Learning Technologies seeks global future

Learning Technologies (LTG), a provider of workplace digital learning and talent management services, is in a period of transition. After purchasing two performance management platforms and a diversity and inclusion consultancy in the first quarter (Q1), the group has reaffirmed in its robust interim results to 30 June that the “transformative” $394m (£288m) acquisition of workforce performance solutions provider GP Strategies should complete in Q4. 

GP Strategies posts around $500m of annual revenues, double that of LTG. It has four times the number of employees. Jonathan Satchell, chief executive, said the acquisition should drive “major changes in the numbers next year”' The deal will allow the group to “triple our revenue for a 6 per cent share dilution”. Numis expects the transaction to deliver “at least” a 30 per cent accretion. The “strategic rationale” is to expand globally: to build a new business of £500m revenue and more than 5,000 employees. Funding for the deal comes from an £85m equity placing and $305m debt refinancing completed in July. 

Given the figures and forecasts involved with GP Strategies, investors could be forgiven for merely glancing over the interim results and looking ahead with bated breath. That would be a mistake, given the announcement of a 20 per cent increase in the interim dividend to 0.30p a share and a 29 per cent rise in revenues to £82.6m. After struggling in 2020 due to the impact of the pandemic, both group divisions, software & platforms and content & services, have returned to growth. Overall, organic growth was up 7 per cent and profit before tax for the year is now expected by the market to exceed 2020 results. 

The group’s trading margin was down slightly to 27 per cent. This was impacted by short-term losses from the Reflektive and Bridge acquisitions: these subsequently moved into the black and so analysts do not expect a similar drag on margins going forward. Currency fluctuations also took a toll, with a £5m loss due to unfavourable exchange translations. 

Peel Hunt forecasts adjusted EPS of 5.1p, which suggests growth of 18 per cent. By 2023, the broker expects profit before tax of £64.8m – a 64 per cent increase on the full-year 2020 numbers.

The GP Strategies acquisition promises to change the scale of the group's operations, but a forward rating of 42 times forecast earnings, though not unusual within the sector, suggests that LTG is still priced for growth – we concur. Buy. 

Last IC view: Buy, 136p, 22 Sep 2020