Earnings Call: H2 2025

Apr 29, 2026

Summary

Revenue fell to £4.9m as regional funding changes disrupted training, prompting cost cuts and a £1.6m year-end cash position. Counter grew to £1.5m revenue, with £1.5m contracted for 2026 and a further £1m near closing; break-even is estimated at £5m revenue.

Good afternoon, and welcome to the Northcoders Group PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated on the right-hand corner of your screen. 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 publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. I would now like to hand you over to Chris Hill, CEO. Good afternoon, sir. Thank you very much. Thank you everyone for joining us today. I want to be very clear and transparent that 2025 was a challenging year, not just for Northcoders, but the wide skills and recruitment sector, especially the technology-focused ones, amongst the changes to the industry that we have been seeing. For us directly, the shift in the U.K. government funding for skills from a national model to a regional one did fundamentally change the landscape, significantly reduced volumes, decision-making from those authorities was very delayed, and it did really create a lot of uncertainty across the market. We are not going to hide. I will start to talk about what I am proud of. What I think really defines us for the last year is how we responded to that disruption and uncertainty. We took very early decisive action. We made business, substantially reducing our cost base and protecting the gross margins despite incredibly significant downward trend in revenue. One main thing we focused on is preserving cash, which was the right decision rather than waiting for a different outcome in a market that we realized had structurally changed. They were not easy decisions, and they very much affected our team and required a lot of hard work across the business. They were the right decisions. I do want to take a moment just to say how proud I am of the Northcoders Group team and the way they handled the past year with professionalism, resilience, and still that focus on maintaining great quality for both our learners and our clients. They have all been truly exceptional. The last year was not just about defense. We continued to build what we believe is the future of the business. What you see today is a company that has gone through a deliberate transition. Yes, revenue is down year-on-year, but we have protected gross margin. We maintained a strong cash balance, significantly reduced our cost base, and we built real momentum within our new B2B offering, Counter. That matters because it gives us clear options for the future. As we go into this year, we are certainly not standing still. I will take you through the rest of the investment deck in the results deck, apologies, in more detail, and we will talk about those points then. This is probably the last time that I will use this business performance slide. However, it is relevant to the last full year, how the business was set up when we went into the year. Northcoders Group is made up of three core brands. Our business developed into the quiz, and I know many people have seen this before. Northcoders has always been our training engine, training group, house of technology focus. Tech Returners, who does a similar thing but for people returning to tech, and now Counter. The way that we operate our model is, we have various training frameworks that people from all walks of life come and join us on a journey to become professional technologists. Using the recruitment through Tech Returners and Northcoders, Counter teams to organizations, for the long term, culturally built in. We are working with some substantial clients across mainly finance services, particularly sub-tier and the public sector also. I will start with the headline numbers. As mentioned, this is a deliberate transition year for the business. As expected, revenue is down following the structural funding changes. We protected cash, and we reset the cost base as early as we possibly could in the year, which has put us in a much stronger position, going into 2026. Revenue fell to GBP 4.9 million, due to loss in government funding. However, restructuring has enabled us to keep the gross margins strong. Most of our team were full-time employed tutors. Although 59% gross margin looks negative versus the 67%, that is also due to a change in sales split and a slight lag of the future filtering taking effect when compared with the prior year. Our EBITDA was a negative GBP 0.6 million, which does, again, highlight the amount of restructuring cost base that has changed. The revenue was pretty much half from the year before. We did a lot to combat a GBP 3.9 million drop in revenue from 2024. The cash balance remains strong and has improved year on year. We took, in terms of Counter, the revenue last year, was up to GBP 1.5 million. It was GBP 0.8 million. Within the year, in terms of sales orders, when we took pre-bookings for Counter contracts are 12 months in length, and we took a record of GBP 2.5 million in the year in Counter sales orders. I will talk more later about training in the curriculum. Again, not shying away from that. I went over this in the introduction. In a bit more detail in terms of what was structural changes to the U.K. Skills funding, it was very much a national volume-led contract that we believed would be in place for 5 years. That was how long our contract was. The change in government decided that the allocation of skills funding was going to go to regional combined authorities, which took a lot of time to reduce procurement and the award phase, lots of the authorities did not really know how to do any of this stuff. We have had good success here in London with Greater London Authority, which is a rewarding relationship that is continuing to power through this year. While the funding landscape changed, by no means has the demand for digital skills gone away. Yes, there are changes to what employers and companies are wanting. It's shifting towards experience, AI capability, and embedded delivery. In more detail on our response to the year, our action when we knew that the national contract would no longer exist, and we didn't envisage the regional authority would do work across apprenticeships and other regional authority type funding in the past few years of the business. We didn't expect that. So we materially reduced our cost base, and that was across the board, not just around our boot camps. But any sort of discretionary spending, we literally made cut after cut, after cut to make sure that we just reduced the cost as much as we possibly could to preserve the cash in the year that we knew would be that would not hit the revenues or cash generation of the year before. We've got a slide later on the revenues, so how they changed. Private and commercially funded training was an area that we focused on, as well as Counter where we've seen positive traction last year and going into this year also. I'll talk about the repositioning of the business. It's more led by Counter, and I feel like it's a much more balanced business model. We now, for example, when we're working on training boot camps with Greater London, that's giving us an opportunity to expand the people into Counter, and we are specifically tailoring the training that we do to the needs of our clients and training the people through those types of programs. Northcoders are required to fulfill the demands of our Counter teams, which is enterprise-led and has a significant opportunity with targeted group market within a large department of public sector and other peers on the market recently reported significant demand public sector technology service that our very strategy with Counter fully aligns with the government strategy, which is to reduce the contractor headcount within the civil service for digital and convert that over to full-time employees to ultimately save the taxpayer money. We're going about Counter incredibly professionally, and we are now listed on multiple frameworks, including getting our big ISO accreditation has been a huge achievement. So when procuring work through professional financial services and public sector, those are certainly invaluable. Our excellence was recognized despite the disruption of restructuring and all details going on when we were rated outstanding by Ofsted for our training services, which of course gives us credibility, not only within skills group and funding but within wherever things like Skills England, the new initiative go towards with these kind of modularized training platforms that are coming in. I'm going to talk more about Counter. I firmly believe that we've made strong progress in 2025, and the momentum has continued into this year. We're delivering increasing levels of embedded teams across both enterprise and public sector clients. Our accreditation, which I mentioned on the last slide, is going to really open up more markets as well as the frameworks that we can both work with large consultancy businesses to kind of pair us with our modeling. Now we can work directly with the public sector services themselves. The government's initiative is to save GBP 500 million a year, which is the reducing of contractors figure. Counter does what it says on the tin. We put people in to deliver strategic value, which is what the public sector needs, hence the vast amounts of live procurement and digital services which are procured by central government. When the time is right, and have been very successful within the public sector, is the high potential person that they're taking through Counter. We are receiving purchase orders now for longer extensions, more teams, and that area is substantially growing. In terms of evolving the training division to growth in private and AI-led training, we're looking to create the next kind of generation of AI-enabling software engineering and data engineering talent. That's what employers are asking us for. They're really asking for people to be able to use the tooling that'll trouble them lots of hours of sort of the disruption. The way that everything's being done through the focus on AI, and we've got a small, agile team, that's where we're really able to make those changes, be bespoke about it. I think it's really important at this point too. We've talked quite a lot about the growth of Counter and that being the strategic focus. Training individuals for all walks of life and giving them life-changing opportunities still remains core to what we do and always will do. Of course, we want to move that reliance away from that large kind of funding that we saw last year. Focus on higher quality and just getting better outcomes for less people, higher quality. Focus on those people going into counseling rather than just the improvement market. The board is well aware that the AIM listing is a powerful way to investigate merger and acquisition strategic options, and we will directly seek opportunities. Anything that is adjacent that may accelerate the scale of Counter or bring us into adjacent markets, complimentary capability earnings enhancing, we are looking to do whatever we can and certainly not considering these options. We are heavily considering that to just bring good shareholder value. I want to make clear that there were certain options that we were seeking. You'll notice I'm on my own this year. I'm not quite as eloquent as in the past, but got a good idea about where we sit. I'm going to go through, obviously, we covered this in terms of the revenue drop in 2025, and the EBITDA loss of GBP 2.6 million. Obviously, the bottom line loss for the company is around GBP 3 million, which I'll talk about soon. It's mostly not cash-based losses. It's to do with the restructuring of the business and the asset sale of the balance sheet that are no longer required to run the trading at such volume. Finally, for me, at least more interestingly, is the change in the revenue switch of 60% of last year's revenue was government funding and expanding not only the percentage, but the amount of revenue that's coming from direct to consumer or corporate training as well, and with 30% of last year's revenue being Counter. That's the growth of the trend of Counter's revenue being a more significant portion of the wider group revenue. We are seeing that coming this year, and we certainly do see it taking over. Okay. In terms of the income statement, we talked before about the gross profit margin. We do make a lower gross profit margin within Counter also than we do within training. As the Counter revenue becomes more significant than the training revenue, our margin will come down. But we've got long, high visibility contracts that last for 12 plus months. Obviously, in terms of gross margins last year, there was a slight lag between restructuring taking effect and that actually hitting the P&L. In terms of what else is in the bottom line, minus GBP 2 million of profit after tax is the significant write-downs on the balance sheet to do with the training assets that have been procured and developed over the years because they simply will no longer be required because they were there to run large scale contracts to train 100, 150 people a month. It's just not a match to what is a much leaner business model, not only on cash costs but just on P&L costs going into 2026. It was a decision to no longer use some of those assets. Then, of course, there is restructuring. Restructuring comes at a one-off kind of non-operational cost. We did the best we could by everybody who was leaving the company in terms of fairness and in terms of what the cost of letting go and find new opportunities. These slides, just in terms of more detail on the cash flow position and the balance sheet and the balance sheet. I'm not going to go through the details of the outposts included in this, which will be shared with everybody. I'd like to talk about the outlook next. A positive start to the year. We've got contracted revenue in place, and we've got a strong pipeline for Counter also, I might add. We got GBP 1.5 million of revenue already contracted for Counter. We've got GBP 1 million literally at the final stage of closing. We are waiting on purchase orders and getting those things started. That takes us up to around sort of GBP 2.5 million of which is fairly early in the year. We're one-third of the way through it, and we've got around about sort of GBP 600,000 of group Counter. We think that will be about GBP 1 million in terms of the expectation for H2. The courses that we're doing now have broken down into the more modular pieces. We're seeing employer-led demand for software engineers and data engineers who need to be trained in AI tooling, kind of like reinventing ourselves. That's a significant opportunity area, which has already started. At a high level, we estimate the break-even point to be around GBP 5 million for the year to cover the current cost base. We're assuming Counter when it comes to gross profit, we're assuming a Counter net on that with good visibility of around GBP 3 million. We do have high confidence in closing the remaining gap on a number of areas that continue to get succeed within Counter. The repeat business contracts are always often extended, then there's an active pipeline around about GBP 4 million worth of deals. When I talk about an active pipeline, I mean that we are actively engaged at discussion point, discovery stage with the remainder of the organization looking to close those deals, not just that we've kind of spoke to once type of timeline. Outside of that, there is also, we have started to write bids to the kind of G-Cloud framework and the other frameworks that were on for central government, which are larger. I think it will take some time to start seeing those things. They're probably a bit like the kind of regional authorities, the boot camp funding generally takes quite a bit of time, but we are now in a strong position again with public sector cases, which is imperative to be winning. We're confident of our full year 2026, and certainly we can cover that. Breaking point. We believe in the strategy, and we are seeing traction, and we're working hard to convert sustainable growth plans to bring long-term shareholder value. Just to finish up. With a bold transition year 2025, took early action to get ahead. Super proud of the team, and retaining the quality of what we do and the excellence. You can see that through the repeat orders through Bowser, and the great opportunities that people have been going into who have gone through the training boot camps that we ran last year. We've entered 2026 as a leaner, much more focused business in a better position, and we're seeing real traction. Now I'm just going to break down the related line of costs as well, just so everyone knows. We've got the resourcing cost of GBP 150,000 costs and redundancy costs, GBP 1.5 million of impairment. There was also a GBP 80,000 leasehold impairment write-off for dilapidations for that's the last of our leasehold buildings. We're now in super agile, getting back to the earlier resourcing cost basis because of people. We're looking at everything we do. We're using much leaner in London and in Manchester, flexible spaces that are much better for our needs than having these kind of large lease premises. They're a thing of the past. The P&L amortization depreciation last year was GBP 500,000. Obviously, we'll be nowhere near that high for this year. Share-based payments, then around what's called net interest cost, interest paid versus received, around GBP 100,000, then GBP 8,000 of tax expense also. At the beginning of the year, we restructured our debts, moving over to a loan we now have with NatWest, which is not subject to EBITDA debt serviceable cash flow covenants. It's secured against the intellectual property, which despite the balance sheet change, that's more just about the International Accounting Standard and the use of those assets. Those assets still exist, and they were revalued at the beginning of this year to a service satisfaction level. The relation with NatWest is going well. There could be further opportunities in the future. I am going to go and open up the questions. Sorry about that. There we go. When will your upskilling costs, my apologies for doing the presentation on my own, not being able to kind of go through these. When will the upskilling courses come live, and how much revenue are they expecting to generate? That is probably asking about the modular-based upskilling courses that they are already live and available. We are seeing specific interest around AI engineering from employers, specifically around upskilling teams of software developers and data engineers into becoming that kind of AI native, has become the term being used for people who are using AI tools to write software, build software from day one. In terms of the courses, our primary focus has remained on securing accounts, but those courses also form part of accounts as broader framework for delivery of value and winning in the marketplace, support the capability, and the delivery. In terms of how much we are expecting to generate, it is still very early for me to put a revenue expectation in that versus accounts context. For example, they are much smaller. The price and the revenue from those, we are probably not able to guide on a specific number. The initial engagement is encouraging, and then later on, I can make sure that that is something that we focus on to tell the shareholders and investors about as they begin to, they have become less of an early stage. What are the biggest challenges you see to the Counter consulting model competing against smaller digital consultancies or securing significant business for Northcoders? It is a competitive market, that is for sure. We do firmly believe that versus some of the kind of unlike hire train deploy mechanisms that we have some serious value. We are engaged with the client from day one. We run recruitment drives alongside our clients for people like super culturally aligned from day one. We have got that real alignment, guiding the focus of the individuals moving over to work for the client as opposed to work for other, like in some consultancies where you have kind of like transient advisors that they are there to upsell alternatives from the consultancy of the artist to deliver value. We are not focused on that. We have been told that it is a refreshing approach. I do believe that it is a new approach to combine, as we call it, upskilling modules in the question, combining, upskilling those people during that time so that it is valuable to the organization. In terms of competitive strengths, we have presence on the frameworks and the ISO certifications were not easy to obviously help by offering a listed business with all of the compliance and things like that that we have in place. That gives us a strategic advantage. So yes, of course, competition exists and there is a lot of competition. We believe we have got a strong platform to continue scaling Counter. What is the latest cash position? What is the latest cash position? So at the end of the year, cash was GBP 1.6 million. The costs have been significantly reduced during this year. One thing about and we are seeing growth in revenue and there are immediately cash generative. So in terms of the cash flows and cash is month-on-month. Some of the training that we have done in the past, we still do very small amounts of it where we kind of rely on our balance sheets holding student loans and they would be paid back through these increased income agreements. We are not doing so that much. All of our revenue is cash generative, so we are confident in the cash flows. To mention those advanced learner loans that we have done quite a significant amount of in the past, we do have cash coming in. Just with the revenue being recognized months and years ago. So that also strengthens the cash as well. Are there plans to find a new CFO? The plan was to review that post these results. We knew that we would get someone in to help reduce. However, we have a financial controller who is a qualified accountant who I have been working very closely to put these deals together and has done an excellent job with doing this. So we will be reviewing that now that we knew that trying to get someone to do this year-end. Charlotte has been here for quite a bit of that month, so we wish Charlotte all the best. I know she has got other things going on, so I am sure she is watching, but all the best for the future. I take it now that there are definitely plans to review that. So with established players in the Counter market such as FDM and Sparta are suffering revenue decline and strong headwinds, what makes Northcoders' offerings different and successful? Thanks for that question. I believe I covered that. The offering is different. The way that we embed and the way that we work with clients is different. There have been multiple problems, both of those brands mentioned there directly. The hire train deploy market, it has always been kind of like a grab to get the best university students, give them these kind of training agreements that they kind of have to suppress their income over years. It is a bit of saying that we believe people are deployed into war zones, not careers that they love, and that really comes to a Counter and people are actively applying. They have other opportunities to go to these roles, and we do not have this kind of positive high risk within revenue decline within the hire train deploy market, which I am reminded of a wider recruitment market. Also, I am well aware of is this kind of edge. You have got sat there, you kind of get, you have recruited X amount of graduates and they are on your payroll. Teams are assigned immediately with the client when they come in through the Counter. We have a small amount of techniques because the different type model also is a small incubator of individuals from Tech Returners and Northcoders or the wider market, depending on what you do further field also depending on the contract. When we are satisfied that technique who returns to Northcoders at the end. It is a very different model, much more agile, much more lean. We are getting great feedback on it, and we look forward to basing everyone on our platforms. The share price is at an all-time low. What do you see as fair value? I do not think I am able to answer that question, but I suppose, yes, of course, very low share price, but that is pretty understandable. Last year it was also a large loss-making year. We not only look at organically growing our business, but we also look at using the fact that we are AIM-listed as a superpower to bring back shareholder value. That is always our focus is to increase that. Is AI a risk to Group's businesses and are there any AI opportunities? Yeah, I would say both. I certainly do believe that it is an opportunity, and that is what we are seeing from employers. I know that, again, widely reported kind of price improvement market is struggling significantly. That is probably where that question is coming from because it comes out only after a large improvement price. I try to figure out how AI native is going to be coming. There has also been reports of software development being an all-time requirement type. What I believe you have got to blend the two things together. People have to become more efficient and more understanding of how you use the AI tool. There is, of course, risks in that. Cybersecurity risks certainly pretty insignificant and again potential large area where automated software engineering will be multiple. We have obviously multiple stories around organizations falling foul of that. So I do think it is something that we will have to do properly. Again, hiring people with AI engineering skills alongside problem-solving brain is certainly the way forward for us. "In H2, do you see some of the government funding business being backed by local government?" We do have government funding. We are currently doing Greater London Authority, and that is going very well. We had around 2,000 people apply for a cohort. So we got super great engaged people through the scheme. We have been doing some of that rebuilding community, doing that in person out near Tottenham Court Road. We are seeing super strong results of people coming out. Then we had already one repeat cohort from London, and we are super confident in the KPIs, and we know that the budget has been allocated. So yeah, I think in H2, there will be the looks for that, and we will talk about that, trying to get that boot camp figure to GBP 1 million, and I am certain that we can do that. "What is the best estimate for the current year?" Okay, that is really interesting. Okay, so we do not have formal numbers in the market. I know there was certainly one out from the Zeus analyst this morning saying that once we see the visibility, and we feel like we are in a better position to do that, we certainly will. I went over the break-even point of the company. When I talk about break-even at that point, that was certainly bottom line break-even and kind of the sort of break-even cash flow position also. Obviously, there was a question which just come in as well. It is also about will you be able to service the NatWest loan from the operating cash flow. The operating cash flow takes into account the servicing, which is paid down monthly, of the NatWest loan. It looks too high for the given stage of business following a reset. Is that the biggest business risk? We have seen the revenues growing and the revenues cash generative, so that is well managed, the kind of cash position. I think that answers both those questions. I will take this last one, which is, "Can you update on the current management structure?" We have myself and Amul ultimately sort of founders of the company and involved at a very early stage. Jessica currently leads and heads up counseling, is super focused on that as opposed to doing anything with the sales team in the investment market. Two Non-Executive Directors, one Chair. Again, in terms of our CFO, we have a very well-seasoned ex-CFO on, Nick Parker, sitting on our board. So there has been some great support there. Within the company, we have a kind of technology leader. We have a training leader. We have someone who leads all of the administration and the kind of the leads on public sector training and because there is lots of like box ticking required to do that. Human resources, we have a human resources person. At the moment below that, currently recruiting for a new Head of Marketing to bring the new and current products to market. Counseling is made up of tech leads and kind of core management team that do work within the training with counselors, especially when it comes to project side of those. Then, we have two or three teams that will either journey, like customer journey for training in terms of careers, in terms of onboarding calls where people are recruited to start our courses. Then some people who directly teach as well. So it is a small team in terms of like the non-cost of sales staff, which obviously accounts with cost of sale is individuals. We are now around 30 people. So there is quite a lot. It is quite something. It is probably about right for the size of the business. As we look to, we will certainly be looking at being much more kind of headcount efficient through some of the ways and means that are pretty popular as we grow the revenue density line, we need to start significantly growing. That is pretty good overnight base to certainly go this year. Then resource will be primarily focused on sales and marketing go-to-market, which we do also have a lead for that in Manchester and a lead for that for counseling. Thank you. That is all of the questions. That's great. Thank you for answering all those questions from investors. The company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Chris, can I please just ask you for a few closing comments? Yeah, absolutely. Thanks again for your time today and alongside that, your continued support. Hope I've gone across well that we've taken decisive action over the past year and that we're entering this year as a much more resilient business and we're being super laser focused on what we believe will succeed, and seeing encouraging traction within that across both Counter and training. Yeah, thanks again, and I look forward to continuing to update everyone on our progress. That's great. Thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.