to benefit from financial support of the Government's technology Skills Bootcamps initiative.  This is exemplified by its success in securing a new funding bid with the Department for Education worth £4.5 million over the next two years as well as additional bids currently underway.  It is another demonstration of Northcoder's reputation as a top tier training provider dedicated to upskilling the workforce and provides a substantial revenue stream for the future.

The Business Solutions division achieved a significant milestone by signing its first public body contract as a training provider in a significant central Government department project, scheduled to commence in 2023.  This reflects the Group's expertise and credibility in delivering impactful solutions to Government bodies.

Despite this, the Board wants to address the challenges facing its Business Solutions division in the context of the positive momentum during H1 2023.  The current financial year has brought forth market challenges that require a more cautious outlook for the second half of the financial year.  The technology market has encountered headwinds, including unanticipated budget constraints, workforce reductions, and recruitment freezes.  These factors have prompted many corporate clients to delay and defer their budget commitments to the Group's Academy, Your Return to Tech, and Consultancy programmes.  The Group acknowledges these challenges and remains committed to addressing them proactively, charting a course forward that ensures Northcoders' continued growth and success.

Financial Review

Northcoders delivered a strong performance in the Period, with underlying profitability in line with management expectations.

Revenue for the Period was £3.5 million (H1 2022: £2.4 million), up 46% on the equivalent period last year.  Consumer Revenue, which includes core bootcamps and apprenticeship revenues, generated revenue of £2.8 million, up 62% on the comparable period in 2022.  The division delivered EBITDA of £0.5 million showing further efficiencies in the training model.  Northcoders Business Services division generated revenue of £0.3 million and the Group is confident in the decision to invest into sales, marketing and the expansion of Business Services and the acquisition of Tech Returners will see benefits in future years. Tech Returners generated revenue of £0.4 million in the period since its acquisition.

Gross profit for the Period was £2.2 million (H1 2022: £1.7 million) at a gross margin of 63%. EBITDA, adjusted for share based payments, was £0.04 million (H1 2022: £0.42 million) and loss after tax was £0.25 million (H1 2022: profit of £0.19 million).  Basic earnings per share was a loss of (3.16 pence per share (H1 2022: profit of 2.79 pence).  Basic adjusted earnings per share was a loss of 2.07 pence per share (H1 2022: profit of 4.59 pence).  Net assets at the Period end were £5.5 million (H1 2021: £2.44 million) of which cash was £2.0 million (H1 2021: £1.0 million).

Operational Review

Northcoders' IPO strategy of geographical expansion beyond Manchester and Leeds has yielded significant results.  Over 45% of Training Bootcamp learners now reside outside of these cities, marking a substantial shift from the Group's position at IPO just two years ago.  This expansion signifies Northcoders' growing national presence.

In February 2023, the Group took a strategic step by acquiring Tech Returners.  Tech Returners' brands and services have seamlessly integrated into the Business Solutions divisions and building a pipeline of potential new client contracts.  This move strengthens the Group's presence in the technology training sector.

Northcoder's commitment to diversity and inclusion is further exemplified by the launch of 'ReFrame', the North's largest Women in Technology conference, as part of Tech Returners' offerings.  Through effective marketing and public relations efforts, ReFrame is creating substantial corporate brand awareness in the London region.

Northcoders' Data Engineering division has showcased robust performance, thanks to increased investment in the course delivery team.  The division can now efficiently train significant cohorts of learners each quarter, addressing the rising demand for data engineering skills.

In line with the Group's expansion efforts, Northcoders launched its third business unit, focusing on training bootcamp courses and Corporate Solutions services in the Cloud Engineering discipline.  The inaugural cohort was successfully launched in March 2023, marking a promising start in this dynamic field.

Northcoders remains steadfast in its commitment to a thoughtful, strategic approach in product development.  This approach yields positive results as the tailored training programs resonate with a diverse audience.  The Group's innovative spirit drives us to adapt to the ever-evolving market landscape, and after the successful launch of the Data Engineering discipline, Northcoders is exploring further opportunities in its Consumer Training division and other disciplines.

As a youthful organisation, the Group constantly reassess its business roadmap to ensure that long-term, sustainable growth is fostered.  As the final quarter of 2023 is approached, the Board is confident about the new product offerings and the trajectory of the business whilst being mindful of the wider macroeconomic environment.

Current trading and prospects

Despite the strategic momentum achieved in H1-2023 which ended in line with management's expectations, the current financial year is presenting several market challenges for the Group's Business Solutions division.  FY23 was and still is expected to be a second half weighted year but the outturn is uncertain due to the prevailing headwinds encountered by the technology market. Budget constraints, workforce reductions and recruitment freezes, has led to many corporate clients delaying and deferring budget commitment to Northcoders' Academy, Your Return to Tech and Consultancy programmes.

In particular, a client is undergoing a substantial business reorganisation including a division closure. As a result, their immediate demands for our services have diminished below the £750k we had been expecting with the quantum now being uncertain. We are actively collaborating with them during this transitional phase and remain optimistic about the possibility of future work and contract fulfilment, as the client has expressed a keen interest in continuing our partnership.

As a result of this contract, and the more cautious technology training market conditions, the Group now expects revenue and profits for the year as a whole to be significantly below current expectations.  With its strong balance sheet, the Board remains confident in Northcoders' ability to continue to deliver significant  growth and continues to build its reputation as a leading technology training provider in the UK.  The Company continues to work with blue chip corporates and now public bodies, as both hiring partners and customers, to improve the UK's technology gap with digital transformation remaining a priority.

Chris Hill

Chief Executive Officer

19 September 2023

Group Statement of Comprehensive Income

For the period ended 30 June 2023

Group Statement of Financial Position

As at 30 June 2022