viewLearning Technologies Group plc

Learning Technologies helping talent shine through in a digital age


In the six months to 30 June, adjusted earnings (EBIT) were ahead of expectations at £19.4mln, up 134% year-on-year, while revenues surged 85% to £62.6mln


Quick facts: Learning Technologies Group plc

Price: 137.6 GBX

Market: AIM
Market Cap: £920.15 m
  • Operates in fast-growing e-learning and talent management market

  • Approximately 70% of LTG’s business undertaken in the US

  • Half-year revenues came at around £62.5mln, up 85% year-on-year

  • Berenberg analysts have a 12-month share price target of 180p


What Learning Technologies does

Learning Technologies Group PLC (LON:LTG) operates in the fast-growing workplace digital learning and talent management market.

The AIM-listed firm offers a mix of product and services that focus on partnering with clients to achieve measurable results.

Working across recruitment, performance, learning, compensation, diversity and inclusion, compliance, succession, engagement and technical integration, the firm enables corporate and government clients to keep up with the increasing speed of change in the digital world.

Approximately 70% of LTG’s business is undertaken in the US, with the UK and Europe accounting for the majority of the balance.

The group comprises a Software and Platforms division that accounts for approximately 70% of revenues on a proforma basis and typically sells multi-year SaaS (software-as-a-service) licences which enjoy high customer retention rates.

LTG’s Content & Services division typically delivers shorter-term, fixed price projects to clients.



How is it doing

In the six months to 30 June, adjusted earnings (EBIT) were ahead of expectations at £19.4mln, up 134% year-on-year, while revenues surged 85% to £62.6mln.

The amount of recurring revenue also rose to 74% of the total from 51% in 2018, with the adjusted EBIT margin increasing to 31.1% from 24.5%.

Revenues had been boosted by 7% organic growth from LTG’s software & platforms division, which makes up 68% of the total, offsetting a 3% contraction from the content & services arm.

The company also boasted of “strong cash generation”, with net debt falling to £13.9mln from £15.7mln in the period; since then, it has fallen further to £7.8mln.

As a result of the improved results, the firm hiked its interim dividend 67% to 0.25p per share.

Looking ahead, LTG said trading for the full year was currently in line with expectations, with content & services expected to report 8% organic growth in the year despite its first-half dip.

The firm’s PeopleFluent business is expected to “return to growth in 2020”, while BreezyHR, a US firm its bought for US$30mln in April, was achieving “significant growth”.

Breezy, whose products are used by 10,000 companies in 72 countries, was bought as part of LTG’s drive to boost earnings before tax (EBIT) to a run rate of at least US$72mln (£55mln) by the end of 2021.


What the boss says: Jonathan Satchell, chief executive

"Our first-half performance increased recurring revenues and robust current trading provides great confidence for the year ahead to deliver further organic growth, strong margins and excellent cash generation. On the back of this momentum, we are investing in H2 2019 to drive sales further, as well as supporting organic growth initiatives into 2020."


Blue Sky

At the start of 2020 analysts at Berenberg tipped LTG as one of their "top picks" for the technology, media and telecoms (TMT) sector, upping its share price target to 180p from 140p.

Berenberg sees “three avenues through which the company can deliver organic upgrades above consensus figures: upcoming large contracts, better-than-expected client retention; and/or better platform and software margins”.

Furthermore, with its strong cash generation and debt-free balance sheet, LTG has “firepower to pursue M&A even when the stock price is low, at current share levels deals naturally become more accretive”, and with a no major deal having materialised in 2019, the analysts said “we are more confident that something larger will play out this year”.

Among their TMT coverage, the Berenberg analysts noted that the average software business's shares trade at a multiple of circa 37 times forward EPS.

“While LTG’s organic growth is slightly lower than the double digits at some software peers, margins are substantially higher as is the share of recurring revenue. With scope for organic growth to accelerate in FY 2020, margins likely to go up further and highly accretive M&A options plentiful, there are numerous avenues for LTG’s earnings to be much higher.

“As these earnings dynamics play out, we believe LTG’s valuation will play catch-up.”

Goldman Sachs, house broker, has forecast that global spend on corporate learning over 2018-2030 will grow at a 5% compound average growth rate (CAGR), up from 2.1% CAGR in 2008-18, driven by a rise in automation requiring employees to obtain new skills.

“While lower costs have been the main reason for the shift to eLearning within the corporate world to date, we see the next wave of growth being driven by higher-value bespoke content, aided by more sophisticated HR tech systems,” Goldman said.

In their view, they added, LTG’s business portfolio “is well positioned to benefit from this inflection, given its bespoke content offering, which we see as a key differentiator vs. larger peers.”


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on 23/7/19

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