20 September 2022

Northcoders Group PLC

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

Interim Results

Group continues to deliver IPO strategy and geographic expansion, with record demand and continued support from UK government

Northcoders (AIM:CODE), an independent provider of training programmes for software coding, is pleased to announce its results for the six months ended 30 June 2022 ('H1 2022' or the 'Period').

Financial Highlights

·    Revenue more than doubled to £2.37 million in H1 2022 (H1 2021: £1.09 million), an increase of 117%

o  Particularly strong demand for bootcamp training, delivering revenues in H1 2022 of £1.72 million (H1 2021: £0.93 million) as Northcoders continues to build its reputation as a leading technology training provider

o  Growing contribution from Business Services of £0.20 million (H1 2021: £0.16 million), leveraging significant market opportunity as businesses struggle to manage UK tech skills gap

·    Gross profit increased 110% to £1.66 million (H1 2021: £0.79 million) with a gross margin of 70%

·    Significant 62% increase in underlying adjusted EBITDA of £0.42 million (H1 2021: £0.26 million)

·    Benefitted from efficiencies of hybrid teaching model with ongoing remote learning, combined with teaching in person at hubs, generating profits after tax of £0.19 million (H1 2021: £0.02 million),  delivering adjusted EPS of 4.59 pence (H1 2021: 0.47 pence)

 Operating Highlights

·    Continued growth in demand with 3,494 applications in H1 2022 compared to 3,662 applications in FY 2021

·    Further expansion of Business Services division supported by successful launch of new Developer Incubator, the Group's "Teams-as-a-Service" model for businesses to hire teams of junior developers, managed by Northcoders' internal consultancy team

·    Well-known corporates such as On the Beach, Evri, HESA and Sky Bet have also started their training programmes in the Period

·    Capacity increased as employee headcount rose to 84 (H1 2021: 41)

·    Data Engineering product trials progressed with curriculum finalised and first cohort due to start in October 2022

·    Birmingham hub successfully launched with strong demand and Midlands based staff headcount increasing as planned

Current trading and outlook

·    Individual applications continue to grow, with an additional 1,798 applications since the Period end

·    Continued demand for Business Services, with repeat programmes from NHS Digital

·    Further Government support announced with £4.00 million contract secured

·    Strong performance giving the Board confidence to invest additional funds in the second half of the year to support further growth in FY 2023

·    On track to deliver FY 2022 targets with Q3 2022 trading continuing at record levels and, as of 16 September 2022, contracted bookings for 2022 standing at £5.50 million, supported by persistently growing demand for technology engineers

·    At this early stage contracted booking for 2023 already stands at £2.50 million

·    Approved Government supplier for corporate services after being accepted onto 'Crown Commercial', the UK Government's procurement system

Chris Hill, Chief Executive Officer of Northcoders, said: "More than doubling revenues in the first half of the year is testament to the growing reputation of Northcoders as one of the UK's leading technology training providers, with a business model that is able to evolve to meet the demands of individuals and corporates alike.

"The continuing Government support for technology training serves to highlight the significant digital skills gap in the UK. The lack of qualified engineers is limiting the progress of businesses nationwide which in turn is holding back a domestic economic recovery. This is combined by a lack of diversity in the technology sector that requires immediate attention as it ultimately further limits the supply of quality engineers and impedes the levelling up agenda.  A shortage of talent is simultaneously pushing sector salaries to all time highs and increasing the attractiveness of the career path and demand for Northcoders services.

"As the Group moves into the second half of the year Northcoders is continuing to deliver on its growth strategy as a result of this unabated demand and there is significant confidence in the Group's ability to provide all stakeholders with sustainable and profitable long term growth."

Analyst meeting and Investor Meet Company presentation

A virtual meeting for sell-side analysts will be held at 10.00 a.m. today, 20 September 2022. Please contact Buchanan via northcoders@buchanan.uk.com if you wish to join the meeting. A copy of the Interim Results presentation will be available on the Group's website later today: www.northcodersgroup.com.

Northcoders will be also be presenting via the Investor Meet Company platform today, 20 September 2022 at 4.30 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. 

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Notes to Editors

Northcoders is a market leading provider of coding and software development training for businesses and individuals. Founded in 2015, its 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' coding school 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 supply innovative EdTech solutions for the upskilling and reskilling of employees, and is also a registered provider of government-backed apprenticeships in the field.

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 from businesses and public agencies. It operates in a significant and growing market with structural growth trends further accelerated by Covid-19.

Northcoders was admitted to trading on AIM in July 2021 with the ticker CODE.L.  For additional information please visit www.northcodersgroup.com . 

Introduction

The Board of Northcoders is pleased to present its interim results for the six months ended 30 June 2022. The Group has made significant progress since its IPO in July 2021 and has successfully taken advantage of increased demand for its products and services. In line with the Group's IPO strategy, it has not only rapidly scaled the geographic reach of the business but also successfully implemented two new products, the Developer Incubator and The Data Engineering Bootcamp, with the latter's first cohort expected to begin imminently.

Trading in H1 2022 has been encouraging, which alongside continued tight control over costs, has ensured the Group is on track to meet market expectations for the full year ended 31 December 2022, despite the additional investment into new planned products in the second half of the year to support further growth into 2023.

Financial Review

Northcoders delivered a strong performance in the Period, with underlying profitability higher than initial management expectations.

Revenue for the Period was £2.37 million (H1 2021: £1.09 million), up 117% on the equivalent period last year.  Training generated revenue of £2.17 million whilst Business Services generated revenue of £0.20 million. Further explanation of revenue classification can be found below.

Gross profit for the Period was £1.66 million (H1 2021: £0.79 million) at a gross margin of 70%.

EDITDA, adjusted for share based payments, was £0.42 million (H1 2020: £0.26 million) and profit after tax was £0.19 million (H1 2021: £0.02 million).

Basic earnings per share was at 2.79 pence per share (H1 2021: 0.37 pence). Basic adjusted earnings per share was 4.59 pence per share (H1 2021: 0.47 pence).

Net assets at the Period end were £2.44 million (H1 2021: net liabilities of £0.51 million) of which cash was £1.04 million (H1 2021: £0.36 million).

Operational Review

The Group started 2022 with its highest ever demand and this has continued to grow throughout the Period. Continuing with the hybrid model developed in 2021, Northcoders is able to offer training remotely to anyone in the UK, with hubs now located in Manchester, Leeds, Newcastle and Birmingham.

The time and investment in the Group's systems, marketing strategy and delivery processes following the 2021 IPO has led to a 117% increase in revenues and increased operating profit in the Period. During H1 2022, the number of Northcoders students in training at any one particular time increased by 85% on 2021 across all programme types, and the Group expects this to increase further as it develops internal platforms and increases tutor headcount. This is testament to the Group's evolved delivery platform and is a credit to the expanding Northcoders team.

During the Period, Northcoders secured multiple new contracts in its Business Services division, with Rolls Royce and EMaC Ltd, among others. Well-known companies such as On the Beach, Evri, HESA and Sky Bet have also started the coding training programmes during the Period.

The Group has also continued to see an increase in demand from individuals wanting to enrol on coding training courses. Application numbers for the first six months to 30 June 2022 stood at 3,494, which compares favourably with the 3,662 applications in the 12 months to December 2021. The Group grew its graduate hiring network by a further 10% by engaging with 32 new companies for the first time in the Period. Northcoders now has a network of almost 350 hiring partner companies to sustain its graduate hiring from B2C coding bootcamps.

After successfully delivering the Group's industry leading outcomes on the Wave 2 iteration of the Department for Education Skills Bootcamp Initiative, the Board is pleased to have been awarded a further £4.0 million contract in Wave 3 post Period end. This will enable the Group to continue to offer scholarship places to individuals and accessibility to its life changing courses. These scholarships are now not only in Software Engineering for coding but also Data Engineering.

Data Engineering is the newest teaching discipline, with the success and the lessons learnt from the industry leading Software Development coding bootcamp giving the Company confidence to provide an industry leading, sought after, bootcamp in Data Engineering. The team is in place and the curriculum is being finalised with a planned launch date of October 2022.  

Revenues

Going forward, and to best reflect the Group's growth trajectory, revenue will be categorised into two core divisions, Training and Business Services (formally Corporate Solutions).

Training
Training revenues comprise of Software Engineering (coding) and Data Engineering. These courses are targeted at individuals and the vast majority are delivered by shorter bootcamps, but they are also delivered via longer term apprenticeships. Training can be funded privately with a range of consumer finance mechanisms available, through Government supported scholarships or through Government apprenticeship programmes.

Demand for the Group's core bootcamp courses continues to grow strongly. The Northcoders apprenticeships have also increased albeit not as quickly as anticipated at the time of the IPO as the strong preference is currently for the shorter, more intensive bootcamp training programme and, particularly boosted by the additional Department for Education ('DfE') contract, the Company is looking at focusing on this area of Training for growth in the near term.

Encouragingly, the rapid growth in demand seen towards the end of 2021 has not slowed down and applications from consumers have been boosted as more individuals look to retrain in this space. The number of applications by the end of August 2022 had reached 145% of that experienced in the full year 2021. With the competitive demand for technology skills growing the Group has experienced its average graduate salary increase to £27,000 which is contributing to the overall attractiveness of a career in the sector.

The Group has also continued to increase the number of its hiring partners, which now stands at over 370. Some of the most recent additions include Cinch Cars Limited, Visualsoft and Experian.

Supported by the benefit of increased marketing spend following the fundraise at IPO, the Board expects the growth in demand to continue as Northcoders further expands its geographical reach and list of hiring partners.

By continuing to closely monitor the progress of alumni, the Group can see that the vast majority are not only rapidly gaining suitable employment following qualification, but also progressing fast within the industry. It is these individuals, with their Northcoders background, who act as ambassadors for the training that the Group provides and once noticed by their employer companies, they too become convinced of the value of a Northcoders training programme and seek out further such staff for training to meet their own corporate needs. This in turn has formed a network of demand for the Group's Business Services division, creating added value to Northcoders.

In H1 2022, Northcoders has worked hard to increase the accessibility of training to attract students from all demographics. The Group is pleased that it now has a wide range of funding mechanisms for the students including DfE Scholarships, Apprenticeships, Income Sharing Agreements, External loan facilities and discounts for upfront payments. This is something that the Group is passionate about maintaining and improving.

Post Period end, Northcoders' quality and delivery was acknowledged when the Group was successfully awarded a further £4.00 million government funded scholarship programme for its training courses.

Business Services

Northcoders' Business Services division works with businesses to distinguish which service best fits their needs. This could result in a Northcoders academy, (NHS Digital academy has trained a large group of employees year on year), a developer incubator (the Group's teams-as-a-service product) or in certain instances a custom application is built internally as an outsourced service for corporates. The division continues to attract new business with revenue for the year growing steadily. 

The Group's new product, 'Developer Incubator' has experienced encouraging levels of demand since its launch in February 2022, with contracts secured with Rolls Royce and EMaC Limited proving successful.

Developer Incubator is a corporate offering which supplies a group of junior engineers along with more senior engineers on a consultancy basis, these juniors are then incubated within the Northcoders education system and trained on the Company's own software processes. At the end of the consultancy period (usually 18 months) the juniors are then hired by the corporate client. This type of programme can be delivered in both Software and Data Engineering training and has the potential to be tailored to multiple technical disciplines. After the success of the work undertaken for Rolls Royce and EMaC, the Group is now in a strong position to market this product to a wider audience in order to drive further growth in the Business Services division.

The Group has also secured further academy work with NHS Digital which has commenced this month, as well as confirming acceptance onto 'Crown Commercial' which is the UK Governments portal for business service procurement.

The Directors believe that the Group's Business Services offering has the potential to generate significant growth in revenue and accelerate the scaling of the broader business, albeit that the profits will be at lower margin than those generated from the Training division.

Geographic expansion and Hub roll out

Northcoders' geographical reach expanded considerably in the Period, as the hybrid model is enabling students from all regions to study with the Group despite no physical hub. This has been supported by the most recent round of Department for Education funding which is to be delivered nationwide and is enabling marketing of the Northcoders brand to an increased number of locations throughout the UK. For example, there has been a rapid increase in the number of students from London and South of England in the last three months.  

Outlook

The growing level of attention to IT training by UK Government bodies, corporates and individuals is encouraging the Group to continue to expand its operations to meet increasing demand. The job outcomes and industry recognition give confidence that Northcoders operations have never been more relevant and critical.

Northcoders is confident in its prudent, careful approach for developing new products and is seeing the benefits of this as products are successfully introduced, with tailored and appropriate training programmes appealing to a broad audience.  The Group will continue to be innovative and react to what the market needs, looking at other disciplines once the Data Engineering division has been launched. As a young company, the Group will also continue to evaluate the roadmap of the business to ensure it is evolving its model to generate maximum long term, sustainable growth.

To optimise retention of the Group's highly skilled team as we move through the cost-of-living crisis, the Group has already increased salaries. There will also be a one off bonus to help with cost of living increases in the second half of this year. Regardless of this, the recent progress gives Northcoders confidence in its ability to meet full year 2022 expectations.

Moving into the final quarter of 2022 and look to 2023 the Group is excited about the new products and the direction that the business is moving in. Contracted revenue for 2022 currently stands at £5.50 million and revenue already contracted for 2023 stands are £2.50 million. Northcoders will continue to improve and expand organically, and where appropriate through selective acquisition, whilst always striving to maintain the quality and core values that it is known for.

Chris Hill

Chief Executive Officer

20 September 2022

Group Statement of Comprehensive Income

For the period ended 30 June 2022

Group Statement of Financial Position

As at 30 June 2022