Join our community of smart investors

Learning Technologies builds scale at a cost

The learning technology group is unlikely to make any further acquisitions this year
April 10, 2017

Learning Technologies (LTG) spent last year continuing to build scale. The digital learning provider maintained its acquisitive strategy, picking up US e-learning standards provider Rustici Software and a 27 per cent stake in analytics specialist Watershed Systems. This came at a price, with deferred consideration and other acquisition-related costs pushing the group into a pre-tax loss. After stripping these out, operating profit increased by around two-thirds to £3.1m.

IC TIP: Hold at 45.5p

One of management's main goals is to increase the margins of its acquisitions. Chief executive Jonathan Satchell says the bespoke nature of its learning models, which can involve multiple changes along the design process, means the group can charge a higher price according to the work done. During 2016 adjusted cash profit margins increased to 27 per cent from 22 per cent the previous year.

The group is trying to broaden its reach beyond its UK base. Last year revenue generated outside the UK increased to 36 per cent of the group total, up from 12 per cent in 2015. After the period-end the group acquired NetDimensions, a provider of learning management systems. This will give Learning Technologies access to the south-east Asia market. Mr Satchell said the group is unlikely to make any further acquisitions during 2017.

House broker Numis expects adjusted pre-tax profit of £10m for the 12 months to December 2017, giving EPS of 1.5p (from £6.4m and 1.2p in 2016).

LEARNING TECHNOLOGIES (LTG)

ORD PRICE:45.5pMARKET VALUE:£248m
TOUCH:44.5-46.5p12-MONTH HIGH:46pLOW: 29p
DIVIDEND YIELD:0.5%PE RATIO:na
NET ASSET VALUE:6p*NET DEBT:28%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20126.90.782.2nil
20137.6-0.93-0.4nil
201414.9-0.13-0.10.10
201519.91.210.30.15
201628.3-1.19-0.30.21
% change+42-198-217+40

Ex-div: 8 Jun

Payment: 7 Jul

*Includes intangible assets of £40m, or 7p a share