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Learning Technologies Group plc: THE INVESTMENT CASE

Learning Technologies Group interims beat expectations; impact of NetDimensions deal to be felt more fully in the second-half

Broker Numis thinks the benefits of the NetDimensions deal will be felt in the fourth quarter
Learning Technologies Group interims beat expectations; impact of NetDimensions deal to be felt more fully in the second-half
INVESTMENT OVERVIEW: LTG The Big Picture
The company is at the forefront of ed-tech

Shares in Learning Technologies Group PLC (LON:LTG) were higher in early trade after the company posted interim results that beat expectations.

However it expects the impact of March’s purchase of NetDimensions to really kick in during the second half.

WATCH: Learning Technologies resetting targets after achieving £50mln growth ambitions

Underlying profit (EBITDA) from the company, which is at the forefront of the ed-tech revolution, was £4.1mln, up 41% on the year earlier.

City broker Numis said normalised profit beat its estimate by around £600,000.

Revenues were up a third at £17.6mln, while LTG is paying a half-time dividend 0.09p a share, up 29%.

Net debt is currently £9.8mln, or around 1.1 times EBITDA, while it recently secured a long-term facility of £20mln.

Landmark period 

The six months to June have been eventful with the most significant landmark being the e-learning specialist’s £54mln swoop for software group, NetDimensions.

“The acquisition completes the final key technical capability that will allow the group to offer its corporate and government clients a truly comprehensive service,” said chairman Andrew Brode.

“The ambitious integration of NetDimensions has been completed on time and the Board is confident that this will result in a strong margin performance in the second half of the year.”

Brode said the business would continue to look at other potential purchases that might leverage its “established technical capabilities and working practices in domain specific market sectors”.

At 9.20am, the shares, up 66% in the last year, advanced a further 1.1% to 50,57p, valuing the business at 290p.

Numis raised its price target price to 63p from 60p and said: “The group has successfully achieved its ambition to grow revenues to an annualised rate of over £50mln.”

It added it thought the NetDimension integration had been completed on time and reckoned the £5.9mln (US$8mln) annual benefits will be realised from the fourth-quarter onwards.

It raised its current-year pre-tax profit forecast to £11.3mln from £10mln.

Buy-and-build strategy

LTG’s is a buy-and-build strategy focused on the emerging and increasingly lucrative area of e-learning

NetDimensions is the biggest of its five deals to date. Early last year it snapped up Rustici Software, a global market leader in digital learning interoperability, for £19mln.

Jonathan Satchell, LTG’s chief executive, described Rustici as “the expert plumber of our industry”.

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.

It also bought LINE (2014), Preloaded (2014) and Eukleia (2015).

NetDimensions and Rustici are two of five business units that make up LTG. The others are technology arm LEO, gomo learning, a software as a service group, and the aforementioned Preloaded, a BAFTA award-winning educational games specialist.

 

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