Latest Results

Chief Executive Officer’s review

A fundamentally reshaped business

The first half of FY26 was a key turning point for Northcoders, following major changes that simplified the business with lower fixed costs and focus on B2B clients. The revenue drop reflects FY25 government funding shifts, but Northcoders is now a fundamentally different company.

The clearest evidence of this transformation is the shift in our revenue composition. In FY24, approximately 87% of Group revenue came from government-funded training. Today, approximately 76% of FY26 revenue recognised to date and currently contracted comes from B2B corporate customers, with government-funded training expected to account for only around 12% of FY26 revenue. This reflects our strategy to reduce reliance on unpredictable government funding and focus increasingly on contracted corporate technology projects with greater revenue visibility.

The transition inevitably affected reported revenue, which reduced to £1.4 million from £3.7 million in H1 FY25 as government-funded training revenues reduced ahead of the full ramp-up of corporate work, which is weighted towards H2. Approximately £2.4 million of B2B corporate revenue has now been recognised or contracted for FY26, with contracted H2 B2B revenue already exceeding total Group revenue recognised during H1.

Counter and corporate growth

Counter continues to develop as the principal driver of the Group’s transition towards B2B corporate revenues. At the FY25 results in April 2026, we reported approximately £1.5 million of Counter revenue contracted for recognition during FY26, together with more than £1.0 million of opportunities at final stage and a wider pipeline exceeding £4.0 million.

Since then, contracted revenue has continued to grow. Approximately £2.4 million of Counter revenue has now either been recognised or contracted for delivery during FY26, comprising approximately £0.9 million recognised during H1, approximately £0.4 million during July and August and approximately £1.1 million currently contracted for delivery during the final four months of the year.

Counter has a near-term opportunity pipeline of approximately £3.0 million, with a further approximately £0.6 million of corporate opportunities across the wider Group. Of this combined £3.6 million near-term pipeline, approximately £0.3 million has the potential to be recognised during FY26, subject to successful conversion and delivery timing.

A more flexible operating model

The change in the revenue mix changes Northcoders' economics. Gross margin was 55% in the Period, down from 67% in H1 FY25, due to more corporate project work, which is expected to make up about 75% of FY26 revenue and usually yields a 50% gross margin.

As more direct costs are tied to contracted customer activity, they increase with revenue growth. This contrasts with the Group’s historic model, which kept significant technology, curriculum, and delivery within the fixed costs before revenue. We are evolving by building a network of specialist partners, enabling Northcoders to respond quickly and access technical expertise without substantially raising fixed costs. The core team manages customer relationships, quality, IP, and propositions, while adding specialist support based on client demand.

Cost base and path to profitability

The restructuring undertaken during FY25 and H1 FY26 is now substantially complete. At the FY25 results we announced annualised cost savings of approximately £2.1 million and, subject to final confirmation, further actions taken during H1 have increased total annualised savings to approximately £2.5 million.

The £0.5 million adjusted EBITDA loss in H1 shows revenue was too low to cover operating costs supporting the Group. During H2, the situation will improve with higher revenues, better visibility, and a reduced fixed cost base, with no near-term cost increases planned.

With H2 revenue expected to be materially ahead of H1, the Board expects a significant improvement in operating leverage during the second half. Based on current contracted revenues and the reduced cost base, the adjusted EBITDA loss in H2 is expected to be materially lower than in H1, with the final quarter of FY26 expected to be EBITDA positive. The restructuring was designed not simply to reduce costs, but to create a business capable of scaling revenue without rebuilding the historic fixed cost base, allowing future growth to convert more efficiently into profitability.

Northcoders AI

In September 2026, we launched Northcoders AI, extending the Group’s corporate proposition into AI engineering, adoption and workforce capability. The proposition has already generated initial contracted revenue and, while the contribution remains modest at this early stage, we have been encouraged by the speed and quality of customer engagement since launch. More significantly at this stage, Northcoders AI is opening new conversations with both existing and prospective corporate customers and strengthening the Group’s wider business development pipeline.

We see an opportunity to support organisations not simply with AI training, but with the practical adoption, deployment and continued development of AI capability, while at the same time considering the overall security of such systems.

Cash and working capital

Cash at 30 June 2026 was £0.6 million, compared with £1.6 million at 31 December 2025. Net cash outflow from operating activities was £0.8 million during the Period, reflecting the H1 trading performance and working capital movements, while approximately £0.2 million of bank borrowings were repaid during H1. 

As the contribution from Counter and other corporate revenues increases, the working capital characteristics of the Group are also changing. Corporate contractual billing and collection cycles provide greater predictability than the milestone-based payment profile historically associated with government-funded training. As such, we anticipate that operational cash flows in the second half of the year will be broadly neutral and become cash positive in the subsequent year.

Outlook

We expect H2 revenue to be materially ahead of H1, supported by increasing contracted corporate revenues and continued growth in Counter. Combined with the Group’s substantially reduced fixed cost base and more flexible delivery model, this is expected to result in significantly improved operating leverage during the second half. The Board expects the adjusted EBITDA loss in H2 to be materially reduced compared with H1, with the final quarter of FY26 expected to be EBITDA positive.

Counter continues to build scale and visibility, while the launch of Northcoders AI provides an additional route to growth and is already generating encouraging early commercial engagement. There remains more to do, but we believe the changes made over the last 18 months have created a simpler, more agile and more resilient business with a credible platform from which to return to profitable and cash generative growth.

Chris Hill
Chief Executive Officer