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Learning Technologies Group plc: THE INVESTMENT CASE

Acquisitions quite literally paying off for Learning Technologies

The e-learning specialist is reaping the rewards from its strategy to consolidate the sector
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Learning Technologies Group PLC (LON:LTG) is one of the few pure digital learning businesses on the stock market.

Quoted since November 2013, the company’s policy is to use its listed status to consolidate the sector.

The most recent addition to the family was NetDimensions (Holdings) Limited (LON:NETD) which it bought in February for £54mln in cash.

Impressive year in 2016

Performance last year was strong across the board, LTG said, including in the US with a strong contribution from its new Rustici division which it acquired last January for US$26mln.

As a result, revenues for the 12 months to 31 December 2016 jumped 42% to £28.3mln (2015: £19.9mln), while recurring revenues – which are important for a company’s visibility – almost tripled to 27% (2015: 10%).

READ: Learning Tech surges as solid results prompt divi hike

WATCH: LTG boss delighted with 'excellent progress' made in 2016

Learning Tech also diversified its revenue streams away from the UK, with international sales now accounting for 36% of the business (2015: 12%).

Margins also improved last year to 27% (2015: 22%), which helped to push up adjusted underlying earnings (EBITDA) to £7.7mln (2015: £4.3mln).

The AIM-listed group did post a loss before tax of £1.2mln (2015: £1.2mln profit), although this was down to costs related to the acquisitions of Rustici and US$3mln investment in learning analytics firm Watershed Systems.

As a result of the strong trading performance, Learning Tech hiked its dividend by 40% to 0.21p per share.

2017 off to a flyer as well

Pleasingly for investors, the fine form has continued into 2017, with the company stating that trading so far has been “significantly ahead of last year”, boosted by a “healthy” order book.

LTG is expecting sales to continue on their upward trajectory, and margins to strengthen again.

In addition to that, the group said it is “excited by the opportunities already identified” from the acquisition of NetDimensions which bodes well for the future.

Consolidation paying off

LTG’s strategic aim has always been to build a dynamic portfolio of complementary businesses and an international e-learning business of scale.

As mentioned previously, it snapped up management software group NetDimensions earlier this year for £54mln.

READ: Learning Tech acquires NetDimensions in £54mln deal

WATCH: NetDimensions acquisition 'transformational' for LTG

Learning Tech funded that deal through a £46.5mln placing at 37.5p, which will represents approximately 22.7% on the enlarged capital.

The firm's chairman Andrew Brode provided a £5mln overdraft and Barclays a £3.5mln facility to make up the rest of the consideration.

Early last year, LTG snapped up Rustici Software, a global market leader in digital learning interoperability, for US$26mln.

Jonathan Satchell, LTG’s chief executive, describes Rustici as “the expert plumber of our industry” and it clearly had things humming nicely by the end of 2016.

At the same time as buying Rustici, LTG  took a 27.3% equity stake in Watershed Systems, an e-learning analytics group that specialises in measuring the effectiveness of learning programmes.

Watershed is still in the development stages, so a minority stake in the company protects Learning Technologies from financing requirements while still giving the company a seat at the table.

Acquisitions add strings to its bow

The additions above are no doubt effective in their own right but the greater value to LTG is the ability to offer a blended service, which is resulting in increased take-up of its services.

A stunning example of this was the landmark deal with existing customer Civil Service Learning.

In partnership with its strategic partner, accountancy firm KPMG, and others, it will develop a new training platform for 400,000 civil servants.

The platform incorporates a combination of digital, informal and classroom components, across 15 curriculum areas, from leadership & management, diversity, EU practices, through to project management and digital delivery. .

It was the most significant contact the group had even won.

Blended learning still appropriate

The blended learning approach being deployed with the Civil Service is proving especially relevant in today's workplace, believes Satchell.

"All types of learning are relevant, but the problem with the traditional method of parking people in a room and presenting to them is what we call 'knowledge decay'.

“We see a very steep drop-off in the retention of what was learnt in the training room if it is not followed up with e-learning sessions.

“In fact, you want to start with the e-learning before the live presentation, so you can determine training needs and prime people on what they are going to learn,"  Satchell said.



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