City round-up: Northcoders; McBride; SysGroup; Pebble; Cropper; Kelso ups NCC stake
Northcoders, the Manchester-based coding specialist with bases in Birmingham, Newcastle and Leeds, has hit record annual revenues of £7.1m, it reported today, but slipped into a pre-tax loss.
Turnover increased by 27% from £5.6m in 2022, driven by geographic expansion and entry into new disciplines.
However, the firm made a £1.225m pre-tax loss, which is compared with a pre-tax profit of £346,429 the previous year. Northcoders attributed this to investment in infrastructure and the nascent B2B training division.
Cash balance as at December 31, 2023, was £1.6m, against £2.8m last year. Net assets increased to £4.8m (FY22: £4.6m).
Northcoders reported record growth in numbers of individuals trained, increasing to 2,852 from 1,685 last year.
A focus on student outcomes led to further growth in hiring partners with 465 (FY22: 407) partnered with in the period.
Its relationship with the Government continues to strengthen, achieving a £4.5m bid to fund students in H2-2023 and FY-2024. A further £10m bid win announced in January 2024.
In current trading, both B2C and B2B divisions are starting FY24 strongly, with record B2C applications and a growing pipeline for B2B contracts.
Revenue access and contracted visibility is already reaching £8.3m for FY24.
The company said it is currently trading in line with market expectations for FY24.
CEO, Chris Hill, CEO, said: “I am pleased to report another year of record revenue growth with further increasing demand for our high quality training products. Despite the subdued technology hiring market making FY23 more challenging in certain areas of the business, we have continued to fulfil our ambitious growth strategy.
“We have continued to scale our B2C division using our growth levers of geographic expansion, increasing technology disciplines that we teach, and introducing new training formats. We have also further developed our nascent B2B division, using the group’s strong reputation in technology training to build our pipeline of new business prospects. Our position is strong as the hiring market returns and look forward to providing more updates in due course.”
He added: “There’s no doubt that digital transformation continues to be at the forefront of business priorities, driving individual and corporate training demand for our services. This, combined with the long term bi-party government funding commitments to upskilling private and public sectors, leaves Northcoders well positioned to continue to scale the business and deliver value to our shareholders.”
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McBride, the Manchester-based cleaning products manufacturer, said it expects its adjusted operating profit will be around 10% ahead of current market expectations by June 30, 2024, in a trading update today.
Group-compiled consensus of broker forecasts for its 2024 financial year are currently an adjusted operating profit of £61m and net debt of £132m.
It said strong operational performance, combined with continued high demand levels for its private label products has meant group trading in March and April has been ahead expectations.
For the first nine months of the current financial year, overall volumes were 6.5% higher than the prior year, with private label volumes growing by 9.7%.
Group revenue was 8.2% higher than the prior year on a constant currency basis, benefiting from both volume growth and the impact of pricing actions in the past financial year to recover input cost inflation.
Input costs for chemicals and packaging remain at similar levels as at the last update in February 2024, with employment, general supplies and financing costs continuing to apply inflationary pressures. There are early signals that certain materials will see price rises as the group progresses into the second half of 2024, primarily in the more sustainable materials categories.
It said it continues to monitor and manage potential supply chain risks caused by heightened geopolitical tensions.
McBride plans to issue a full year trading update on July 16.
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Heejae Chae
Cloud hosting business, SysGroup, said it is ideally placed to participate in the ongoing expansion of AI to business services, in a trading update for the year ended March 31, 2024, today.
The group, which relocated from its original Liverpool base to Spring Gardens in Manchester last month, is focused on the artificial intelligence (AI) and machine learning (ML) transformation.
It said group revenues increased five per cent to £22.7m (FY23: £21.6m), driven by a significant 14% increase in the second half of the year which offset a three per cent decline in the first half.
It continued to maintain the momentum into the new financial year across all technology offerings.
At the end of April, it closed the second largest contract in SysGroup’s history, totalling £2.2m of revenue over three years, providing cyber security managed services to a leading challenger bank.
It said its AI/ML proposition continues to gain traction amongst both new and existing customers, with a growing pipeline of opportunities.
Following significant investment in technology and people to support its strategic growth, the group expects to report Adjusted EBITDA of approximately £2m.
The group finished the year with a gross cash balance of £1.9m (FY23: £4.2m) and a net debt position of £3.4m (FY23: net debt of £1.3m), excluding contingent consideration of £1.8m (FY23: £2.7m).
Executive chair, Heejae Chae, said: “Our strategy, execution and leadership has been totally transformed over the past nine months since I joined the group.
“We have set a strategic vision to become the premier end-to-end data solution provider for small and medium sized businesses (SMB) embarking on their AI/ML journey. We will provide further details on our strategy and progress in the year end results announcement in July 2024.”
He added: “In a short period of time, we have developed new capabilities in AI/ML, data management and cloud which are crucial in today’s data driven world. Our progress is recognised by our partners, evidenced by achieving AWS Select Partner Status, approval for Zscaler Global MSSP Programme, and working with one of UK’s largest Valued Added Reseller to be their Machine Learning Partner of choice.
“Our customers, more importantly, are embracing our transformation and new capabilities as demonstrated by the double digit organic growth following years of stagnation.
“We believe that we are ideally positioned to participate in the most consequential development in technology. Evidence is becoming indisputable that adoption of AI is no longer an option for businesses. However, the challenge for SMBs to embark on the AI/data journey is significant. Our vision is to be the partner of choice for the UK business in their transformation.”
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Chris Lee, chief executive of Pebble Group
Richard Law, the chairman of promotional products group Pebble has resigned, with group CEO, Chris Lee, taking over until a replacement is sought.
The listed business is to buy back up to £5m in its own shares on the back of a market update that claims current trading is “consistent with the same period in 2023” and “progressing in line with the delivery of Full Year 2024 market expectations”.
Last year Pebble issued a profit warning and in January 2024 confirmed that lower revenues of £124m (FY 22: £134.0m) and lower profits of £16m (FY 22: £18.0m), were in line with a profit warning issued to the market in November which saw the share price tank to a record low of 52p.
Its Facilisgroup division has appointed a Chief Product Officer, while Brand Addition has appointed a Global Marketing Director to evolve the businesses’ approach to new client acquisition.
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James Cropper paper mill in Kendal
Paper and packaging group James Cropper PLC expects profits to be “slightly ahead” of previous expectations and says the outlook for FY2025 is “encouraging, with a return to growth expected” across both the Advanced Materials and Paper & Packaging businesses for the full year.
However, in a trading statement to the markets this morning the listed group said its advanced materials business has seen a year-on-year contraction in revenue, primarily reflecting the slowdown in fuel cell market demand. This was partially offset by growth in the hydrogen electrolyser business where, despite the delays to expected projects reported in January 2024, the business continued to acquire new customers through trials and specification development with electrolyser OEMs.
The core (non-hydrogen) Advanced Materials business was underpinned by growth in the aerospace and automotive sectors.
The mid-term outlook for both the hydrogen and the core business remains strong.
Within the Paper & Packaging business, supply chain destocking compounded by the impact of high inflation on consumer confidence continued to be felt through the second half of the year.
Despite volume pressures, customer retention remained high as the business benefits from strong relationships at the channel, converter and end customer levels. Lower input costs (energy and carbon tax), mix improvements and productivity initiatives, as well as maintenance of strong average selling prices, are helping to protect margins.
A planned restructuring is on schedule, and the future project pipeline is “encouraging” and the company said: “forward indicators, such as order intake, point to early signs of market recovery throughout FY2025.”
Steve Adams, CEO of James Cropper, said: “I am pleased with the response from our whole organisation to the challenging trading environment over the second half of the year.
“Our priority has been a relentless focus on business development, leveraging our strong product and technology offer. We have addressed the drop in volumes by protecting our pricing, delivering continuous improvement in all our operations, driving down input costs and maintaining tight cost control.
“The Advanced Materials business has continued to strengthen its technological leadership whilst maintaining strong customer relationships, as well as building world class partnerships and identifying future accelerated growth opportunities.
“The Paper & Packaging business continues its focus on driving value growth through operational effectiveness and building on its strong brand and capability leadership in luxury packaging.
“As a Group, we have remained steadfast in focusing on our strategy for accelerated growth and the Board is confident that the growth prospects of the Group, as a whole, remain significant in the coming years.”
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Activist investor Kelso has purchased a further 700,000 ordinary shares in Manchester headquartered cyber and escrow business NCC.
Kelso believes that NCC is undervalued and “the sum of the parts of NCC is significantly greater than the current market capitalisation.”
In a statement accompanying the announcement of the purchase Kelso chief executive John Goold stopped short of calling for NCC to be broken up, but applauded the group’s performance in the Escode division.
Last week NCC held a capital markets day for investors, which focused on the performance of Escode.
“In our view, the value of the Escode division has historically not been fully appreciated. The NCC capital markets presentation on 25 April 2024 at the London Stock Exchange was well attended and gave the investment community much greater insight into the potential of the business.
Escode is the global market leader in software escrow with over 14,000 clients including c.57% of the Fortune 500 and c.40% of the Forbes 2000. It had revenue in 2023 of £64.3m with EBIT of £30.8m. With its market leading position, first rate client retention rates and long term contracts, Escode has extremely high quality earnings. Coupled with steady industry growth, principally driven by regulatory change in particular in the finance and infrastructure markets, we believe this makes Escode a highly valuable business.
We look forward to attending the Cybersecurity capital markets day on 20 June 2024 which we expect will be equally informative. The Cybersecurity division had revenue to 31 May 2023 of £270.8m and EBIT of £6.9m (2022: £31.9m) following a pull back in the market. In January 2024, NCC reported its interim results which were in line with market expectations and as such this gives confidence that the turnaround is gathering pace.
John Goold, CEO of Kelso, commented: “Well executed capital markets days are a vital part of any listed company’s investor relations strategy, allowing holders and non-holders to deepen their knowledge. Last week’s presentation of Escode allowed investors to hear from the senior management within the business and also one long term customer, NatWest Bank. We look forward to the Cybersecurity division capital markets day in June.”
Kelso’s total holding to 2.2m shares at an average cost price of 117p.
