Shares in Learning Technologies Group PLC (LON:LTG) surged early doors after the company said the full-year outcome will be significantly ahead of expectations.
The acquisition of PeopleFluent in May looks like a real winner, with the company revealing in its results for the first half of 2018 that the integration of the acquired company is ahead of expectations.
READ: Learning Technologies trades in-line with expectations as it completes PeopleFluent acquisition
The board of Learning Technologies (LTG) now expects the earnings before interest and tax (EBIT) margin of PeopleFluent to be at least 25% in 2019 – up from a previously expressed target of “at least 20%”.
Based on the upgraded PeopleFluent EBIT margin, the board expects full-year profit will be significantly ahead of its previous expectations.
The first half of 2018 saw revenue rise 60% to £33.8mln from £21.1mln the year before, with the proportion of recurring revenue rising to 51% from 37%. Organic revenue growth on a constant currency basis, excluding the exceptional contribution from Civil Service Learning, was 10%.
For the first time, the group now earns more of its revenues outside the UK – 59%, compared to 45% in the first half of last year.
The Software & Platforms side of the business now accounts for 51% of group revenues, up from 40% in the first half of last year.
NetDimensions returned to organic growth at a substantially lower cost base while the Rustici and gomo businesses continue to show strong organic growth.
The Content & Services side of the business performed in line with expectations, despite tough prior year comparators for the LEO and Preloaded businesses.
The group’s adjusted EBIT soared 137% to £8.9mln from £3.8mln while statutory profit before tax was £1.3mln, versus a loss before tax the previous year of £2.3mln.
The interim dividend has been increased by two-thirds to 0.15p from 0.09p.
Net debt at the end of June stood at £15.7mln, compared to net debt of £6.1mln a year earlier.
"The first half of 2018 has been pivotal for LTG with the PeopleFluent acquisition confirming our shift towards recurring software revenues, and significantly increasing our US presence. Together with NetDimensions, PeopleFluent demonstrates our ability to successfully integrate businesses and drive growth and margin progression through operating model improvements,” said Jonathan Satchell, the chief executive officer of LTG.
READ: Peel Hunt starts coverage of Learning Technologies Group with a ‘buy’ rating, 140p target price
“Alongside our track record of delivering organic growth and substantial margin improvements, LTG has a strong balance sheet and acquisition pipeline and is well placed to continue its strategy of consolidating the high growth corporate e-learning market. A robust performance from our core business and the successful integration of PeopleFluent underpins our confidence that full-year profit will be significantly ahead of the board's expectations," he added.
Broker Peel Hunt, which recently initiated coverage of LTG with a ‘buy’ rating, said revenues were in line with its expectations but profits were some 20% higher than it had been expecting.
The broker said it would bump up its earnings per share for fiscal 2019 by around 15%.
“The acquisitions of PeopleFluent and NetDimensions has [sic] transformed the revenue profile increasing the proportion of attractive recurring revenues for the group,” Peel Hunt said.
House broker Numis increased its target price to 165p from 132p after it made material upward revisions to its forecasts.
“Management note a strong pipeline of future potential acquisitions,” Numis said,
“Importantly, given recurring revenue base, management confirm good visibility into 2019,” it added.
Shares in LTG were up 11.1% at 140p in early deals.
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