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Learning Technologies churning out the cash

Numis Securities remains "very comfortable" with its 'buy' recommendation and has shifted the price target up to 90p
Computer-based learning
Numis is now expecting EBIT of £14mln for 2017

E-learning specialist Learning Technologies Group PLC (LON:LTG) said profit and cash generation in 2017 were significantly ahead of expectations.

The board said it expects group revenues for 2017 to be not less than £51.8mln, up from £28.3mln in 2016.

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

The strong performance was driven by organic revenue growth of more than 20% (excluding the Civil Service training contract it won in partnership with KPMG), with recurring revenues up to 39% from 27% in 2016, largely as a result of the strong growth in the group’s software businesses and a maiden contribution from NetDimensions, which was acquired in March 2017.

READ: Learning Technologies sees better results this year due to contract timing change

Adjusted earnings before interest and tax (EBIT) will be materially ahead of market expectations at not less than £14mln, up from £7mln the year before.

The doubling of EBIT was primarily as a result of strong growth in services and software licence sales, the successful integration of NetDimensions and a continued focus on controlling costs.

At the end of 2017, gross cash was up to £15.7mln from £5.3mln a year earlier, and net cash was positive at around £1.0mln, versus net debt at the end of 2016 of £8.5mln.

READ: Capital Network’s analysis of Learning Technologies (requires subscription)

There was the promise of more to come, as well, with the group revealing it has an encouraging pipeline of international acquisition opportunities.

"2017 has been another exceptional year. LTG has experienced robust organic revenue growth during the year and, along with the successful acquisition and integration of NetDimensions, now enjoys a higher proportion of recurring revenues and an increasingly diversified client base both in terms of market sectors and geographical reach,” said Andrew Brode, the chairman of LTG.

“LTG's scale and expertise allows it to work closely with large blue-chip corporates and national governments as their trusted strategic partner, who are increasingly embracing e-learning solutions as evidenced by the record order book we carry into 2018,” he added.

Numis Securities raised its target price to 90p after what it termed a “strong trading update”.

The broker had been expecting the group to end the year with net debt of £8mln, whereas it actually ended it cash positive.

Numis is now expecting EBIT of £14mln for 2017 and has increased the underlying profit before tax forecast to £13mln from £12.3mln previously; the earnings per share estimate has been nudged up to 1.9p from 1.8p.

“We remain very comfortable with our BUY recommendation on LTG with risk to estimates firmly on the side as we move through 2018,” the broker said.

In late afternoon trading, shares in Learning Technologies were up 13.4%, or 10.0p at at 84.8p.

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