TIDMLTG
RNS Number : 3638M
Learning Technologies Group PLC
16 September 2019
Learning Technologies Group plc
HALF YEAR RESULTS 2019
Strong sales and margin expansion drives EBIT and cash
generation
Learning Technologies Group plc ("LTG" or the "Company"), the
provider of services and technologies for digital learning and
talent management, is pleased to announce its half year results for
the six months ended 30 June 2019.
Strategic highlights
-- Strong Group EBIT margin performance and cash generation
-- Cross-selling initiatives driving sales momentum
-- PeopleFluent progressing well - confident of return to growth in 2020
-- Content & Services displaying significant improvement
versus H2 2018, with momentum in LEO and Preloaded, reflecting
focussed investment in sales
-- Launch of Instilled Learning Experience Platform ('LXP')
-- Successful acquisition of BreezyHR, integrated swiftly and
now delivering impressive revenue growth
Financial highlights
-- Revenue up 85% to GBP62.6m (H1 2018: GBP33.8m), 74% recurring revenue (H1 2018: 51%)
-- Software & Platforms (68% of Group revenue)
o Organic revenue up 7%, excluding PeopleFluent
o PeopleFluent successfully managing retention rates to
stabilise revenues
o Growth across Rustici, gomo and Watershed
o BreezyHR integration completed and growing strongly
-- Content & Services (32% of Group revenue)
o Organic revenue (excluding CSL contract) down 3% but confident
of strong organic growth for FY 2019
o Excellent sales momentum supports expectation of strong H2 for
LEO and Preloaded
o Cross-selling supporting recent wins
-- Adjusted EBIT ahead of expectations, up 134% to GBP19.4m (H1 2018: GBP8.3m)
-- Strong margin progression, with EBIT margins up 660 basis points to 31.1%
-- Adjusted diluted EPS of 2.228 pence, up 117%
-- Proposed interim dividend of 0.25 pence, up 67%
-- Good cash generation, resulting in net debt of GBP13.9m
following $12.7m acquisition of Breezy and net debt : EBITDA of
0.3x (H1 2018: 0.8x)
-- Robust balance sheet and debt facility supports strong acquisition pipeline
Current trading and outlook
-- FY2019 in line with upgraded expectations, as announced on 22 July 2019
-- Software & Platforms performing well aided by high growth
acquisitions and new product developments
-- Content & Services expected to deliver organic growth of c.8% in FY2019
-- Strong cash generation since period end; net debt at end August 2019 down to GBP7.8m
-- Active pipeline of strategic acquisition opportunities with significant funding capacity
-- Sales pipeline and high proportion of recurring revenue
underpins the Board's confidence for 2019 performance
Jonathan Satchell, CEO of LTG, said:
"In the first half of 2019 both our divisions have delivered a
strong performance, with Software & Platforms delivering an
increasing proportion of high margin recurring revenues from
software licenses, and organic sales momentum greatly increasing in
Content & Services.
"The Group continues to deliver excellent shareholder value by
efficiently transforming recently acquired businesses, with
PeopleFluent successfully integrated and expected to return to
growth in 2020 and BreezyHR, acquired in April 2019, achieving
significant growth and showing great promise.
"Our first half performance increased recurring revenues and
robust current trading provides great confidence for the year ahead
to deliver further organic growth, strong margins and excellent
cash generation. On the back of this momentum, we are investing in
H2 2019 to drive sales further, as well as supporting organic
growth initiatives into 2020."
Financial summary:
GBPm unless otherwise stated H1 2019 H1 2018 Change
-------------------------------
Revenue 62.6 33.8 +85%
-------- -------- -------
Recurring Revenue % 74% 51%
-------- -------- -------
Revenue Outside UK % 79% 59%
-------- -------- -------
Adjusted EBIT (pre IFRS16 and
SBP adjustments) 20.0 8.9 +125%
-------- -------- -------
Adjusted EBIT 19.4 8.3 +134%
-------- -------- -------
Adjusted EBIT margin 31.1% 24.5%
-------- -------- -------
Statutory PBT 6.8 1.3
-------- -------- -------
Adj. Diluted EPS (pence) 2.228p 1.028p +117%
-------- -------- -------
Proposed Interim Dividend per
share (pence) 0.25p 0.15p +67%
-------- -------- -------
Net Debt (13.9) (15.7)
-------- -------- -------
Analyst and investor presentation
LTG will host an analyst and investor presentation at 8.30 a.m.
today, Monday 16 September 2019, at LTG's offices.
Enquiries:
Learning Technologies Group plc
Jonathan Satchell, Chief Executive +44 (0)20 7402
Neil Elton, Chief Financial Officer 1554
Numis Securities Limited (NOMAD and Corporate
Broker)
Stuart Skinner, (Nomad), Nick Westlake, Ben +44 (0)20 7260
Stoop 1000
Goldman Sachs International (Joint Corporate
Broker) +44 (0)20 7774
Bertie Whitehead, Adam Laikin 1000
FTI Consulting (Public Relations Adviser) +44 (0)20 3727
Jamie Ricketts, Chris Birt, Jamille Smith 1000
About LTG
LTG is a leader in the growing workplace digital learning and
talent management market. The Group offers end-to-end learning and
talent solutions ranging from strategic consultancy, through a
range of content and platform solutions to analytical insights that
enable corporate and government clients to close the gap between
current and future workforce capability.
LTG is listed on the London Stock Exchange's Alternative
Investment Market (LTG.L) and headquartered in London. The Group
has offices in Europe, North America and Asia-Pacific.
Chairman's Statement
Introduction
The Board is delighted to report that Learning Technologies
Group plc ('LTG') has made excellent progress over the period,
particularly with its ongoing transition towards a software licence
model delivering high margin, recurring revenues. The integration
of the transformational acquisition of PeopleFluent Holdings Corp
('PeopleFluent') in May 2018 has been completed successfully and,
as planned, the acquired business is on track to return to growth
in 2020. It is pleasing to see a significant improvement in Content
& Services' performance compared to H2 2018, driven by a
greater focus on sales and a number of large contract wins. At the
same time the Group has delivered continuing strong operating
margins, enabling management to invest further in R&D and
incremental sales initiatives, resulting in some notable successes
in cross-selling.
Results
With effect from 1 January 2019 LTG has adopted the new
accounting standard IFRS16 - Leases. In addition, Adjusted EBIT*
has been restated to include the impact of share based payments.
Further details of these adjustments are provided below.
In the six months ended 30 June 2019, revenues increased by 85%
to GBP62.6 million (H1 2018: GBP33.8 million) with like-for-like
revenues on a constant currency basis (excluding the
post-acquisition contribution of BreezyHR, the acquired
PeopleFluent businesses, and excluding the exceptional contribution
from the Civil Service Learning ('CSL') contract) increased by 2%
to GBP27.0 million. The acquired PeopleFluent businesses
contributed GBP35.1 million of revenue for H1 2019, compared to
GBP36.0 million (3% decline) of revenue had they been owned for the
entirety of H1 2018.
With the acquisition of PeopleFluent, Watershed and BreezyHR, as
well as the strong organic growth in the Group's other software
licencing businesses, recurring licence fee and support contract
revenues increased from GBP16.5 million in H1 2018 to GBP41.3
million in H1 2019, an increase of 150%.
Adjusted EBIT grew by 134% to GBP19.4 million (H1 2018: GBP8.3
million) with margins increasing from 24.5% in H1 2018 to 31.1% in
H1 2019, primarily as a result of the inclusion of PeopleFluent for
the full period and operational synergies achieved ahead of
plan.
Operating profit of GBP8.2 million (H1 2018: GBP0.9 million) is
stated after amortisation of acquired intangibles, various
acquisition earnout charges, share-based payments, and integration
costs. Following the acquisition of PeopleFluent, amortisation of
acquired intangibles increased to GBP10.2 million (H1 2018: GBP5.7
million). The share based payment charge increased to GBP1.0
million (H1 2018: GBP0.6 million) as a result of increased grants
following the acquisition of PeopleFluent. Acquisition-related
deferred consideration and earnout charges declined to GBP1.1
million (H1 2018: GBP1.5 million) and relate primarily to the
anticipated earnout resulting from Watershed's and BreezyHR's
incremental revenue growth during the first year of their
respective three-year earnout agreements. There were no integration
costs of note in H1 2019 (H1 2018: GBP0.1 million).
Transaction costs relating to the acquisition of BreezyHR were
GBP0.3 million (H1 2018: GBP2.6 million) and interest on
borrowings, was GBP0.9 million (H1 2018: GBP0.5 million). A finance
charge of GBP0.2 million (H1 2018: GBPnil) relates to the Group's
leases following adoption of IFRS16 (see Note 12).
The Group reported a net profit of GBP6.8 million for the six
months ended 30 June 2019 attributable to the owners of the parent
company (H1 2018: profit of GBP1.3 million).
The basic earnings per share in H1 2019 was 1.012 pence (H1
2018: 0.221 pence). Adjusted diluted earnings per share as set out
in Note 5 increased by 117% to 2.228 pence (H1 2018: 1.028
pence).
At the time of the acquisition of PeopleFluent in May 2018, LTG
entered into a new debt facility with Silicon Valley Bank ('SVB')
and Barclays Bank for $63 million. The facility comprises a $42
million term loan repayable in quarterly instalments of $2.1
million, and a $21 million multi-currency revolving credit
facility, both available for five years. The facility is subject to
various financial covenants and interest is charged at between 160
and 210 basis points above LIBOR based on the covenant results.
LTG maintained strong operating cash flows in the period. Net
cash flow from operating activities (excluding deferred
consideration payments relating to 2018) was GBP15.5 million (H1
2018: GBP11.0 million). Excluding the transaction costs relating to
the acquisition of BreezyHR and acquisition related deferred
consideration payments, operating cash flow conversion was 79% (H1
2018: 91%).
In H1 2019 approximately 79% of LTG's business was undertaken
for customers outside of the UK and a growing percentage of the
Group's revenues are denominated in USD. Net USD cash inflows are
used as an internal hedge against the USD loan capital and interest
repayments helping to reduce the business' overall exposure to
exchange rate volatility. At 30 June 2019 gross cash was GBP21.1
million and net debt was GBP13.9 million (31 December 2018: gross
cash was GBP26.8 million and net debt was GBP11.5 million).
Following the period end net debt as at 31 August 2019 had reduced
further to GBP7.8 million and the Group is on track to be
unleveraged by the end of the year.
Overall net assets increased to GBP172.8 million at 30 June 2019
(31 December 2018: GBP168.8 million) and shareholders' funds
increased from 25.3 pence per share to 25.9 pence per share.
Impact of adoption of new accounting policies
With effect from 1 January 2019 the Group has adopted a new
accounting standard: IFRS16 - Leases. As a result the Group has
recognised lease liabilities in relation to leases which had
previously been classified as 'operating leases' under the
principles of IAS 17 Leases. These liabilities are measured at the
present value of the remaining lease payments, discounted using the
lessee's incremental borrowing rate as of 1 January 2019.
Further, with effect from 1 January 2019 the Board has resolved
to report Adjusted EBIT inclusive, rather than exclusive, of the
share based payment charge. This is to align the Group with
guidance from the FRC's Corporate Reporting Thematic Review and to
recognise that share based payment charges are a valid cost of the
business and relieve the Group of an alternative cash expense.
The financial comparatives used for prior periods in this report
are restated to reflect the impact on the financial results for the
Group as if the new accounting policy with regards share based
payments had been adopted in the prior year. The modified
retrospective approach has been applied to the prior period changes
in respect of IFRS16 with a net charge to retained earnings as at 1
January 2019 of GBP2.3 million. There was a net credit to retained
earnings in H1 2019 of GBP0.2 million.
The table below sets out the effect of these adjustments on
Adjusted EBIT:
H1 2018 H2 2018 FY 2018 H1 2019
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Adjusted EBIT pre accounting
policy changes 8,885 18,360 27,245 20,012
-------- -------- -------- --------
Adjusted EBIT margin (%) 26.3% 30.6% 29.0% 32.0%
-------- -------- -------- --------
Share Based Payment charge adjustment (588) (666) (1,254) (997)
-------- -------- -------- --------
IFRS16 adjustment - - - 433
-------- -------- -------- --------
Revised Adjusted EBIT 8,297 17,694 25,991 19,448
-------- -------- -------- --------
Revised Adjusted EBIT margin
(%) 24.5% 29.4% 27.7% 31.1%
-------- -------- -------- --------
Further details are provided in Note 12.
The full-year 2019 share based payment charge is expected to be
approximately GBP2.8 million as a result of performance related
share option grants made to the extended management team following
the acquisition of PeopleFluent in May 2018, and the launch of a
new Employee Stock Purchase Plan in the US with effect from May
2019.
Operational Review
Following the acquisition and successful integration of
PeopleFluent, we have made a number of structural improvements to
LTG to support our long-term prospects and performance.
PeopleFluent's talent software solutions business has been combined
with the NetDimensions' LMS software business (acquired in March
2017) to create a leading best-of-breed integrated platform,
operating under the PeopleFluent brand. Together this combined
business represents approximately half of LTG's revenue.
PeopleFluent's workforce compliance and diversity business has been
renamed 'Affirmity' and the company's contingent workforce
management solutions provider has been renamed 'VectorVMS'. Both
these businesses operate under their own management teams. KZO, an
exciting video curation tool, was incorporated into the gomo
business and rebranded 'gomo video'.
The acquired PeopleFluent business had experienced declining
revenues for a number of years mainly as a result of low client
retention rates on some of their products. LTG management guided in
H1 2018 that the acquired business was anticipated to deliver
annual revenues of c$98.0 million in 2018, declining to c$91.0
million in 2019 (as restated under IFRS15), and that management had
the objective to return the acquired business to net sales and
revenue growth by 2020. As a result of higher-than-expected
retention rates in H1 2019, the substantial improvements being made
to the software products, and encouraging new sales, the Board is
increasingly confident that the acquired PeopleFluent business will
deliver on its revenue targets in 2019 and return to growth in
2020.
Management have sought to address client churn firstly by
transferring PeopleFluent's existing LMS customers to the industry
leading NetDimensions LMS, and secondly by focussed investment in
the talent acquisition platform. LTG has committed significant
R&D investment to the acquired and integrated PeopleFluent
talent acquisition platform. The acquisition of BreezyHR (see below
for further details) whose award winning product features will be
incorporated into the PeopleFluent enterprise solution, is further
evidence of investment to support long-term organic growth.
PeopleFluent will shortly launch the new updated talent acquisition
functionality which we are confident will enhance the candidate
experience on our platforms. PeopleFluent has invested heavily in
developing new product features across its range of products.
VectorVMS has also invested substantially in its product features
and will launch a new mobile solution this month.
LTG's Software & Platforms division (excluding the acquired
PeopleFluent business referenced above) continues to deliver good
growth with revenue up 6.8% from GBP13.0 million in H1 2018 to
GBP14.6 million in H1 2019. Watershed, acquired in November 2018,
has grown revenues by 28.5% on a like-for-like basis and its
software solutions are increasingly sold as part of integrated
sales with other Group companies. The Group launched 'Instilled' in
May 2019, a 'Learning Experience Platform' ('LXP') that leverages
the capabilities of a number of LTG's software solutions including
gomo video, Watershed, and Rustici's SCORM Engine. This LXP places
the user experience at its heart, enabling learners to create,
share and recommend content, empowering them to create their own
'learning journeys'.
Content & Services division (excluding the acquired
PeopleFluent business referenced above and the CSL contract)
revenues of GBP12.5 million were up 15.2% on H2 2018 and declined
by 2.6% against tough prior year comparators. Content &
Services projects are typically run on a fixed price, non-recurring
basis, with a relatively short sales cycle.
Strong sales momentum from LEO and Preloaded has continued from
Q4 2018 into H1 2019, with H1 2018 to H1 2019 sales growth of
approximately 19% giving confidence that full-year organic revenue
growth will be above trend at approximately 8%. Notable sales
successes include a large multi-million dollar contract win for LEO
in the US which in turn has resulted in a further substantial
multi-year contract for the 3 products from the Software &
Platforms division.
Recurring revenues have increased from GBP17.3 million (51.0%)
in H1 2018 to GBP46.5 million (74.3%) in H1 2019. As well as high
visibility of revenues, the Software & Platforms division
generated adjusted EBIT margins of 35.6% in H1 2019 (H1 2018:
32.1%) primarily as a result of the inclusion of the PeopleFluent
business for a full period and the successful integration of the
business into LTG during the second half of 2018. Content &
Services saw adjusted EBIT margins also increase from 16.7% in H1
2018 to 21.1% in H1 2019. Adjusted EBIT margins for both periods
are stated inclusive of the share based payment charge.
Acquisition and integration of BreezyHR
On 17 April 2019, LTG announced that the Company had entered
into an agreement to acquire the entire issued and outstanding
shares of capital stock of BreezyHR Inc. ('BreezyHR') for cash
consideration of $12.7 million. Further performance based payments
capped at $18.0 million are payable in cash to BreezyHR management
and equity investors based on ambitious revenue growth targets in
each of the years ending 31 December 2019, 2020 and 2021. Deferred
contingent consideration will be charged to the income statement as
the qualifying conditions are met.
BreezyHR is a fast-growing talent acquisition software business,
providing small to medium sized businesses ('SMB') with
feature-rich, intuitive and user-friendly recruitment software to
optimise their recruitment processes and maximise productivity. The
addition of BreezyHR to LTG's best-of-breed talent and learning
businesses is expected to enhance the Group's position in the
talent acquisition market. The acquisition extends the Group's
existing enterprise client-base to include a new SMB audience, with
typically faster self-service sales-cycles. Since its founding in
2014, BreezyHR's software has managed the recruitment of 15 million
candidates across 10,000 companies in 72 countries.
We are delighted with the revenue growth rate of BreezyHR and
expect it to achieve the full amount for the first year of the
deferred consideration.
BreezyHR is now a business within PeopleFluent, part of LTG's
Software & Platforms division. The post-acquisition results for
BreezyHR are reported in line with LTG's accounting policies. Prior
to acquisition, BreezyHR prepared accounts on a cash accounting
basis and did not capitalise R&D. Further details are provided
in Note 11.
Dividend
On 28 June 2019, the Company paid a final dividend of 0.35 pence
per share, giving a total dividend for 2018 of 0.50 pence per
share. This represented a 67% increase on the dividend paid
compared to 2017. Given its confidence in the continuing success of
the Group, the Board is pleased to announce that it has approved an
interim dividend of 0.25 pence per share (2018: 0.15 pence per
share), representing a 67% increase. This will be paid on 8
November 2019 to shareholders on the register at 18 October
2019.
Current Trading and outlook
The Board is delighted with the progress that the Group has made
in the first half of 2019, in particular the acquisition and
successful integration of BreezyHR and the launch of 'Instilled'.
The Group's recurring software revenue base continues to grow
alongside strong operating margin performance and cash generation
and we are seeing the increasing success of cross-selling
initiatives. Whilst we have not yet completed Q3, we are seeing
evidence of this excellent trading momentum into the second half.
This, together with retention rates in PeopleFluent and expected
progress in Content & Services, underpins confidence in the
outlook for the rest of the 2019 financial year.
The Board continues to actively pursue acquisition
opportunities, particularly in the US, and in sectors that will
extend LTG's domain specific expertise and broaden and increase its
scale in markets in which LTG already has a leading presence. With
continuing robust operating margins and a strong balance sheet the
Board considers LTG well placed to achieve our strategic goal of
run-rate revenues of GBP200 million and run-rate Adjusted EBIT** of
at least GBP55 million by the end of 2021.
Andrew Brode
Chairman
16 September 2019
* 'Adjusted EBIT' is defined as the Group profit or loss before
tax, excluding the amortisation of acquisition-related intangible
assets, acquisition related deferred consideration and earn-outs,
finance expenses, the Group's share of profits or losses in
associates and joint ventures and other specific items including
exceptional foreign exchange movements.
** 'Adjusted EBIT' target prior to accounting policy changes
referenced in Note 12.
Consolidated statement of
comprehensive income Six months Six months
to to Year to
30 June 2019 30 June 2018 31 Dec 2018
Note GBP'000 GBP'000 GBP'000
Revenue 3 62,628 33,805 93,891
Operating expenses (excluding
acquisition-related deferred
consideration and earn-outs
and share based payment charge) (52,360) (30,765) (84,917)
Operating profit (before acquisition-related
deferred consideration and
earn-outs) 10,268 3,040 8,974
Acquisition-related deferred
consideration and earn-outs (1,055) (1,504) (3,761)
Share based payment charge (997) (588) (1,254)
Operating profit 8,216 948 3,959
Adjusted EBIT 19,448 8,297 25,991
Amortisation of acquired intangibles (10,177) (5,745) (15,193)
Acquired intangibles written
down - - (681)
Acquisition-related deferred
consideration and earn-outs (1,055) (1,504) (3,761)
Integration costs - (100) (2,397)
--------------------
Operating profit 8,216 948 3,959
----------------------------------------------- ------- -------------------- ------------------
Fair value movement on contingent
consideration - - 183
Costs of acquisition (270) (2,628) (2,621)
Share of losses of associates/joint
ventures - (69) (132)
Profit/(loss) on disposal (2) - -
of fixed assets
Finance expenses:
Charge on contingent consideration - (15) (54)
Unwinding onerous lease - - -
Interest on borrowings (921) (530) (1,512)
Net foreign exchange differences - 3,591 3,608
Finance Charge (235)
Interest receivable 30 9 10
Profit before taxation 6,818 1,306 3,441
Income tax credit/(expense) 4 (61) 43 730
Profit after taxation 6,757 1,349 4,171
Profit for the period/year
attributable to the owners
of the parent 6,757 1,349 4,171
Profit for the period/year - - -
attributable to non-controlling
interests
Earnings per share attributable
to owners of the parent:
Basic, (pence) 5 1.012 0.221 0.655
Diluted, (pence) 5 0.996 0.216 0.641
Other comprehensive income:
Exchange differences on translating
foreign operations 460 2,001 6,231
Total comprehensive profit
for the period 7,217 3,350 10,402
Attributable to:
The owners of the parent 7,217 3,350 10,402
Non-controlling interests - - -
Consolidated statement
of financial position 30 June
2019 30 June 2018 31 Dec 2018
Note GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 1,910 2,352 2,144
Right of use assets 12 10,871 - -
Intangible assets 6 244,237 238,851 242,458
Deferred tax assets 3,398 2,605 2,858
Investments accounted for - 1,619 -
under the equity method
Other receivables, deposits
and prepayments 421 173 161
Amounts recoverable on
contracts - - 421
--------------- -------------------- ---------------
260,837 245,600 248,042
CURRENT ASSETS
Trade receivables 30,971 21,205 34,314
Other receivables, deposits
and prepayments 7 4,217 5,335 3,897
Amounts recoverable on
contracts 5,282 4,561 3,397
Amounts due from related
parties 12 6 7
Cash and bank balances 8 21,067 32,062 26,794
Restricted cash balances 215 323 336
61,764 63,492 68,745
TOTAL ASSETS 322,601 309,092 316,787
--------------- -------------------- ---------------
CURRENT LIABILITIES
Lease liabilities 12 2,905 - -
Trade and other payables 9 63,573 68,182 72,470
Net restricted cash from 335 - -
the consolidation invoice
process (CIP)
Borrowings 10 6,587 6,499 6,602
Corporation tax 2,377 526 1,631
Amounts owing to related - - -
parties
--------------- -------------------- ---------------
75,777 75,207 80,703
NON-CURRENT LIABILITIES
Lease liabilities 12 10,181 - -
Deferred tax liabilities 25,229 26,338 26,299
Other long-term liabilities 9,515 3,117 9,008
Borrowings 10 28,333 41,304 31,657
Provisions 803 273 301
--------------- -------------------- ---------------
74,061 71,032 67,265
TOTAL LIABILITIES 149,838 146,239 147,968
--------------- -------------------- ---------------
NET ASSETS 172,763 162,853 168,819
-------- -------- --------
EQUITY
Share capital 2,506 2,498 2,501
Share premium account 147,998 147,517 147,560
Merger relief reserve 31,983 31,983 31,983
Reverse acquisition reserve (22,933) (22,933) (22,933)
Share-based payment reserve 2,442 983 1,608
Foreign exchange translation
reserve 4,401 (289) 3,941
Accumulated retained earnings/(losses) 6,366 3,094 4,159
--------- --------- ---------
TOTAL EQUITY ATTRIBUTABLE
TO THE OWNERS OF THE PARENT 172,763 162,853 168,819
--------- --------- ---------
Non-controlling interests - - -
--------- --------- ---------
TOTAL EQUITY 172,763 162,853 168,819
--------- --------- ---------
Consolidated statement of changes in equity
Share Share Merger Reverse Share Foreign Retained Total
capital Premium relief acquisition based exchange profits/(losses) equity
reserve reserve payments reserve
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2018 2,145 64,208 31,983 (22,933) 1,092 (2,290) 1,220 75,425
Profit for
period - - - - - - 1,349 1,349
Exchange
differences on
translating
foreign
operations - - - - - 2,001 - 2,001
---------- -------- --------- ------------ --------- --------- ----------------- ----------
Total
comprehensive
income
for the period - - - - - 2,001 1,349 3,350
Issue of shares
net of share
issue costs 353 83,309 - - - - - 83,662
Share based
payment charge
/ credited to
equity - - - - 588 - - 588
Tax credit on
share options - - - - - - 1,224 1,224
Transfer on
exercise and
lapse of
options - - - - (697) - 697 -
Dividends
payable - - - - - - (1,396) (1,396)
Balance at 30
June 2018 2,498 147,517 31,983 (22,933) 983 (289) 3,094 162,853
Profit for
period - - - - - - 2,822 2,822
Exchange
differences on
translating
foreign
operations - - - - - 4,230 - 4,230
---------- -------- --------- ------------ --------- --------- ----------------- ----------
Total
comprehensive
income
for the period - - - - - 4,230 2,822 7,052
Issue of shares
net of share
issue costs 3 43 - - - - - 46
Share based
payment charge
/ credited to
equity - - - - 666 - - 666
Tax credit on
share options - - - - - - (799) (799)
Transfer on
exercise and
lapse of
options - - - - (41) - 41 -
Dividends paid - - - - - - (999) (999)
Balance at 31
December 2018 2,501 147,560 31,983 (22,933) 1,608 3,941 4,159 168,819
1 January 2019
restatement
due to IFRS 16 - - - - - - (2,314) (2,314)
Profit for
period - - - - - - 6,757 6,757
Exchange
differences on
translating
foreign
operations - - - - - 460 - 460
---------- -------- --------- ------------ --------- --------- ----------------- ----------
Total
comprehensive
income
for the period - - - - - 460 6,757 7,217
Issue of shares
net of share
issue costs 5 438 - - - - - 443
Share based
payment charge
/ credited to
equity - - - - 997 - - 997
Tax credit on
share options - - - - - - (62) (62)
Transfer on
exercise and
lapse of
options - - - - (163) - 163 -
Dividends
payable - - - - - - (2,337) (2,337)
Balance at 30
June 2019 2,506 147,998 31,983 (22,933) 2,442 4,401 6,366 172,763
---------- -------- --------- ------------ --------- --------- ----------------- ----------
Consolidated statement of cash flows
Note Six months Six months Year to
to to 31 Dec 2018
30 June 2019 30 June
2018
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Profit before taxation 6,818 1,306 3,441
Adjustments for:-
Loss on disposal of PPE 2 - -
Share options charge 997 588 1,254
Amortisation of intangible
assets 11,175 6,162 16,300
Depreciation of plant and
equipment 1,841 263 1,000
Share of losses of investments - 69 132
Finance expense - 15 54
Finance expense - interest 235 - -
portion of lease liabilities
(IFRS 16)
Finance interest on borrowings 921 530 1,512
Net foreign exchange difference - 17 -
on bank loan
Fair value movement on contingent
consideration - - (183)
Acquisition-related deferred
consideration and earn-outs 1,055 1,504 3,761
Payment of acquisition-related
deferred consideration and
earn-outs (2,321) (2,613) (3,166)
Impairment of acquired intangibles - - 681
Interest income (30) (9) (10)
--------------- ------------ -------------
Operating cash flow before
working capital changes 20,693 7,832 24,776
(Increase)/decrease in trade
and other receivables 4,098 1,208 (9,740)
(Increase) in amount recoverable
on contracts (1,886) (182) 424
(Decrease)/increase in payables (7,171) (559) 5,064
15,734 8,299 20,524
--------------- ------------ -------------
Interest paid (837) (235) (1,224)
Interest received 30 9 10
Income tax received/(paid) (1,700) 299 422
--------------- ------------ -------------
Net cash flow from operating
activities 13,227 8,372 19,732
--------------- ------------ -------------
Cash flow used in investing
activities
Purchase of property, plant
and equipment (731) (262) (778)
Development of intangible
assets (2,793) (1,195) (3,304)
Acquisition of subsidiaries,
net of cash acquired (8,764) (106,585) (107,436)
Net cash flow used in investing
activities (12,288) (108,042) (111,518)
--------------- ------------ -------------
Cash flow used in financing
activities
Dividends paid (2,337) - (2,395)
Cash generated from issue
of shares, net of share issue
costs 443 83,662 83,708
Proceeds from borrowings - 47,219 47,110
Repayment of bank loans (3,248) (14,871) (25,803)
Contingent consideration payments
in the period - (193) (193)
Cash payments for the principal (1,655) - -
portion of lease liabilities
(IFRS 16)
Net cash flow from/(used in)
in financing
activities (6,797) 115,817 102,427
--------------- ------------ -------------
Net (decrease)/increase in
cash and cash equivalents (5,858) 16,147 10,641
Cash and cash equivalents
at beginning of the year 26,794 15,662 15,662
Effects of foreign exchange
rate changes 131 253 491
------------ -------------
Cash and cash equivalents
at end of the year 8 21,067 32,062 26,794
=============== ============ =============
Notes to the consolidated financial statements for the six
months to 30 June 2019
1. General information
Learning Technologies Group plc ("the Company") and its
subsidiaries (together, "the Group") provide a range of learning
and talent software and services to corporate customers. The
principal activity of the Company is that of a holding company for
the Group, as well as performing all administrative, corporate
finance, strategic and governance functions of the Group.
The Company is a public limited company, which is listed on the
AIM Market of the London Stock Exchange and domiciled in England
and incorporated and registered in England and Wales. The address
of its registered office is 15 Fetter Lane, London, England, EC4A
1BW. The registered number of the Company is 07176993.
2. Basis of preparation
The unaudited consolidated interim financial information has
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the
EU).
The interim results for the six months to 30 June 2019 are
neither audited nor reviewed by our auditors and the accounts in
this interim report do not therefore constitute statutory accounts
in accordance with Section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2018 have been
filed with the Registrar of Companies and the auditor's report was
unqualified, did not contain any statement under Section 498(2) or
498(3) of the Companies Act 2006 and did not contain any matters to
which the auditors drew attention without qualifying their
report.
The accounting policies used in preparing the interim results
are the same as those applied to the latest audited annual
financial statements except for the adoption of new and amended
standards as set out in Note 12.
3. Segment analysis
Geographical information
The Group's revenue from external customers and non-current
assets by geographical location are detailed below. The six months
to 30 June 2019 include the geographical location of the right of
use assets identified as a result of adoption of IFRS 16 from 1
January 2019. These are not included in the prior period
comparatives as a result of the use of the modified retrospective
approach in application (see Note 12 for detail).
United Asia
UK Europe States Pacific Canada Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Six months to 30
June 2019
Revenue 13,216 5,713 37,864 1,693 2,322 1,820 62,628
-------- ---------- -------- --------- -------- -------- ---------
Non-current assets 32,829 - 206,615 17,488 86 - 257,018
-------- ---------- -------- --------- -------- -------- ---------
Six months to 30
June 2018
Revenue 14,025 3,132 13,928 1,006 812 902 33,805
-------- ---------- -------- --------- -------- -------- ---------
Non-current assets 31,751 - 191,446 19,530 95 - 242,822
-------- ---------- -------- --------- -------- -------- ---------
Year to 31 December
2018
Revenue 24,859 7,263 52,912 2,253 3,766 2,838 93,891
-------- ---------- -------- --------- -------- -------- ---------
Non-current assets 28,412 - 197,969 18,735 68 - 245,184
-------- ---------- -------- --------- -------- -------- ---------
Information about reported segment revenue, profit or loss and
assets
Software & Platforms Content & Services Other
On-premise Support
Software Hosting and Platform Consulting Rental Grand
Licenses & SaaS Maintenance Total Content development and other Total Income Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Six months to 30 June 2019
Recurring
revenue 7,484 30,827 2,991 41,302 - 868 4,311 5,179 59 46,540
Non-recurring
revenue 796 226 404 1,426 9,111 3,239 2,312 14,662 - 16,088
----------- -------- ------------ --------- -------- ------------ ----------- --------- -------- ---------
Revenue 8,280 31,053 3,395 42,728 9,111 4,107 6,623 19,841 59 62,628
----------- -------- ------------ --------- -------- ------------ ----------- --------- -------- ---------
Depreciation
and
amortisation (2,256) (583) - (2,839)
EBIT 15,203 4,186 59 19,448
Amortisation
of acquired
intangibles (8,047) (2,130) - (10,177)
Profit before
tax 5,061 1,698 59 6,818
Additions to
intangible
Assets 12,723 - - 12,723
Total assets 257,888 61,315 - 319,203
Six months to 30 June 2018
Recurring
revenue 6,333 8,992 1,138 16,463 - 793 - 793 - 17,256
Non-recurring
revenue 441 2 298 741 11,311 2,584 1,913 15,808 - 16,549
----------- -------- ------------ --------- -------- ------------ ----------- --------- -------- ---------
Revenue 6,774 8,994 1,436 17,204 11,311 3,377 1,913 16,601 - 33,805
----------- -------- ------------ --------- -------- ------------ ----------- --------- -------- ---------
Depreciation
and
amortisation (557) (122) - (679)
EBIT 5,525 2,772 - 8,297
Amortisation
of acquired
intangibles (4,890) (855) - (5,745)
Share of
losses
of associates (69) - - (69)
Profit/(Loss)
before tax (2,136) 3,442 - 1,306
Investments
accounted for
under the
equity
method 1,619 - - 1,619
Additions to
intangible
Assets 121,285 37,395 - 158,680
Total assets 215,132 93,960 - 309,092
Year to 31 December 2018
Recurring
revenue 12,572 41,328 4,088 57,988 - 1,071 4,963 6,034 58 64,080
Non-recurring
revenue 1,166 4 676 1,846 19,262 5,765 2,938 27,965 - 29,811
----------- -------- ------------ --------- -------- ------------ ----------- --------- -------- ---------
Revenue 13,738 41,332 4,764 59,834 19,262 6,836 7,901 33,999 58 93,891
----------- -------- ------------ --------- -------- ------------ ----------- --------- -------- ---------
Depreciation
and
amortisation (1,746) (361) - (2,107)
EBIT 18,997 6,936 58 25,991
Amortisation
of acquired
intangibles (11,873) (3,320) - (15,193)
Share of
losses
of associates (132) - - (132)
Profit/(Loss)
before tax (274) 3,657 58 3,441
Additions to
intangible
Assets 162,071 3,972 - 166,043
Total assets 279,928 36,859 - 316,787
EBIT is the main measure of profit reviewed by the Chief
Operating Decision Maker.
The total assets figure for 30 June 2019 is exclusive of
deferred tax assets.
Information about major customers
In the six months to 30 June 2019 no customer accounted for more
than 10 percent of reported revenues (H1 2018: no customer
accounted for more than 10 percent of reported revenues).
4. Taxation
Taxation for the six months to 30 June 2019 has been calculated
by applying the estimated tax rate for the current financial year
ending 31 December 2019 to an estimated tax adjusted profit
figure.
5. Earnings per share
Six months Six months Year to
to to
30 June 2019 30 June 2018 31 Dec 2018
GBP'000 GBP'000 GBP'000
Profit after tax attributable
to owners of the Group: 6,757 1,349 4,171
Weighted average number of
shares:
Basic 667,503,571 609,427,992 637,325,890
Diluted 678,469,771 623,998,444 650,592,819
Basic earnings per share
(pence) 1.012 0.221 0.655
Diluted earnings per share
(pence) 0.996 0.216 0.641
Adjusted diluted earnings
per share (pence) 2.228 1.028 3.040
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The Company
has share options that are dilutive potential ordinary shares.
In order to give a better understanding of the underlying
operating performance of the Group, an adjusted earnings per share
comparative has been included. Adjusted earnings per share is
stated after adjusting the profit after tax attributable to equity
holders of the Group for certain charges as set out in the table
below.
Adjusted EBIT in the adjusted earnings per share calculation is
now inclusive, rather than exclusive, of the share based payment
charge. The prior period comparatives have also been restated on a
consistent basis, with share based payment charges included within
the adjusted EBIT figure.
Six months to 30 June 2019 Six months to 30 June 2018 Year to 31 Dec 2018
Profit Weighted Pence Profit Weighted Pence Profit Weighted Pence per
after average per after average per after average share
tax number share tax number share tax number
of of of
shares shares shares
GBP'000 '000 GBP'000 '000 GBP'000 '000
Basic earnings
per ordinary
share 6,757 667,504 1.012 1,349 609,428 0.221 4,171 637,326 0.655
--------- --------- --------- --------- --------- --------- --------- --------- ----------
Effect of
adjustments:
Amortisation of
acquired
intangibles 10,177 5,745 15,193
Acquired
intangibles
written down - - 681
Integration costs - 100 2,397
Cost of
acquisitions 270 2,628 2,621
Fair value
movement on
contingent
consideration - - (183)
Acquisition
earnout 1,055 1,504 3,761
Net foreign
exchange
differences on
financing
activities - (3,591) (3,608)
Interest
receivable (30) (9) (10)
Finance expense
on contingent
consideration - 15 54
Finance expense 235 - -
on lease
liabilities (IFRS
16)
Income tax
(credit)/expense 61 (43) (730)
--------- --------- --------- --------- --------- --------- --------- --------- ----------
Effect of
adjustments 11,768 - 1.763 6,349 - 1.042 20,176 - 3.166
--------- --------- --------- --------- --------- --------- --------- --------- ----------
Adjusted profit
before tax 18,525 - - 7,698 - - 24,347 - -
--------- --------- --------- --------- --------- --------- --------- --------- ----------
Tax impact after
adjustments (3,408) - (0.510) (1,285) - (0.211) (4,572) - (0.717)
--------- --------- --------- --------- --------- --------- --------- --------- ----------
Adjusted basic
earnings per
ordinary share 15,117 667,504 2.265 6,413 609,428 1.052 19,775 637,326 3.103
Effect of
dilutive
potential
ordinary shares:
Share options - 10,966 (0.037) - 14,061 (0.023) - 13,267 (0.063)
Deferred - - - - - - - - -
consideration
payable
(conditions met)
Deferred
consideration
payable
(contingent) - - - - 509 (0.001) - - -
Adjusted diluted
earnings per
ordinary share 15,117 678,470 2.228 6,413 623,998 1.028 19,775 650,593 3.040
6. Intangible assets
Goodwill Customer Branding Acquired Internal Total
contracts IP software
and relationships development
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2018 46,050 45,020 1,788 1,445 3,410 97,713
Additions on acquisition 79,009 43,280 1,723 33,473 - 157,485
Additions - - - - 1,195 1,195
Foreign exchange differences 1,351 1,143 39 339 52 2,924
At 30 June 2018 126,410 89,443 3,550 35,257 4,657 259,317
Additions on acquisition 1,959 1,355 - 1,940 - 5,254
Additions - - - - 2,109 2,109
Disposals/Impairment - - (1,048) - (178) (1,226)
Foreign exchange differences 3,889 1,941 75 1,235 101 7,241
---------- ------------------- --------- --------- ------------- ----------
At 31 December 2018 132,258 92,739 2,577 38,432 6,689 272,695
Additions on acquisition 6,232 1,454 - 2,244 - 9,930
Additions - - - - 2,793 2,793
Foreign exchange differences 209 (64) (2) 19 69 231
---------- ------------------- --------- --------- ------------- ----------
At 30 June 2019 138,699 94,129 2,575 40,695 9,551 285,649
Accumulated
amortisation
At 1 January 2018 - 11,813 590 464 1,437 14,304
Amortisation charged -
in period - 5,004 192 533 433 6,162
---------- ------------------- --------- --------- ------------- ----------
At 30 June 2018 - 16,817 782 997 1,870 20,466
Amortisation charged
in period - 6,952 255 2,257 674 10,138
Disposals/Impairment - - (367) - - (367)
At 31 December 2018 - 23,769 670 3,254 2,544 30,237
Amortisation charged
in period - 7,433 153 2,590 999 11,175
---------- ------------------- --------- --------- ------------- ----------
At 30 June 2019 - 31,202 823 5,844 3,543 41,412
Carrying amount
At 30 June 2018 126,410 72,626 2,768 34,260 2,787 238,851
========== =================== ========= ========= ============= ==========
At 31 December 2018 132,258 68,970 1,907 35,178 4,145 242,458
========== =================== ========= ========= ============= ==========
At 30 June 2019 138,699 62,927 1,752 34,851 6,008 244,237
========== =================== ========= ========= ============= ==========
7. Other receivables, deposits and prepayments
30 June 2019 30 June 2018 31 Dec 2018
GBP'000 GBP'000 GBP'000
Sundry receivables 1,099 1,368 1,118
Prepayments 3,118 3,967 2,779
4,217 5,335 3,897
============= ============= ============
8. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash
equivalents comprise the following:-
30 June 2019 30 June 2018 31 Dec 2018
GBP'000 GBP'000 GBP'000
Cash and bank balances 21,067 32,062 26,794
============= ============= ============
9. Trade and other payables
30 June 2019 30 June 2018 31 Dec 2018
GBP'000 GBP'000 GBP'000
Trade payables 1,322 1,597 924
Payments received on account 54,048 52,919 56,417
Tax and social security 597 1,437 2,109
Contingent consideration - 182 8
Acquisition-related deferred
consideration and earn-outs - 1,219 3,205
Accruals and others 7,606 10,828 9,807
------------- ------------- --------------
63,573 68,182 72,470
============= ============= ==============
10. Borrowings
On the acquisition of PeopleFluent Holdings Corp. the existing
debt facility with Silicon Valley Bank was repaid and a new debt
facility with Silicon Valley Bank was entered into for a total of
$63 million. This is made up of a $42 million multicurrency term
loan and a $21 million multicurrency revolving credit facility,
both available to the Group for 5 years. The facility attracts
variable interest between 1.6% and 2.1%, based on the Group's
leverage, above LIBOR for the currency of the loan. The term loan
is repaid with quarterly instalments of $2.1 million with the
balance repayable on the expiry of the loan in April 2023.
The bank loan is secured by a fixed and floating charge over the
assets of the Group and is subject to various financial
covenants.
30 June 30 June 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Current interest-bearing
loans and borrowings 6,587 6,499 6,602
Non-current interest-bearing
loans and borrowings 28,333 41,304 31,657
------------------- ------------------- -------------------
34,920 47,803 38,259
=================== =================== ===================
11. Acquisitions
On 17 April 2019, LTG announced the acquisition of Breezy HR
('BreezyHR') for initial cash consideration of $12.7 million funded
by the Group's existing cash and bank facilities. The acquisition
supported LTG's strategic goal to achieve run-rate EBIT** of at
least GBP55 million by the end of 2021.
BreezyHR is a fast-growing talent acquisition software business,
providing small to medium sized businesses (SMB) with feature-rich,
intuitive and user-friendly recruitment software to optimise their
recruitment processes and maximise productivity. Breezy will become
a business within PeopleFluent, part of LTG's Software &
Platforms division.
The following table summarises the consideration paid for
BreezyHR, the fair value of assets acquired and liabilities assumed
at the acquisition date.
11. Acquisitions (continued)
Consideration Fair Value
GBP'000
------------------------------------------------------------------------------ ----------------------------------
Cash paid 9,726
Total consideration 9,726
------------------------------------------------------------------------------ ----------------------------------
Recognised amounts of identifiable assets acquired Fair value
and liabilities assumed GBP'000
------------------------------------------------------------------------------ ------------------------------------
Cash and cash equivalents 962
Property, plant and equipment 20
Trade and other receivables 147
Trade and other payables (572)
Net deferred tax assets/liabilities on acquisition (751)
Intangible assets identified on acquisition 3,698
Impact of IFRS 16 adjustments on acquisition (9)
Total identifiable net assets 3,495
------------------------------------------------------------------------------ ------------------------------------
Goodwill 6,231
Total 9,726
------------------------------------------------------------------------------ ----------------------------------
The total consideration and fair value adjustments to the assets
and liabilities assumed are provisional and are management's best
estimates at this time.
BreezyHR contributed GBP923,000 of revenue for the period
between the date of acquisition and the balance sheet date and
GBP114,000 of profit before tax attributable to equity holders of
the parent. As a preliminary assessment, had the acquisition of
BreezyHR been completed on the first day of the financial year
Group revenues would have been approximately GBP1,036,000 higher
and group profit before tax attributable to equity holders of the
parent would have been approximately GBP25,000 lower.
12. Changes in accounting policies
i. IFRS 16 - Leases
The Group has adopted IFRS 16 Leases from 1 January 2019.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The lessee's weighted average
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 3.5%.
The incremental borrowing rate used is based on the 3 month
LIBOR rates in the respective asset territories (98% US and UK)
plus a 1.6% margin included in the Group's current banking facility
as at 1 January 2019.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
i) The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
ii) Reliance on previous assessments on whether leases are onerous
iii) The accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases
iv) The exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application
v) The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
A modified retrospective approach has been used meaning
comparatives have not been restated but an adjustment has been made
to opening equity. The Group has taken the accounting policy choice
to measure the right of use assets as if IFRS 16 had applied since
the inception of the lease.
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
GBP'000
Right of use assets increase 11,847
Lease liabilities increase 14,161
Of which:
Current Liability 2,806
Non-Current Liability 11,355
The net impact on retained earnings on 1 January 2019 was a
decrease of GBP2.3 million.
ii. Share Based Payment Charge
The Share based payment charge is now included within the
Group's EBIT figure. Prior year results, including the Earnings per
share calculation have been restated to provide a consistent
comparative.
13. Events since the reporting date
No significant events noted since the reporting date.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DGGDCDUBBGCU
(END) Dow Jones Newswires
September 16, 2019 02:01 ET (06:01 GMT)
Learning Technologies (LSE:LTG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Learning Technologies (LSE:LTG)
Historical Stock Chart
From Apr 2023 to Apr 2024
