Reported financials do not truly demonstrate the progress made at Learning Technologies (LTG) in the first half of 2016. Strip out costs associated with acquisitions, integration and other financial items, and adjusted cash profits rose 145 per cent to £3.2m. This reflects a surge in revenues and a 10 percentage point increase in cash profit margins, a result of increased economies of scale and cost cutting.
The group's buy and build strategy seems to be working well in the fragmented e-learning market. Recently acquired Rustici has added another unique software product to the portfolio, not to mention a good source of recurring revenue. According to chairman Andrew Brode, the subsidiary is already performing ahead of expectations. Future growth is likely to come from Watershed, in which LTG took a 27 per cent stake in January. Although the group's share of the losses from this business came in at £100,000, Watershed did make good progress in its analytic tools development.
Evidently, the enhanced product offering is helping LTG attract new clients. In December 2015, the group won a "landmark contract" alongside partner KPMG with the UK Civil Service. Initial revenues from this deal are expected by December and as such management looks to the second half of the year with optimism.
Broker Numis has upgraded full-year forecasts and now expects pre-tax profits of £6.2m for the year to December 2016, giving EPS of 1.1p, up from £3.8m and 0.76p in 2015.
LEARNING TECHNOLOGIES (LTG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 34p | MARKET VALUE: | £140m | |
| TOUCH: | 33-35p | 12-MONTH HIGH / LOW: | 38p | 20p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | 89 | |
| NET ASSET VALUE: | 7.4p* | NET DEBT: | 32% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 8.4 | 0.21 | 0.10 | 0.05 |
| 2016 | 12.8 | -0.07 | 0.09 | 0.07 |
| % change | +52 | - | -5 | +40 |
Ex-div: 6 Oct Payment: 28 Oct *Includes intangible assets of £46.5m, or 11p a share | ||||
