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Learning Technologies Group plc: DEEP DIVE

Learning Technologies helping talent shine through in a digital age

The AIM-listed firm's 2018 results in March showed a 104% year-on-year jump in pre-tax earnings (EBIT) to £27.2mln, ahead of markets expectations, as revenues soared by 83% to £93.9mln
OVERVIEW: LTG The Big Picture
In April, the group said it was acquiring recruitment software group Breezy HR in a US$30mln deal
  • Operates in fast-growing e-learning and talent management market

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

  • 2018 EBIT leapt by 104%, while revenues soared by 83%

  • Goldman Sachs has 12-month share price target of 113p


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:

On 17 April, the company said it was acquiring US recruitment software group Breezy HR in a deal worth up to US$30mln.

The group is putting down an initial US$12mln for Breezy, whose products are used by 10,000 companies in 72 countries. Further performance-based payments capped at US$18mln could be distributed over a three-year earn-out period.

The deal is 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.

In its 2018 results on 26 March, LTG reported a 104% year-on-year jump in pre-tax earnings (EBIT) to £27.2mln, ahead of markets expectations, as revenues soared by 83% to £93.9mln.

In a trading update back in January, the group had predicted full-year revenues of £94mln and EBIT of no less than £26.5mln.

Revenues at LTG’s software & platforms division, which makes up 64% of the total, was up 9% on a like-for-like (LFL) basis, offsetting an 8% LFL decline in its content & services arm caused by “particularly strong” comparatives to the prior year.

Recurring revenues rose to 68% of the total in 2018, up[ from 38% the year before, driven primarily by the group’s acquisition of US recruitment and talent management firm PeopleFluent in May 2018.

LTG rewarded shareholders by hiking its final dividend 67% to 0.35p per share, taking the full year dividend to 0.5p.

Jonathan Satchell, LTG’s chief executive, said that the company had made “a good start” to the new year with trading in line with management expectations.

He pointed to the company’s new strategic goal of achieving run-rate revenues of £200mln and run-rate EBIT of “at least” £55mln by the end of 2021.

What the boss says – CEO Jonathan Satchell:

"2018 was an important year for LTG.  We continued our evolution towards a predominantly software licence model delivering high margin recurring revenue… We are delighted with the progress made at PeopleFluent which has extended our offering beyond corporate digital learning, into talent management.”

Blue Sky:

Goldman Sachs thinks LTG shares could see around 50% upside potential over the next 12 months as the e-learning market grows.

In a note initiating coverage on LTG with a ‘buy’ rating and a 113p target, the US investment bank’s analysts pointed out that, after mapping out global education spending to 2030, they forecast a 5% compound average growth rate (CAGR) in global spend on corporate learning over 2018-2030, up from 2.1% CAGR in 2008-18, driven by a rise in automation requiring employees to obtain new skills.

The analysts said: “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.”

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.”

In 2019-23, the Goldman analysts forecast LTG to deliver 7% growth in organic revenue, 11% increases in adjusted operating profit and a 14% rise in earnings per share per annum.

They said that, given the scope for further bolt-on M&A deals, as implied by LTG’s strategy, they have factored in a 6p/share value from future acquisitions in their price target.

Goldman Sachs was appointed as LTG’s joint corporate broker, alongside Numis Securities in February 2018.

LTG shares currently change hands at 72p each, giving the firm a market cap of round £470mln.

--Updates with Breezy HR acquisition details--

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Learning Technologies Group plc Timeline

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