Northcoders Group (LSE:CODE) — Interim results for the six months ended 30 June 2026

0:01 Good afternoon, ladies and gentlemen, and welcome to the NORTHCODERS GROUP PLC investor presentation. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Chris Hill. Chris, good afternoon, sir. Hi. Good afternoon. Thank you, everyone, for joining me for this presentation. I'll move straight on to the... Displaying the numbers for the results announced today.

0:46 So 1,400,000 of revenue in the first half of the year with a 500,000 EBITDA loss. Obviously, it was a difficult first half to the year. We've been over a significant restructuring period. And, of course, it probably goes without saying that the business is small than we would have wanted, and we understand that the losses sustained over the restructuring period have been fairly significant, and we we we would like to have gone faster. But what the good news is is that we do now have a clear near term route to to... Well, firstly, to breakeven, which is now, and then through to profitability. In terms of things like that, our revenue for the second half of the year is substantially ahead that recognized in the in the first half, and, the the the overheads were around 1,250,000 for the first half, but around about 1,000,000 for for the second half. The one thing as well to sort of... I'm keen to point out on here is in terms of the gross margin. The gross margin is obviously lower than than previously, and that is more to do with... We we we now have a business model where we directly link revenue to the cost of sales. We don't have a lot of sunken costs that sits, in the gross profit line. So whilst it's, whilst the the margins are lower,

2:16 the, overhead cost, is is lower also. Let's go over for anyone who's new to the presentation. Thank you for joining us. I'll go briefly over, like, the history and then the evolution of the business, really. We we pioneered The UK coding boot camp model with an employer led approach to solving the tech skills gap. We trained over 4,000 people, worked with a rate in the hiring partners. We've been going now for for ten years, and we've been well accredited. Along the way, I'm sure it's kind of the news now is that we went through a period where we were doing significant training numbers through a government framework, which came to a immediate halt. And since then, we, yeah, we've we've stuck to the business completely. We moved a lot of costs, and we're now very, focused on b to b services.

3:07 And we pick up some small... Going to the revenue mix later, we pick up some some small amounts of government funded work and still some some some b to c as well. So what's changed over that time? We have had a substantial restructure, which has not only been expensive but has also been taking a lot of management's time and focus. But we are now through doing all of that restructuring. Our capability has completely changed, and we now have a very, very, very small amount of kind of discretionary spending. We have really got the overheads as low as we possibly can and, again, directly linked the actual cost of sale, which is mostly people to the to the revenue. So we recruit people directly when we win a new contract as opposed to having a bank of people ready to capitalize on on on on opportunities.

4:03 But within that, we we do still have flexibility and the ability to act fast through a network of of subcontracts, especially in the trading space where opportunities come along that we want to be able to deliver quickly. So the main focus now of the businesses, we do training for b... Mostly for b to b. We are still working with Greater London Authority on some skills boot camps, but we haven't been doing any major bidding through some of the other combined authorities. It just wasn't really a very high amount of revenue that was available through chasing that route, but with still against the operating principles, there's still quite a lot of permanent overhead required to to to operate in that way.

4:52 And then our main route to market for b to b is through COUNTA, which is... We'll talk more about the the revenue and what that's shaping up by embedding engineering teams into organizations, and it works on kind of a higher train and deploy model and also based on fully scoped projects. But the difference for the client is that the individuals who come through the higher train deploy model is they're able to become a long term employee at the end of the contract. So we'll talk about the revenue mix. Now, obviously, this isn't comparing apples with apples. We know that the the the amount of, like, the level of revenue has come down a lot over this time, but we are now pleased to say that the revenue is back to to to growing from this point forward. But, you know, way back in 2024, literally 9% of our business was b to b clients, so almost all of it was government funded. So we were aware of this at the time before the the contract was almost, you know, sort of taken away from us. And the pivot towards growing counter was something that we were already working on and had launched and growing the b to b side of it. Obviously, in an ideal world, we'd have kept the training underpinned by the government contracts, so we were able to grow COUNTA on top of that. Whereas instead, with the change in government and the framework almost disappearing overnight, you can see that change flow through from twenty twenty five and then into the kind of expected outturn for 2026.

6:21 And there's... The total cost savings at the full year results was around about 2,000,000, but there has been further annualized savings made within the business. And that has now all come to an end in terms of one off costs, restructuring, and things like that. And, you know, we now have a a a a core team that work across multiple areas. And, yeah, I'm happy to say that all of that type of... Those type of matters are now behind us. So in April, we had one and a half... The full year results, had one and a half million. In terms of the... One of the benefits of the counter model is that our contracts are often relatively lengthy, around about twelve months. There are some organizations that when it comes to kind of sort of public sector and critical infrastructure, which is one of the areas that we are we are really strong in. We only get purchase orders for short amount of time due to the nature of the security clearance required for those type of contracts, so they are kind of renewed quarterly rather than being... But they are really sticky. They're really good clients we're working with, and and and they're they're certainly certainly growing. So we've got $22,400,000 through counter for the full year, of which 0.9 of that was the first half of the year, but up to 1.5 in in in the second half, which is fully contracted and, obviously, cash generative month to month.

7:44 Furthermore, we do have a a near term opportunity pipeline with both new clients and current clients around about 3,000,000, and that is kind of the pipeline we obviously have for the business development and activity outside of this, but that is what we're considering of the the the real near term opportunities that could turn into contracted revenue very, very soon. We have the same actually in in in in training also. We do have to have some graduate some graduate academies running again this year, which is good to see that come back. And, hopefully, there will be more of a trend for all sorts of reasons for the just specifically for us to... You know, your kind of KPMGs and and and so on, getting back to doing more graduate recruitment and working with NORTHCODERS to to do that and give them the skills that they need for their roles.

8:34 So one of the new things that we have launched is NORTHCODERS Northcoders AI. So we call this the NORTHCODERS AI Foundry. And this is bringing together a lot more of the kind of technical aspects required while everyone's heard a lot about AI within engineering. There's certainly been a lot of movement towards rather than having teams made up of individual engineers with different skill sets such as testing, coding, data engineering, so on, Deploying agents to kind of write that code for you has been something that's been significant growth in that area, and the main driver for businesses is being able to ship things faster. But, obviously, it hasn't come without its problems. There's definitely been cultural change problems for organizations, and there has definitely been a lot more quality assurance issues. And, certainly, we... One thing that we're very considerate of is the cybersecurity elements and that being, you know, breaches have become more common. There's certainly big news stories about breaches of systems directly linked to AI generated code because it's not been quality assured properly.

9:38 It's not been tested properly. What NORTHCODERS AI does is it aims to work across that model with a a shorter skills and training framework because... And, also, it opens up the opportunity for COUNTA, which has always been all about pod models where we've had a tech leader and some individuals recruited either through tech returners or ideally through the NORTHCODERS training or through other kind of sort of junior engineers. But with, you know, the movement for what they call forward deployed engineering, which Northcoast AI is at the heart of, we now have the ability for people with much... With... Who are more experienced and are able to go in as a single person or a pair into an organization. So it's just kind of bringing down that sort of barrier to the large contract size required to to grow COUNTA.

10:26 And we've had some really great short term traction. We have... It's well known that we we have we have a case study, and we've been growing the amount of people who we have within HMRC through counter. It's well into double figures now. We've actually just... Through NORTHCODERS AI initiative, we've actually just signed up another major central government organization. We're in a very early stage of that. It's the discovery phase, and, obviously, we have to be running the AI foundry to build those teams out. But we think it's certainly got a very... A space of opportunity to to to the great work we've done, testament to the case studies in HMRC, and the ability to be able to compete for for that type of business through the the the frameworks and the certifications that we've got ourselves onto, which for the size of this business is, you know, relatively unheard of. So we're able to be agile, and people love the brand of, you know, the life changing opportunities for individuals. And so it's it's been really good to get through that, and we are starting to actively see pipeline building through those certifications and frameworks.

11:44 K. I'll go through the the the finances. I think, yeah, the the the... Obviously, I'm not gonna just read through the the numbers on the income statement. This presentation is certainly publicly available. But, yeah, just the the key takeaways for... Is the the contracted revenue for the full year is is much higher than h one. And, also, the costs are reduced, and we're not carrying any of those extra costs in the gross profit line. We're literally... So the gross profit margin, there... There's no risk to to to that at at this point. Move on to to the cash. So in terms of at the period end, obviously, there's a lot of cash has been utilized through the restructuring and and, you know, obviously, through the through the losses sustained as we've transitioned the business, but that has now come to come to an end. The company is in q four this year is EBITDA positive, and we don't expect that to change either going forward. So, you know, cash is relatively quickly collected from from corporate corporate clients.

12:51 So we've got a similar amount of cash today as we had at the end of this of this period. And so, obviously, we're generating the cash from operating activities, and we do, of course, have our monthly contracted repayments to NatWest, which we're fully up to date with. We'll facilitate with all of our creditors and repayments as well. So there's no... There's nothing in the cash balance that I don't know is owed to to... For income tax or or anything around that. So... But, obviously, the cash discipline remains super important. So, yes, there's other areas where we would like to go faster. We'd like more discretion we're spending on marketing activity, sales activity, but we're doing everything that we can to protect that while sort of sustainably growing the pipeline and and, you know, launching new products. So still remaining exciting, but being really conscious about about the cash.

13:50 I think, again, the, you know, the the balance sheet remains relatively unchanged. We haven't been investing capital into into engineering or or fixed assets. So that's just there for people people who are interested. There's not been any new fundraisers or shares issued in the period, so everything does remain unchanged. Cool. So, I'll just wrap up before going to, you know, the questions. Obviously, we we now, certainly, run rate, breakeven and going into profitability with our contracted revenue for q four, the monthly kind of overhead costs outside of bill... Below the the the gross profit were coming into the year. We're over 230,000, and they're now around 170.

14:38 And that is where we can we can still grow while keeping the cost base around that area for for... Certainly, until we reach a good percentage of profits... Profitability. We... Yeah. We have a near term pipeline, which is very confident in conversion for counter contracts, which does include new clients as well as I mentioned before, we have just started work with a a second major government department. So we're gonna do everything that we can to bring that into being, like, a large a large contracted... Contract as as quickly as we can. There's more kind of near term training...

15:25 Corporate training opportunities through NORTHCODERS AI found you found you having some interesting conversations around around that as well. K. I'm gonna flip to some questions that were... I'll go to questions first that were submitted before the presentation. Question one, there are rumors that NORTHCODERS might go private. Is is is that true? So I I don't know. Possibly, there's speculation. I don't really think it's appropriate for me to comment on individual or, like, rumors found on kind of stock and share forums. But, you know, we remain an aim listed business, and we do believe that AIM offers us valuable strategic options, you know, which we we are looking at.

16:10 I know that one example I use for this with people is people say, oh, it's very expensive for a company of your size being being on AIM. And, yeah, while that's true, some of, like, the ISO certifications and the the the frameworks that we're now getting opportunities through from public sector is unusual for a company of our size. And what... The reason why it's been easier for us is all of the kind of the compliance and all of the regulatory matters that you need in place to to to trade on AIM and to keep the authorities of AIM happy that you're you're doing everything you need to do. So, obviously, the share change in the share price have have have been slow, and I do think that we do have good news coming down the line, though. And once we get back to profitability, that will that will be a time where it it might be more exciting in terms of investors and shareholder value, which is moving me on to the second question of how I propose to bring shareholder value given the share price.

17:11 Well, now that all the restructuring is done, we we can really focus on the business. Well, that's a bit that we can control. I can't control much sometimes about the share price, about the sentiment, but what we can do is focus on the underlying business and deliver. And, obviously, immediate priority is protecting cash balance through generating, operating, cash, growing counter, and the corporate revenues, and doing that in a way that we... We're not rebuilding a big cost base. We we remain, yeah, very, very careful over where we spend money and constantly ask ourselves, you know, do we need to spend money on this? Is there a way of doing it where where we're not risking the growth trajectory of the business by keeping the cost as low as we can.

18:03 Can we have a twelve month broker forecast to improve? Question three. Can we have a twelve month broker forecast to improve sentiment? So I I can't talk about broker forecasts. However, yeah, the brokers put forecast out this morning. So that's Zeus Capital, and that's forecast for the remainder of this year, which we've talked about, and and we can we can... They're available through Zoos Capital's website directly, or they're also available on Research Tree. So, yeah, I... I'm not allowed to go into them, but but they are available. And, you know, it's been good to to have now that we've, you know, sort of the point where we know the... What the visibility looks like and that we've done with it... We... You know, done with the restructuring and so on, it's been good. It shouldn't be sentiment having, having those back in the market.

18:51 How has the trading market... Question four, how has the trading market changed, and how is the transition progressing? So, obviously, yeah, the government funded training market has changed substantially. Obviously, we all know the new prime minister, one of what what... Some coming out of Manchester may or may not do something different with that, but I think it's not only the government framework that's changed that. There has also been... There has been a downturn in graduate recruitment that we do see changing, which is obviously just good for for the world for for many, many reasons. What happened with the government frameworks is it went to regional authorities, but it was incredibly fragmented, and everything was different. All of the time frames were different, and it was really difficult to juggle them all.

19:40 And, ultimately, we're we're working with Greater London. We're training people now. They're super happy. We're hitting our KPIs, and we're looking to to to continue continue doing that with those. But the price pay per individual, simply wasn't enough to... For us to... You know, we've always given the tech industry the skills it needs and created life changing opportunities for individuals. And, there just wasn't the size of funding that they wanted to allocate per head basis on the the skills boot camps just just wasn't worth it. So, hopefully, that answers that question. I'll go and see, what questions have been submitted while we, have been doing the presentation. As the mix move towards corporate contracts, should we expect working capital become structurally less demanding?

20:27 Yeah. Yes. The... Obviously, sometimes what happens with the corporate contracts is when you first get them and you get a new client, it can be quite difficult can be quite difficult to get the the payroll set, get the pay set up, the purchase orders, and we have had a few delays, but cash collections have significantly improved. But once you are working regularly with a client, our clients are super sticky, then, yeah, the cash collections do do come in monthly, and that does obviously... It's a little in arrears. NORTHCODERS is the cost comes out. The working capital's around about a sixty to to ninety day change between the individuals that are on our payroll and the receivable, from the from the contract. What are the customers buying from NORTHCODERS AI today, and how much of the emerging pipeline is genuinely new business versus cross selling to existing customers? So we have a lot of partners.

21:21 We... That new businesses directly through marketing, of course, we do... We we do get new clients all the time, but the business is obviously fundamentally changed. And now NORTHCODERS AI is selling the ability to adopt AI in a much better way for your organization. Focused on more senior people. So, of course, we are seeing people now working with our NORTHCODERS, six, seven years ago, also got a a decade of of building this community. So that's been super strong. There, yeah, there are there are some new clients in the the counter pipeline. Sometimes the new clients will be people who have worked on a hiring basis with NORTHCODERS over the years because there's been literally literally hundreds of those. But the...

22:10 It's just a bit of time, the bit more detail on the question, NORTHCODERS AI is a, yes, a four week framework based on content and simulations. It's quite... Well, simulations, if you're an individual, individuals don't pay for NORTHCODERS AI. The revenue model is the forward deployed engineers through Counter. And, also, we will be returning to the... Because now the training numbers are small within NORTHCODERS. We are planning to bring back the the recruitment fee model also because we still got a lot of demand to hire people from NORTHCODERS due to our reputation, but recruitment fees were a historic part of the business. But they were replaced by the government framework because it was always a tri party employer, training partner, and individual. So the the hiring fee basically came from the milestone through through the contract.

22:59 And then also businesses are able to put their... Put pods through NORTHCODERS AI. So we say three or four people in a pod, usually, that do different things within the technology organization because the whole point of AI is being able to do things that you're not... That... Or not necessarily been in your swim lane. We're able to bring agents together to work across lots of different areas. But because you don't know so much about, for example, quality assurance, they're where the risks lie, and that's what Northcoast AI also looks at the cloud utilization costs and also the the kind of tokens and the and the tooling costs and how we can best manage that and do it do it effectively. So that's a model for for NORTHCODERS AI for businesses, and we... It's obviously in the alpha stage now. So there is just a full time four week framework for businesses. We do have the option to do that two days per week.

23:50 We do also do training consulting so we can deliver on a... You know, in an individual kind of contracted day rate over a period where we can deliver the content and the simulations directly at the flex... Flexible timing for the business. So... Yeah. Okay. Thank you. That's all the questions. Perfect, Chris. That's great. And thank you very much indeed for addressing all of those that came in this afternoon. Of course, if there are any further questions that do come through, we'll make these available to you after the presentation just for you to review. But, Chris, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and to the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great. Yeah. I think I think that the...

24:36 I've had really good support from the the shelves I've spoken to during the course of today, and the main message is that we have finished our restructuring. Yes. We wanted to go faster on the revenue, but we are we are seeing those sales growing. We're not making growth to the below the line costs, and the the the the gross profit is is... The the cost of sale are directly linked to the revenue, not not sat there causing sort of stealth overhead. And, yeah, all of our contracts being cash generative, we are being super cautious on discretionary spending. Of course, we'd like to spend more on sales and marketing, but we will we will soon be EBITDA positive again, and that's when we can start to see how the sales accelerate and then make decisions on being more, well, being more aggressive to to to to grow further. But, yes, thanks. Thank you, shareholders, for for for the support, understanding that it's been sort of a... It's just taken us twelve to fifteen months where we sustained not only EBITDA losses, but, obviously, a significant amount of restructuring costs, which has hit the cash balance. But, know, we are we are through that now, and, obviously, I hope to with...

25:50 Hope to be able to release more news to the market now that we have actually some research and some sort of numbers that we mentioned earlier you can get from you can get from Zoosar. I look forward to keeping people updated. Thank you again. Perfect, Chris. That's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback? On behalf of the management team with NORTHCODERS GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.