Northcoders warns of ‘significant’ reduction to full year revenues and profits

Northcoders, the Manchester-based coding specialist, warned its revenue and profits for the current financial year will be “significantly below current expectations”.

Shares in the group slumped by 38% in early trading following the announcement. By 10am they had recovered slightly but were still 33% below the opening price of 111.05p per share, a 12-month low.

The group achieved a 46% boost to revenues in the six months to June 30, 2023, but slipped into a pre-tax loss.

The business, which also has bases in Leeds, Newcastle and Birmingham, reported sales of £3.5m, up from £2.4m the previous year, driven by record demand for consumer bootcamp training, which delivered revenues of £2.8m (H1 2022: £1.7m), helped by geographical expansion and entry into new disciplines

However, a pre-tax profit of £118,176 in 2022 was transformed into a pre-tax loss of £306,908 for the reporting period.

Northcoders said it has a strong balance sheet, with cash of £2.04m, compared with £1.04m a year ago, and net assets at the period end of £5.5m, up from £2.4m in 2022.

It said it has continued to secure government funding for consumer Skills Bootcamps, achieving a successful Department for Education Skills Bootcamps bid giving a further £4.5m revenue visibility for the second half of 2023 and into fiscal year 2024.

The strategy for geographical expansion continues to progress with more than 45% of the company’s Training Bootcamp learners now based outside Manchester and Leeds, a significant change from the group’s position at IPO two years ago.

And in February this year 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.

However, Northcoders said, despite the strategic momentum achieved in the first half, which ended in line with management’s expectations, the current financial year is presenting several market challenges for the group’s Business Solutions division.

The current financial year 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 the group’s services have diminished below the £0.75m it had been expecting, with the quantum now being uncertain. The group said it is actively collaborating with them during this transitional phase and remains optimistic about the possibility of future work and contract fulfilment, as the client has expressed a keen interest in continuing the 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 said it 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.

Chief executive, Chris Hill, 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 £3.5m, a 46% increase compared to the same period last year, driven by high demand for consumer bootcamp training, generating £2.8m 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.”

He added: “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.”