Operates in fast-growing e-learning and talent management market
Approximately 70% of LTG’s business undertaken in the US
Half-year revenues came at around £62.5mln, up 85% year-on-year
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
In the six months to 30 June, adjusted earnings (EBIT) were ahead of expectations at £19.4mln, up 134% year-on-year, while revenues surged 85% to £62.6mln.
The amount of recurring revenue also rose to 74% of the total from 51% in 2018, with the adjusted EBIT margin increasing to 31.1% from 24.5%.
Revenues had been boosted by 7% organic growth from LTG’s software & platforms division, which makes up 68% of the total, offsetting a 3% contraction from the content & services arm.
The company also boasted of “strong cash generation”, with net debt falling to £13.9mln from £15.7mln in the period; since then, it has fallen further to £7.8mln.
As a result of the improved results, the firm hiked its interim dividend 67% to 0.25p per share.
Looking ahead, LTG said trading for the full year was currently in line with expectations, with content & services expected to report 8% organic growth in the year despite its first-half dip.
The firm’s PeopleFluent business is expected to “return to growth in 2020”, while BreezyHR, a US firm its bought for US$30mln in April, was achieving “significant growth”.
Breezy, whose products are used by 10,000 companies in 72 countries, was bought as 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.
What the boss says: Jonathan Satchell, chief executive
"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."
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.
Peel Hunt recommends the stock as 'buy' and set a 150p target price.