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RNS

Half-year Report

Released 07:00 25-Sep-2018

RNS Number : 7831B
Learning Technologies Group PLC
25 September 2018
 

Learning Technologies Group plc

 

HALF YEAR RESULTS 2018

 

 

Learning Technologies Group plc ("LTG" or the "Company"), the leading integrated learning and talent software and services provider, is pleased to announce its half year results for the six months ended 30 June 2018.

 

Key Financial highlights

 

·      Revenues up 60% to £33.8m

·      Organic revenues up 10% on a constant currency basis (excluding CSL)

·      Strong EBIT margin performance; 26.3% (H1 2017: 17.8%)

·      Adjusted diluted EPS increased by 140% to 1.122p (H1 2017: 0.468p)

·      Business model continuing to support robust margin progression

·      Strong cash generation with significant funding capacity for further acquisitions

·      Interim dividend of 0.15p; a 67% increase on 2017

 

Strategic highlights

 

·      Significant expansion in recurring software revenues via transformational PeopleFluent acquisition

·      Strong recurring revenue growth, c70% on a pro forma basis; H1 2018: 51% (H1 2017: 37%)

·      Integration of PeopleFluent ahead of expectations and adds talent capability and US reach

·      Increased revenue diversity with majority now generated outside the UK

·      Active pipeline of attractive acquisition opportunities

 

Outlook

·      Full year profit will be significantly ahead of the Board's expectations based on the upgraded PeopleFluent EBIT margin

·      High recurring revenue provides good visibility into 2019

·      Healthy order book and strong margins provide further confidence

 

Commenting, Jonathan Satchell, CEO of LTG, said:

"The first half of 2018 has been pivotal for LTG with the PeopleFluent acquisition confirming our shift towards recurring software revenues, and significantly increasing our US presence.  Together with NetDimensions, PeopleFluent demonstrates our ability to successfully integrate businesses and drive growth and margin progression through operating model improvements.

 

Alongside our track record of delivering organic growth and substantial margin improvements, LTG has a strong balance sheet and acquisition pipeline, and is well placed to continue its strategy of consolidating the high growth corporate e-learning market.  A robust performance from our core business and the successful integration of PeopleFluent underpins our confidence that full year profit will be significantly ahead of the Board's expectations."

 

Financial summary

 

 

H1 2018

H1 2017

change

Revenue

£33.8m

£21.1m

+60%

Recurring Revenue %

51%

37%

 

Revenues Outside UK %

59%

45%

 

Adjusted EBIT

£8.9m

£3.8m

+137%

Adjusted EBIT margin

26.3%

17.8%

 

Statutory PBT

£1.3m

(£2.3m)

 

Adj. Diluted EPS

1.122p

0.468p

+140%

Interim Dividend per share

0.15p

0.09p

+67%

Net Debt

(£15.7m)

(£6.1m)

-159%

 

 

Operational highlights

 

Software & Platforms - 51% of Group revenues (H1 2017: 40%)

·      NetDimensions returned to organic growth at a substantially lower cost base; renewal rate in excess of 100% in H1 2018, plus new sales wins 500% higher than H1 2017

·      Integration of PeopleFluent acquisition ahead of expectations; the Board now expects the EBIT margin of PeopleFluent to be at least 25% in 2019

·      Merging NetDimensions and PeopleFluent's talent software businesses - substantial benefits to be gained from leadership, operational and revenue synergies

·      Rustici and gomo continue to show strong organic growth

 

Content & Services - 49% of Group revenues (H1 2017: 60%)

·      In-line performance despite tough prior year comparators in LEO and Preloaded

·      CSL project revenues completed in H1 2018 as anticipated

·      Margin progression from 9% in H1 2017 to 18% in H1 2018

 

Analyst and investor presentation

 

LTG will host an analyst and investor presentation at 9 a.m. today, Tuesday 25 September 2018, at the offices of Numis.

 

Capital Markets Day

 

LTG expects to host a Capital Markets Day for analysts and investors on Thursday 15 November 2018.

 

Enquiries:

 

Learning Technologies Group plc

Jonathan Satchell, Chief Executive

Neil Elton, Chief Financial Officer

 

+44 (0)20 7402 1554

 

 

Numis Securities Limited

Stuart Skinner / Michael Wharton (Nominated Adviser)

Ben Stoop (Corporate Broker)

 

+44 (0)20 7260 1000

 

 

Goldman Sachs International (Joint Corporate Broker)

James A Kelly

Adam Laikin

 

+44 (0)20 7774 1000

 

 

FTI Consulting (Public Relations Adviser)

Rob Mindell / Jamie Ricketts

+44 (0)20 3727 1000

 

 

About LTG

 

LTG is a leader in the high growth workplace learning industry.  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 meet their performance objectives.

LTG is listed on the London Stock Exchange Alternative Investment Market (LTG.L) and headquartered in London.  The Group has offices in Europe, the United States, Asia-Pacific and South America.

Further information on the Group is available at www.ltgplc.com

 

 

Chairman's Statement

 

Introduction

 

The Board is delighted to report that Learning Technologies Group plc ('LTG') has made excellent progress over the period.  The transformational acquisition of PeopleFluent Holdings Corp ('PeopleFluent') in May 2018 moves LTG into the adjacent talent software market, complementing the Group's strengths in learning software, content and services, whilst substantially deepening the Group's presence in the US market.  This has been achieved while the rest of the Group has delivered strong operating margins and NetDimensions, acquired in 2017, has been integrated ahead of expectations.

 

Results

 

Financial comparatives for prior periods are reported on a restated basis; further details are provided below. 

 

In the six months ended 30 June 2018, revenues increased by 60% to £33.8 million (H1 2017: £21.1 million) with like-for-like revenues on a constant currency basis (excluding the post-acquisition contribution of PeopleFluent, restating NetDimensions as if it had been owned for 6 months in both periods, and excluding the exceptional contribution from the Civil Service Learning ('CSL') contract) increased by 10% to £25.8 million.  With the acquisitions of NetDimensions and PeopleFluent as well as the strong organic growth in the Group's other software licencing businesses, recurring licence fee and support contract revenues increased from £7.7 million in H1 2017 to £16.5 million in H1 2018, an increase of 113%.

 

Adjusted EBIT* grew by 137% to £8.9 million (H1 2017: £3.8 million) with margins increasing from 18% in H1 2017 to 26% in H1 2018 following the successful restructuring of NetDimensions during the summer of 2017. 

 

Operating profit of £0.9 million (H1 2017: loss of £0.9 million) is stated after amortisation of acquired intangibles, various acquisition earnout charges, share-based payments, and integration costs.  Following the acquisition of NetDimensions, amortisation of acquired intangibles increased to £5.7 million (H1 2017: £3.0 million).  Acquisition-related deferred consideration and earnout charges increased to £1.5 million (H1 2017: £0.7 million) and relate primarily to the anticipated earnout resulting from Rustici's incremental revenue growth during the final year of their three-year earnout agreement.  Integration charges of £0.1 million relate to PeopleFluent; the majority of the anticipated integration costs related to PeopleFluent will be incurred during the second half of the year. 

 

Transaction costs relating to the acquisition of PeopleFluent were £2.6 million (H1 2017: £1.0 million) and interest on borrowings, was £0.5 million (H1 2017: £0.3 million). 

 

The Group reported a net profit of £1.3 million for the six months ended 30 June 2018 attributable to the owners of the parent company (H1 2017: loss of £2.2 million).

 

The basic earnings per share in H1 2018 was 0.221 pence (H1 2017: loss of 0.454 pence).  Adjusted diluted earnings per share as set out in Note 5 increased by 140% to 1.122 pence (H1 2017: 0.468 pence).

 

At the time of the acquisition of PeopleFluent, 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 new SVB debt facility replaced LTG's previous £20 million debt facility.  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 raised £115.8 million through financing activities during the period (H1 2017: £51.1 million) comprising £83.7 million resulting from the issue of shares, primarily related to a placing in April (net of share issue costs), and net incremental debt financing of £32.3 million as set out above.  The Company converted £72.0 million of the placing proceeds into USD on the 27 April 2018 pending completion of the PeopleFluent acquisition.  The subsequent movement in the exchange rate between conversion and completion of the PeopleFluent acquisition on 31 May resulted in an exceptional foreign exchange gain of £3.6 million. 

 

LTG maintained strong operating cash flows in the period.  Net cash flow from operating activities (excluding deferred consideration payments relating to 2017) was £11.0 million (H1 2017: £2.4 million).  Excluding the exceptional foreign exchange gain and transaction costs relating to the acquisition of PeopleFluent and acquisition related deferred consideration payments, operating cash flow conversion was 112% (H1 2017: 113%).

 

In H1 2018 approximately 59% 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 2018 gross cash was £32.1 million and net debt was £15.7 million (31 December 2017: gross cash was £15.7 million and net cash was £1.0 million). 

 

Overall net assets increased to £162.9 million at 30 June 2018 (31 December 2017: £75.4 million) and shareholders' funds increased from 13.2 pence per share to 24.4 pence per share.

 

Impact of adoption of new accounting policies

 

With effect from 1 January 2018 the Group has adopted two new accounting standards: IFRS15 - Revenue from Contracts with Customers, and IFRS9 - Financial Instruments.  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 standards had been adopted in the prior year.  The impact of adoption of IFRS15 is that revenues and adjusted EBIT were reduced by £0.4m in H1 2017 and £0.7 million for the full year.  The impact of adoption of IFRS9 is immaterial and no adjustment has been made.  Further details are provided in Note 12.

 

The post-acquisition results for PeopleFluent are reported in line with LTG's accounting policies.  Prior to acquisition, PeopleFluent did not capitalise R&D.  The consolidated post-acquisition results for June 2018 for PeopleFluent include capitalised R&D of £0.1m.

 

Update on NetDimensions integration

 

At the time of the 2017 Interim results the Board was able to confirm that the operational cost synergy target of $8 million had been exceeded ahead of time.  The Board further indicated that it expected new sales to pick-up in 2018 and for revenues to increase with effect from 2019.  At the time of the 2017 annual results reported in March 2018 the Board was delighted to confirm that encouraging new sales had been made in Q4 2017.

 

We have seen this positive trend continue in H1 2018, with recurring revenues (including upsells) now totalling 103% and new sales 500% ahead of the prior year.  Owing to the multi-year nature of these sales we expect to see 2018 revenues increase moderately on a like-for-like basis.

 

Acquisition and integration of PeopleFluent

 

As the pace and progress of technology and innovation increase, corporates and government bodies are realising that to succeed, they must invest in programs and technologies to manage change, develop skills, grow knowledge, and instil desired attitudes and behaviours in their staff and their 'extended enterprises', including suppliers and partners.  To do so, their talent strategies are increasingly focusing on learning.  By combining PeopleFluent's talent software with LTG's learning platforms and services, the Group offers a compelling suite of industry leading solutions.

 

On 31 May 2018 LTG completed the acquisition of PeopleFluent, the leading independent provider of cloud based integrated recruiting, talent management, and compensation management solutions.  PeopleFluent is headquartered in Waltham, Massachusetts and generates approximately 85% of its revenues in the US.  The business is a strong strategic fit with LTG, allowing LTG to offer a full suite of products and services to its customers and substantially deepen its presence in the high growth US market.

 

PeopleFluent was acquired for $143.1 million in cash by way of a reverse subsidiary merger.  Final consideration is subject to a post-closing review process that is due to be completed before the end of 2018. There are no deferred consideration obligations.  The total consideration and fair value adjustments to the assets and liabilities set out on in Note 11 are provisional and represent management's best estimates at this time.  The offer was financed by way of a placing of 86.7 million LTG shares issued at 98.0 pence per share and a new debt finance facility, details of which are set out in Note 10.   

 

At the time of the placing LTG set out an ambitious plan to restructure the PeopleFluent business, to improve working practices and to realise substantial synergies.  The Board is pleased to report that the integration of PeopleFluent into the Group has exceeded management expectations.  The transformation program will continue during the second half of 2018, with the majority of the full-year synergies and settled cost base being completed by Q4 2018.  There will be further operating cost reductions achieved throughout 2019, as contracts with external suppliers come to the end of their current terms.

 

At the time of the acquisition, PeopleFluent comprised five key businesses:

 

·      Talent Acquisition, Talent Management, Compensation and LMS ('Talent') - software platforms

·      Workforce Compliance and Diversity ('WCAD') - platform and services business enabling US corporates to monitor their compliance with federal affirmative action plans

·      Vendor Management Services ('VMS') - platforms business allowing corporates to outsource the payment of their contractor workforce

·      Workforce Planning & Analytics ('WPA') - organisation charting software

·      KZO - advanced video content platform

 

As part of the integration, PeopleFluent's Talent business will be merged with NetDimensions under the PeopleFluent logo.  The enlarged group will offer a best-of-breed integrated platform solution encompassing PeopleFluent's leading talent and compensation software with NetDimensions' leading Learning Management System.  The combined business will enjoy annualised revenues of c$80 million and will be headquartered in the US.  Although the integration will not be fully complete until Q4 2018 we have already seen new cross-sell wins as the power of this combined offering resonates with clients.  PeopleFluent will also incorporate the WPA charting software tool.

 

WCAD, which previously operated under the PeopleFluent brand, has been renamed Affirmity.  We believe this will alow Affirmity, which already accounts for approximately a quarter of US affirmative action plans produced, to grow its market share, and also expand into other markets where regulations over workforce diversity and inclusion are increasing.

 

Similarly, VMS has been given greater independence and we look forward to announcing a new brand and strategic developments in due course.

 

KZO offers an exciting video software tool that enables users to collaborate, share comments and auto-translate audio into multiple written languages.  Already offered as part of the PeopleFluent Talent platform, the KZO product has been rebranded 'gomo video' and will be offered as part of LTG's award winning gomo learning SaaS based learning solution.  The market has reacted positively, and the first cross-sells have already been achieved.

 

As with prior acquisitions, LTG is looking to leverage off the best practice and synergies afforded by its central services (including HR, Finance, IT, Facilities, Legal, Marketing, Bid and Hosting).  The scale of PeopleFluent and its presence in the US has meant that LTG has been able to base many of its US central service functions on PeopleFluent's existing infrastructure, particularly in its Raleigh office in North Carolina.  CRM, finance and payroll systems are in the process of being integrated into the merged PeopleFluent operations (incorporating NetDimensions in particular).  LTG has relocated from its Cannon Street base to Fetter Lane, the same location as PeopleFluent's London office, affording greater flexibility and interactions across LTG's UK businesses.  PeopleFluent's New Orleans office has been closed.

 

Management have re-prioritised investment in the R&D roadmap, and reviewed working practices.  As a result, they have substantially restructured the product management and engineering teams and the PeopleFluent sales team under the leadership of NetDimensions' Global Head of Sales.  Although the PeopleFluent businesses enjoy a high level of recurring revenues, churn rates on some products have been high over the past few years.  At the time of the acquisition, LTG management signalled that they anticipated it would take some time to increase retention rates and generate material new sales, which would mean that revenues would continue to decline in the near term before returning to revenue growth from end 2019.  LTG management also stated that they expected PeopleFluent's EBIT margins to be not less than 20% in 2019.  As a result of the successful integration program the Board anticipates that EBIT margins for PeopleFluent in 2019 will now be not less than 25%. 

 

Operational Review

 

The acquisition of NetDimensions in March 2017 and PeopleFluent in May 2018 has seen a marked transformation in the Group from 27% recurring revenues in 2016 to 51% recurring revenues in H1 2018 (and c70% recurring revenues on an annualised basis).  Software & Platforms, which represented 40% of revenues in H1 2017 represented 51% of revenues in H1 2018 (and c68% on an annualised basis).

 

As well as high visibility of revenues, the Software & Platforms division generated adjusted EBIT margins of 34% in H1 2018 (2017: 37%); the H1 reduction reflecting the lower contribution of PeopleFluent in June 2018 and a Q4 weighting in on-premise software licence sales.  Content & Services saw adjusted EBIT margins remain stable at 18% between 2017 and H1 2018.

In addition to the encouraging new sales trends seen in NetDimensions (explained above), LTG's Software & Platforms division continues to deliver strong growth with Rustici delivering revenue growth of 8% and gomo 42%.

Content & Services projects are typically run on a fixed price, non-recurring basis, with a relatively short sales cycle.  The key Content & Services businesses (LEO, Preloaded and Eukleia) saw exceptional growth in 2017.  In H1 2018 LEO reported revenue growth of 16% (excluding the CSL project) whilst Preloaded and Eukleia saw declines of 9% and 4% respectively.  Against strong prior year comparatives, we expect the Content & Services division to report low single digit organic growth in 2018.

 

Revenues from the CSL contract, being delivered alongside our strategic partner KPMG LLP, completed in H1 2018 as expected.

 

Corporate Governance

 

With effect from September 2018 LTG has adopted the QCA Corporate Governance Code.  Further details can be found on the Company's website at www.ltgplc.com

 

I am delighted that Aimie Chapple joined the Board as a Non-Executive Director with effect from 3 September 2018.  Aimie was a senior partner in Accenture and during her 25-year consulting career has led practices in management consulting and human performance and innovation.  She has extensive experience of operating in the US and UK markets.  Aimie joins the Audit and Remuneration Committees.

 

Dale Solomon (Chief Operating Officer) will step down from the Board on 16 November 2018.  Dale has been with the business since 2010 and has provided invaluable insight and drive in helping to grow and transform the Group, most recently leading the integration of PeopleFluent.  The Board thanks Dale for his great contribution and wishes him and his family all the very best for the future.

 

Dividend

 

On 6 July 2018, the Company paid a final dividend of 0.21 pence per share, giving a total dividend for 2017 of 0.30 pence per share.  This represented a 43% increase on the dividend paid compared to 2016.  Given its confidence in the continuing success of the Group, the Board is pleased to announce that it has approved an interim dividend of 0.15 pence per share (2017: 0.09 pence per share), representing a 67% increase.  This will be paid on 2 November 2018 to shareholders on the register at 12 October 2018.

 

Current Trading and outlook

 

The Board is delighted with the progress that the Group has made in the first half of 2018, in particular the acquisition and successful integration of PeopleFluent. The Group's recurring software revenue base continues to grow alongside strong operating margin performance and cash conversion.  We are delivering this excellent trading momentum, and increased recurring revenue, into the second half, giving us confidence in the outlook for the rest of the year and further significant growth in 2019.

The Board continues to actively pursue acquisition opportunities, particularly in the US, and in sectors that will extend LTG's domain specific expertise and increase its scale in the advisory and content creation capabilities in the large North American market. 

The Directors look forward to hosting a Capital Markets Day for analysts and investors on 15 November 2018 and to updating shareholders on progress towards delivering significant profitable growth in the underlying operating businesses during the remainder of 2018, with a view to the longer-term outlook for the Group.

 

 

Andrew Brode

Chairman

25 September 2018

 

 

* 'Adjusted EBIT' is defined as the Group profit or loss before tax, excluding the amortisation of acquisition-related intangible assets, share-based payment charges, 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.

 

 

Consolidated statement of comprehensive income

 

 

Six months to

30 June 2018

 

 

Six months to

30 June 2017

(restated)

Year to

31 Dec 2017

(restated)

 

 

Note

 

£'000

£'000

£'000

Revenue

3

 

33,805

21,095

51,353

 

 

 

 

 

 

Operating expenses (excluding acquisition-related deferred consideration and earn-outs)

 

 

(31,353)

(21,308)

(47,605)

 

 

 

 

 

 

Operating profit/(loss) (before acquisition-related deferred consideration and earn-outs)

 

 

2,452

(213)

3,748

 

 

 

 

 

 

Acquisition-related deferred consideration and earn-outs

 

 

(1,504)

(683)

(1,853)

 

 

 

 

 

 

Operating profit/(loss)

 

 

948

(896)

1,895

 

 

 

 

 

 

Adjusted EBIT

 

 

8,885

3,750

13,344

Amortisation of acquired intangibles

 

 

(5,745)

(3,042)

(7,756)

Acquisition-related deferred consideration and earn-outs

 

 

(1,504)

(683)

(1,853)

Share based payment costs

 

 

(588)

(218)

(675)

Integration costs

 

 

(100)

(703)

 

(1,165)

Operating profit/(loss)

 

 

948

(896)

1,895

 

 

 

 

 

 

Fair value movement on contingent consideration

 

 

-

-

52

Costs of acquisition

 

 

(2,628)

(958)

(920)

Share of losses of associates/joint ventures

 

 

(69)

(80)

(201)

Profit/(loss) on disposal of fixed assets

 

 

-

-

(36)

Finance expenses:

 

 

 

 

 

Charge on contingent consideration

 

 

(15)

(24)

(41)

Unwinding onerous lease

 

 

-

-

(11)

Interest on borrowings

 

 

(530)

(343)

(605)

Net foreign exchange differences

 

 

3,591

22

(151)

Interest receivable

 

 

9

4

7

 

 

 

 

 

 

Profit/(loss) before taxation

 

 

1,306

(2,275)

(11)

 

 

 

 

 

 

Income tax credit/(expense)

4

 

43

12

1,108

 

 

 

 

 

 

Profit/(loss) after taxation

 

 

1,349

(2,263)

1,097

 

 

 

 

 

 

Profit/(loss) for the period/year attributable to the owners of the parent

 

 

1,349

(2,213)

1,247

(Loss) for the period/year attributable to non-controlling interests

 

 

-

                    (50)

(150)

 

Earnings per share attributable to owners of the parent:

 

 

 

 

 

 

Basic, (pence)

5

 

0.221

(0.454)

0.235  

 

 

 

 

 

 

Diluted, (pence)

5

 

0.216

(0.454)

0.225

 

Other comprehensive income:

 

 

 

 

 

Exchange differences on translating foreign operations

 

 

2,001

(2,094)

(3,564)

Total comprehensive profit/(loss) for the period

 

 

3,350

(4,357)

(2,467)

Attributable to:

 

 

 

 

 

The owners of the parent

 

 

3,350

(4,256)

(2,276)

Non-controlling interests

 

 

-

(101)

(191)

 

 

 

Consolidated statement of financial position

Note

 

30 June 2018

 

£'000

30 June 2017

(restated)

£'000

31 Dec 2017

 (restated)

£'000

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

Property, plant and equipment

 

2,352

815

842

 

Intangible assets

6

238,851

87,492

83,409

 

Deferred tax assets

 

2,605

1,344

2,205

 

Investments accounted for under the equity method

 

1,619

1,809

1,689

 

Other receivables, deposits and prepayments

 

173

497

-

 

 

 

245,600

91,957

88,145

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Trade receivables

 

21,205

8,454

12,067

 

Other receivables, deposits

 

 

 

 

 

  and prepayments

7

5,335

5,584

2,363

 

Amounts recoverable on contracts

 

4,561

4,744

4,242

 

Amounts due from related parties

 

6

-

-

 

Cash and bank balances

8

32,062

11,498

15,662

 

Restricted cash balances

 

323

-

-

 

 

 

63,492

30,280

34,334

 

 

 

 

 

 

 

TOTAL ASSETS

 

309,092

122,237

122,479

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Trade and other payables

9

68,182

22,106

25,444

 

Borrowings

10

6,499

1,922

1,849

 

Corporation tax

 

526

1,072

50

 

Amounts owing to related parties

 

-

-

20

 

 

 

75,207

25,100

27,363

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

Deferred tax liabilities

 

26,338

8,235

6,477

 

Other long-term liabilities

 

3,117

185

192

 

Borrowings

10

41,304

15,663

12,765

 

Provisions

 

273

224

257

 

 

 

71,032

24,307

19,691

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

146,239

49,407

47,054

 

                     

 

NET ASSETS

 

162,853

72,830

75,425

 

EQUITY

 

 

 

 

Share capital

 

2,498

2,133

2,145

Share premium account

 

147,517

63,839

64,208

Merger relief reserve

 

31,983

31,983

31,983

Reverse acquisition reserve

 

(22,933)

(22,933)

(22,933)

Share-based payment reserve

 

983

1,698

1,092

Foreign exchange translation reserve

 

(289)

(810)

(2,290)

Accumulated retained earnings/(losses)

 

3,094

(3,890)

1,220

TOTAL EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT

 

162,853

72,020

75,425

Non-controlling interests

 

-

810

-

TOTAL EQUITY

 

162,853

72,830

75,425

 

Consolidated statement of changes in equity  

 

 

   Share

capital

Share

Premium

Merger relief reserve

Reverse acquisition reserve

Share based

payments

reserve

Foreign

exchange

reserve

Retained profits/(losses)

Total

 

Non-controlling interest

Total equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 January 2017

 

 

1,580

17,044

31,983

(22,933)

3,245

1,233

(1,442)

30,710

-

30,710

Restatement due to IFRS 15

12

-

-

-

-

-

-

(650)

(650)

-

(650)

Profit for period

 

-

-

-

-

-

-

(2,213)

(2,213)

(50)

(2,263)

Exchange differences on translating foreign operations

 

-

-

-

-

-

(2,043)

-

(2,043)

(51)

(2,094)

Total comprehensive income for the period

 

-

-

-

-

-

(2,043)

(2,213)

(4,256)

(101)

(4,357)

Issue of shares net of share issue costs

 

553

46,795

-

-

-

-

-

47,348

-

47,348

Share based payment charge / credited to equity

 

-

-

-

-

218

-

-

218

-

218

Deferred tax on share options

 

-

-

-

-

(584)

-

-

(584)

-

(584)

Transfer on exercise and lapse of options

 

-

-

-

-

(1,181)

-

1,181

-

-

-

Tax deduction on exercise of share options recognised

directly in equity

Additions on acquisition                                                                          

 

 

-

-

 

-

-

 

-

-

 

-

-

 

-

-

 

-

-

 

-

-

 

-

-

 

-

911

 

-

911

Dividends payable

 

-

-

-

-

-

-

(766)

(766)

-

(766)

Balance at 30 June 2017 (restated)

 

2,133

63,839

31,983

(22,933)

1,698

(810)

(3,890)

72,020

 

810

 

72,830

Profit for period

 

-

-

-

-

-

-

3,460

3,460

(100)

3,360

Exchange differences on translating foreign operations

 

-

-

-

-

-

(1,480)

-

(1,480)

10

(1,470)

Total comprehensive income for the period

 

-

-

-

-

-

(1,480)

3,460

1,980

(90)

1,890

Issue of shares net of share issue costs

 

12

369

-

-

-

-

-

381

-

381

Share based payment charge / credited to equity

 

-

-

-

-

457

-

-

457

-

457

Tax credit on share options

 

-

-

-

-

-

-

1,331

1,331

-

1,331

Transfer on exercise and lapse of options

 

-

-

-

-

(281)

-

281

-

-

-

Presentational adjustment regarding deferred tax on share options

 

 

-

 

-

 

-

 

-

 

(782)

 

-

 

1,366

 

584

 

-

 

584

Acquisition of subsidiary

 

-

-

-

-

-

-

-

-

(52)

(52)

Acquisition of non-controlling interest

 

-

-

-

-

-

-

(815)

(815)

(668)

(1,483)

Dividends paid

 

-

-

-

-

-

-

(513)

(513)

-

(513)

 

Balance at 31 December 2017 (restated)

 

 

2,145

64,208

31,983

(22,933)

1,092

(2,290)

1,220

75,425

-

75,425

Profit for period

 

-

-

-

-

-

-

1,349

1,349

-

1,349

Exchange differences on translating foreign operations

 

-

-

-

-

-

2,001

-

2,001

-

2,001

Total comprehensive income for the period

 

-

-

-

-

-

2,001

1,349

3,350

-

3,350

Issue of shares net of share issue costs

 

353

83,309

-

-

-

-

-

83,662

-

83,662

Share based payment charge / credited to equity

 

-

-

-

-

588

-

-

588

-

588

Tax credit on share options

 

-

-

-

-

-

-

1,224

1,224

-

1,224

Transfer on exercise and lapse of options

 

-

-

-

-

(697)

-

697

-

-

-

Dividends payable

 

-

-

-

-

-

-

(1,396)

(1,396)

-

(1,396)

Balance at 30 June 2018

 

2,498

147,517

31,983

(22,933)

983

(289)

3,094

162,853

-

162,853

 

Consolidated statement of cash flows

 

Note

Six months to

30 June 2018

 

Six months to

30 June 2017

 (restated)

Year to

31 Dec 2017

 (restated)

 

 

£'000

£'000

£'000

Cash flow from operating activities

 

 

 

 

Profit/(Loss) before taxation

 

1,306

(2,275)

(11)

Adjustments for:-

 

 

 

 

Share options charge

 

588

218

675

Amortisation of intangible assets

 

6,162

3,322

8,404

Depreciation of plant and equipment

 

263

205

422

Share of losses of investments

 

69

80

201

Finance expense

 

15

24

52

Finance interest on borrowings

 

530

343

605

Net foreign exchange difference on bank loan

 

17

(22)

151

Fair value movement on contingent consideration

 

-

-

(52)

Acquisition-related deferred consideration and earn-outs

 

1,504

683

 

1,853

 

Payment of acquisition-related deferred consideration and earn-outs

 

(2,613)

(2,211)

(2,211)

Interest income

 

(9)

(4)

(7)

Operating cash flow before working capital changes

 

7,832

363

10,082

(Increase)/decrease in trade and other receivables

 

1,208

1,807

2,189

(Increase) in amount recoverable on contracts

 

(182)

(2,103)

(1,391)

(Decrease)/increase in payables

 

(559)

1,043

1,124

 

 

8,299

1,110

12,004

Interest paid

 

(235)

(255)

(474)

Interest received

 

9

4

7

Income tax received/(paid)

 

299

(684)

(743)

 

 

 

 

 

Net cash flow from operating activities

 

8,372

175

10,794

 

 

 

 

 

Cash flow used in investing activities

 

 

 

 

Purchase of property, plant and equipment

 

(262)

               (115)

(449)

Disposal of property, plant and equipment

 

-

2

16

Development of intangible assets

 

(1,195)

(667)

(1,384)

Acquisition of subsidiaries, net of cash acquired

 

(106,585)

(44,222)

(45,704)

 

Net cash flow used in investing activities

 

(108,042)

(45,002)

(47,521)

 

 

 

 

 

Cash flow used in financing activities

 

 

 

 

Dividends paid

 

-

-

(1,279)

Cash generated from issue of shares, net of share issue costs

 

83,662

46,720

47,101

Proceeds from borrowings

 

47,219

18,000

18,000

Repayment of bank loans

 

(14,871)

(13,578)

(16,193)

Contingent consideration payments in the period

 

          (193)

(59)

(59)

Net cash flow from/(used in) in financing

 

 

 

 

activities

 

115,817

51,083

47,570

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

16,147

6,256  

10,843

Cash and cash equivalents at beginning of the year

 

15,662

5,348

5,348

Effects of foreign exchange rate changes

 

253

(106)

(529)

 

Cash and cash equivalents at end of the year

 

8

 

32,062

 

11,498

 

15,662

 

 Notes to the consolidated financial statements for the six months to 30 June 2018

 

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 2018 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 2017 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.

 

 

 

 

 

 

 

 

 

 

UK

   Europe

United States

Asia Pacific

Canada

Other

   Total

 

£'000

   £'000

£'000

£'000

£'000

£'000

     £'000

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months to 30 June 2017

 

 

 

 

 

 

 

Revenue

11,568

1,301

6,916

529

467

314

21,095

 

 

 

 

 

 

 

 

Non-current assets

28,915

-

43,583

17,618

-

-

90,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year to 31 December 2017

 

 

 

 

 

 

 

Revenue

27,928

4,704

15,372

1,574

1,367

408

51,353

 

 

 

 

 

 

 

 

Non-current assets

31,224

-

34,527

20,189

-

-

85,940

 

 

 

 

 

 

 

Information about reported segment revenue, profit or loss and assets

 

 

 

Software & Platforms

Content & Services

 

 

On-premise Software Licences

Hosting and SaaS

Support and Maintenance

Total

Content

Platform development

Consulting and other

Total

Grand total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

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

 

 

 

5,917

 

 

 

2,968

8,885

 

Amortisation of acquired intangibles

 

 

 

(4,890)

 

 

 

(855)

(5,745)

 

Share of losses of associates/ joint ventures

 

 

 

(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

 

 

 

 

 

 

 

 

 

 

 

 

 Six months to 30 June 2017

 

 

 

 

 

 

 

 

Recurring revenue

4,684

2,878

179

7,741

-

-

-

-

7,741

 

Non-Recurring revenue

335

5

258

598

9,935

1,406

1,415

12,756

13,354

 

Revenue

5,019

2,883

437

8,339

9,935

1,406

1,415

12,756

21,095

 

Depreciation and amortisation

 

 

 

(361)

 

 

 

(124)

(485)

 

EBIT

 

 

 

2,641

 

 

 

1,109

3,750

 

Amortisation of acquired intangibles

 

 

 

(2,317)

 

 

 

(725)

(3,042)

 

 

Software & Platforms

Content & Services

 

 

 

On-premise Software Licences

Hosting and SaaS

Support and Maintenance

Total

Content

Platform development

Consulting and other

Total

Grand total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

Share of losses of associates/ joint ventures

 

 

 

(80)

 

 

 

-

(80)

 

Profit/(loss) before tax

 

 

 

(3,112)

 

 

 

837

(2,275)

 

Investments accounted for under the equity method

 

 

 

1,809

 

 

 

-

1,809

 

Additions to intangible assets

 

 

 

44,045

 

 

 

10,149

54,194

 

Total assets

 

 

 

80,741

 

 

 

41,496

122,237

 

 

 

 

 

 

 

 

 

 

 

 

Year to 31 December 2017

 

 

 

 

 

 

 

 

Recurring revenue

9,067

10,173

441

19,681

-

-

-

-

19,681

 

Non-Recurring revenue

696

8

510

1,214

23,403

3,703

3,352

30,458

31,672

 

Revenue

9,763

10,181

951

20,895

23,403

3,703

3,352

30,458

51,353

 

Depreciation and amortisation

 

 

 

(821)

 

 

 

(250)

(1,071)

 

EBIT

 

 

 

7,798

 

 

 

5,546

13,344

 

Amortisation of acquired intangibles

 

 

 

(6,314)

 

 

 

(1,442)

(7,756)

 

Share of losses of associates/  joint ventures

 

 

 

(201)

 

 

 

-

(201)

 

Profit/(loss) before tax

 

 

 

(4,310)

 

 

 

4,299

(11)

 

Investments accounted for under the equity method

 

 

 

1,689

 

 

 

-

1,689

 

Additions to intangible assets

 

 

 

47,055

 

 

 

10,556

57,611

 

Total assets

 

 

 

78,460

 

 

 

44,019

122,479

 

                           

 

EBIT is the main measure of profit reviewed by the Chief Operating Decision Maker.

 

Information about major customers

 

In the six months to 30 June 2018 no customer accounted for more than 10 percent of reported revenues (H1 2017: 12%).

 

4.         Taxation

 

Taxation for the six months to 30 June 2018 has been calculated by applying the estimated tax rate for the current financial year ending 31 December 2018 to an estimated tax adjusted profit figure.

 

5.      Earnings per share

 

 

 

 

Six months to

Six months to

Year to

 

 

30 June 2018

30 June 2017

31 Dec 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

Profit after tax attributable to owners of the Group:

 

 

1,349

 

(2,213)

1,247

 

 

 

 

 

Weighted average number of shares:

Basic

 

609,427,992

 

491,485,506

 

530,444,192

Diluted

 

623,998,444

523,025,550

553,938,663

 

 

 

 

 

Basic earnings per share (pence)

 

0.221

(0.454)

0.235

 

 

 

 

 

Diluted earnings per share (pence)

 

0.216

(0.454)

0.225

 

Adjusted diluted earnings per share (pence)

 

 

1.122

 

0.468

 

1.926

 

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:

 

 

 

 

Six months to 30 June 2018  

Six months to 30 June 2017 

Year to 31 Dec 2017  

 

Profit after tax

Weighted average number of shares

Pence per share

Profit after tax

Weighted average number of shares

Pence per share

Profit after tax

Weighted average number of shares

Pence per share

 

£'000

'000

 

£'000

'000

 

£'000

'000

 

 

 

 

 

 

 

 

 

 

Basic earnings per ordinary share

1,349

609,428

0.221

(2,213)

491,486

(0.454)

1,247

530,444

0.235

Effect of adjustments:

 

 

 

 

 

 

 

 

 

Amortisation of acquired intangibles

5,745

 

 

3,042

 

 

7,756

 

 

Share based payment costs

588

 

 

218

 

 

675

 

 

Integration costs

100

 

 

703

 

 

1,165

 

 

Cost of acquisitions

2,628

 

 

958

 

 

920

 

 

Fair value movement on contingent consideration

-

 

 

-

 

 

(52)

 

 

Acquisition earnout

1,504

 

 

683

 

 

1,853

 

 

Net foreign exchange differences on financing activities

(3,591)

 

 

(22)

 

 

151

 

 

Interest receivable

(9)

 

 

(4)

 

 

(7)

 

 

Finance expense on contingent consideration

15

 

 

24

 

 

52

 

 

Income tax (credit)/expense

(43)

 

 

(12)

 

 

(1,108)

 

 

Effect of adjustments

6,937

-

1.138

-

1.141

11,405

-

2.137

Adjusted profit before tax

8,286

-

-

3,377

-

-

12,652

-

-

Tax impact after adjustments

(1,285)

-

(0.210)

(930)

-

(0.189)

(1,984)

-

(0.361)

Adjusted basic earnings per ordinary share

7,001

609,428

1.149

2,447

491,486

0.498

10,668

530,444

2.011

Effect of dilutive potential ordinary shares:

 

 

 

 

 

 

 

 

 

Share options

-

14,061

(0.026)

-

28,207

(0.027)

-

21,789

(0.079)

Deferred consideration payable (conditions met)

-

-

 

 

 

 

-

888

(0.003)

Deferred consideration payable (contingent)

-

509

(0.001)

 

3,333

(0.003)

-

818

(0.003)

 

 

 

 

 

 

 

 

 

Adjusted diluted earnings per ordinary share

7,001

623,998

1.122

2,447

523,026

0.468

10,668

553,939

1.926

 

6.      Intangible assets

 

 

 

Goodwill

Customer contracts and relationships

Branding

IP and Software development

Total

 

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

At 1 January 2017

 

26,608

16,192

809

2,241

45,850

Additions on acquisition

 

20,967

30,059

1,069

1,432

53,527

Additions

 

-

-

-

667

667

Foreign exchange differences

 

(1,544)

(1,612)

(65)

(109)

(3,330)

At 30 June 2017

 

46,031

44,639

1,813

4,231

96,714

Additions on acquisition

 

948

1,752

-

-

2,700

Additions

 

-

-

-

717

717

Foreign exchange differences

 

(929)

(1,371)

(25)

(93)

(2,418)

At 31 December 2017

 

46,050

45,020

1,788

4,855

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

391

2,924

At 30 June 2018

 

126,410

89,443

3,550

39,914

259,317

 

 

 

 

 

 

 

Accumulated

amortisation

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017

 

-

4,669

304

927

5,900

Amortisation charged in period

 

-

-

2,809

120

393

3,322

At 30 June 2017

 

-

7,478

424

1,320

9,222

Amortisation charged in period

 

-

4,335

166

581

5,082

At 31 December 2017

 

-

11,813

590

1,901

14,304

Amortisation charged in period

 

-

5,004

192

966

6,162

At 30 June 2018

 

-

16,817

782

2,867

20,466

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

At 30 June 2017

 

46,031

37,161

1,389

2,911

87,492

 

At 31 December 2017

 

46,050

33,207

1,198

2,954

83,409

At 30 June 2018

 

 

126,410

72,626

2,768

37,047

238,851

               

 

 

 

 

7.      Other receivables, deposits and prepayments

 

 

30 June 2018 

30 June 2017 

31 Dec 2017  

 

£'000

£'000

£'000

Sundry receivables

1,368

633

577

Prepayments

3,967

4,951

1,786

 

5,335

5,584

2,363

 

 

8.      Cash and cash equivalents

 

 

For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:-

 

 

30 June 2018 

30 June 2017 

31 Dec 2017  

 

£'000

£'000

£'000

 

 

 

 

Cash and bank balances

32,062

11,498

15,662

 

9.      Trade and other payables

 

 

 

 

30 June 2018

 

30 June 2017

 

 

31 Dec 2017

 

 

 

 

 

£'000

£'000

£'000

Trade payables

 

 

1,597

854

 

946

Payments received on account

 

 

52,919

10,840

15,618

Tax and social security

 

 

1,437

5,041

1,673

Contingent consideration

 

 

182

216

168

Acquisition-related deferred consideration and earn-outs

 

 

1,219

985

2,641

Accruals and others

 

 

10,828

4,170

4,398

 

 

 

68,182

22,106

25,444

 

 

 

 

10.     Borrowings

 

On the acquisition of PeopleFluent Holdings Corp. (see Note 11) 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 2018

30 June 2017

31 Dec 2017

 

£'000

£'000

£'000

Current interest-bearing loans and borrowings

6,499

1,922

1,849

Non-current interest-bearing loans and borrowings

41,304

15,663

12,765

 

47,803

17,585

14,614

 

 

11.     Acquisitions

On 24 April 2018, LTG announced that the Company had entered into a conditional agreement to acquire the entire issued and outstanding shares of capital stock of PeopleFluent Holdings Corp. ('PeopleFluent') by way of a reverse subsidiary merger for cash consideration of $143 million, (on a cash free, debt free basis), plus transaction costs.

PeopleFluent is the leading independent provider of cloud-based integrated recruiting, talent management, and compensation management solutions.

On 24 April 2018, LTG also undertook a Placing of 86,734,694 new ordinary shares to part-fund the acquisition.

On 31 May 2018, LTG announced that all conditions relating to the acquisition of PeopleFluent were satisfied and so the transaction completed on the same date.

None of the goodwill recognised is expected to be deductible for income tax purposes.

 

The following table summarises the consideration paid for PeopleFluent, the fair value of assets acquired and liabilities assumed at the acquisition date.

 

 

11.     Acquisitions (continued)

 

Consideration

Fair Value

£'000

 

Cash paid

107,787

 

Total consideration

107,787

 

 

 

 

 

 

 

Recognised amounts of identifiable assets acquired and liabilities assumed

Fair value

£'000

Cash and cash equivalents

1,202

Restricted cash, receivables and payables

596

Property, plant and equipment

1,505

Trade and other receivables

13,203

Trade and other payables

(45,801)

Deferred tax liabilities on acquisition

(20,403)

Intangible assets identified on acquisition

78,476

Total identifiable net assets

28,778

 

 

 

 

Goodwill

 

79,009

 

 

 

 

 

Total

 

107,787

 

         

 

 

The total consideration and fair value adjustments to the assets and liabilities assumed are provisional and are management's best estimates at this time.

 

PeopleFluent contributed £6.3 million of revenue for the period between the date of acquisition and the balance sheet date and £0.9 million of profit before tax attributable to equity holders of the parent.  As a preliminary assessment, had the acquisition of PeopleFluent been completed on the first day of the financial year Group revenues would have been approximately £31.0 million higher and group profit before tax attributable to equity holders of the parent would have been approximately £1.4 million higher.

 

 

 

12.     Changes in accounting policies

 

The Group has adopted IFRS 9 Financial Instrumentsand IFRS 15 Revenue from Contracts with Customers from 1 January 2018. The impact on the prior year financial statements is presented in the table below.

Consolidated statement of financial position

 

1 Jan 2017 (as originally presented)

£'000

IFRS 15

£'000

1 Jan 2017 (restated)

 

31 Dec 2017 (as originally presented)

£'000

IFRS 15

£'000

31 Dec 2017 (restated)

£'000

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

Property, plant and equipment

708

-

708

842

-

842

 

Intangible assets

39,950

-

39,950

83,409

-

83,409

 

Deferred tax assets

1,717

335

2,052

1,933

272

2,205

 

Investments accounted for under the equity method

1,890

-

1,890

1,689

-

1,689

 

Other receivables, deposits and prepayments

1,293

-

1,293

-

-

-

 

 

45,558

335

45,893

87,873

272

88,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

14,214

-

14,214

34,334

-

34,334

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

59,772

335

60,107

122,207

272

122,479

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Trade and other payables

9,215

985

10,200

23,756

1,688

25,444

 

Borrowings

3,252

-

3,252

1,849

-

1,849

 

Corporation tax

546

-

546

50

-

50

 

Amounts owing to related parties

45

-

45

20

-

20

 

 

13,058

985

14,043

25,675

1,688

27,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

16,004

-

16,004

19,691

-

19,691

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

29,062

985

30,047

45,366

1,688

47,054

 

 

 

 

 

 

 

 

 

 

NET ASSETS

30,710

(650)

30,060

76,841

(1,416)

75,425

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Share capital

1,580

-

1,580

2,145

-

2,145

 

Share premium account

17,044

-

17,044

64,208

-

64,208

 

Merger relief reserve

31,983

-

31,983

31,983

-

31,983

 

Reverse acquisition reserve

(22,933)

-

(22,933)

(22,933)

-

(22,933)

 

Share-based payment reserve

3,245

-

3,245

1,092

-

1,092

 

Foreign exchange translation reserve

1,233

-

1,233

(2,290)

-

(2,290)

 

Accumulated retained earnings/(losses)

(1,442)

(650)

(2,092)

2,636

(1,416)

1,220

 

TOTAL EQUITY

30,710

(650)

30,060

76,841

(1,416)

75,425

Consolidated statement of comprehensive income

 

As originally presented

IFRS 15

 

Restated

As originally presented

IFRS 15

Restated

 

 

 

6 months to 30 Jun 2017

 

6 months to 30 Jun 2017

Year to 31 Dec 2017

 

Year to 31 Dec 2017

 

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

 

Revenue

 

21,472

(377)

21,095

52,056

(703)

51,353

 

 

 

 

 

 

 

 

 

 

Operating expenses (excluding acquisition-related deferred consideration and earn-outs)

 

(21,308)

-

(21,308)

(47,605)

-

(47,605)

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss) (before acquisition-related deferred consideration and earn-outs)

 

164

(377)

(213)

4,451

(703)

3,748

 

 

 

 

 

 

 

 

 

 

Acquisition-related deferred consideration and earn-outs

 

(683)

-

(683)

(1,853)

-

(1,853)

 

 

 

 

 

 

 

 

 

 

Operating (loss)

 

(519)

(377)

(896)

2,598

(703)

1,895

 

 

 

 

 

 

 

 

Adjusted EBIT

 

4,127

(377)

3,750

14,047

(703)

13,344

 

Amortisation of acquired intangibles

 

(3,042)

-

(3,042)

(7,756)

-

(7,756)

 

Acquisition-related deferred consideration and earn-outs

 

(683)

-

(683)

(675)

-

(675)

 

Share based payment costs

 

(218)

-

(218)

(1,165)

-

(1,165)

 

Integration costs

 

(703)

-

(703)

 

(1,853)

-

(1,853)

 

Operating (loss)

 

(519)

(377)

(896)

2,598

(703)

1,895

 

 

 

 

 

 

 

 

 

 

Fair value movement on contingent consideration

 

-

-

-

52

-

52

 

Costs of acquisition

 

(958)

-

(958)

(920)

-

(920)

 

Share of losses of associates/joint ventures

 

(80)

-

(80)

(201)

-

(201)

 

Profit/(loss) on disposal of fixed assets

 

-

-

-

(36)

-

(36)

 

Finance expenses:

 

 

 

 

 

 

 

 

Charge on contingent consideration

 

(24)

-

(24)

(41)

-

(41)

 

Unwinding onerous lease

 

-

-

-

(11)

-

(11)

 

Interest on borrowings

 

(343)

-

(343)

(605)

-

(605)

 

Net foreign exchange differences on financing activities

 

22

-

22

(151)

-

(151)

 

Interest receivable

 

4

-

4

7

-

7

 

 

 

 

 

 

 

 

 

 

(Loss) before taxation

 

(1,898)

(377)

(2,275)

692

(703)

(11)

 

 

 

 

 

 

 

 

 

 

Income tax credit/(expense)

 

(77)

89

12

1,171

(63)

1,108

 

 

 

 

 

 

 

 

 

 

(Loss) after taxation

 

(1,975)

(288)

(2,263)

1,863

(766)

1,097

 

 

 

 

 

 

 

 

 

 

(Loss) for the period/year attributable to the owners of the parent

 

(1,925)

(288)

(2,213)

2,013

(766)

1,247

 

(Loss) for the period/year attributable to non-controlling interests

 

(50)

-

(50)

(150)

-

(150)

 

 

Earnings per share attributable to owners of the parent:

 

 

 

 

 

 

 

 

 

Basic, (pence)

 

(0.392)

(0.062)

(0.454)

0.379

(0.144)

0.235

 

 

 

 

 

 

 

 

 

 

Diluted, (pence)

 

(0.392)

(0.062)

(0.454)

0.363

(0.138)

0.225

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

(2,094)

-

(2,094)

(3,564)

-

(3,564)

 

Total comprehensive (loss) for the period

 

(4,069)

(288)

(4,357)

(1,701)

(766)

(2,467)

 

Attributable to:

 

 

 

 

 

 

 

 

The owners of the parent

 

(3,968)

(288)

(4,256)

(1,510)

(766)

(2,276)

 

Non-controlling interests

 

(101)

 

(101)

(191)

-

(191)

 

                                         

 

IFRS 15 Revenue from Contracts with Customers - Impact of adoption

 

The Group has adopted IFRS 15 from 1 January 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in IFRS 15, the Group has adopted the new rules retrospectively and has restated comparatives for the 2017 financial year.

 

The impact on the Group's retained earnings as at 1 January 2018 and 1 January 2017 is as follows:

 

 

2018

2017

 

Note

£'000

£'000

Opening retained earnings

 

2,636

(1,442)

Adjustment to recognition of initial licence fees

(i)

(1,295)

(985)

Adjustment to recognition of bundled support and maintenance fees

(ii)

(393)

-

Deferred tax impact

 

272

335

Restated opening retained earnings

 

1,220

(2,092)

 

(i)         Accounting for initial licence fees

 

The Group's initial licence fees do not meet the definition of a distinct performance obligation, so therefore will be combined with the term licence fee and amortised over the full licence contract. This is a change in policy as under IAS 18 this revenue was recognised in full at contract inception.

 

(ii)        Accounting for bundled support and maintenance fees

The Group has concluded that the support and maintenance service included within on-premise licence contracts constitutes a separate performance obligation which should be recognised over time. This is a change in policy as under IAS 18 this revenue was included within the on-premise licence revenue which is recognised on delivery of the software licence to the customer.

 

 

IFRS 15 Revenue from Contracts with Customers - Accounting policies

Revenue from services includes the content, platform development and other revenue streams (see Note 3). Revenue from services for fixed-price contracts is recognised on the percentage of completion method unless the outcome of the contract cannot be reliably determined, in which case contract revenue is only recognised to the extent of contract costs incurred that are recoverable. This is because either LTG are creating an asset with no alternative use to LTG and the contract contains the right to payment for work completed to date, or the customer is simultaneously receiving and consuming the benefits of LTG's services as LTG performs. Foreseeable losses, if any, are provided for in full as and when it can be reasonably ascertained that the contract will result in a loss.  The stage of completion is determined using input methods based on the proportion of contract costs incurred compared to total estimated contract costs.

If the services rendered by LTG exceed the invoices to the customer, an amount recoverable on contract asset is recognised. Conversely, if the invoices to the customer exceed the services rendered by LTG, then a contract liability is recognised.

If the contract is on a time-and-materials basis, revenue is recognised in the amount to which LTG has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable when invoiced.

Business development costs incurred as part of LTG's bid or tender process are expensed as incurred. Only if and when a project is won and contracted are project costs accounted for within long-term contracts through Cost of Sale, there are no costs incurred during the period between the contract being awarded and service delivery commencing. Incremental contract costs are capitalised and amortised on a consistent basis with the pattern of transfer of the service to which the asset relates.

Revenue from subscriptions such as SaaS, "right to access" licences (including initial fees), hosting and support and maintenance is amortised over the contractual period of the licence as the customer simultaneously receives and consumes the benefits of LTG's service. Perpetual licences and on-premise software licences where all material obligations of the Group to the customer have been met on the delivery of the licence are recognised in full when the software has been delivered to the customer as these constitute "right to use" licences.

Some contracts include multiple deliverables, such as professional service fees with the delivery of a licence. However, the professional services do not significantly customise the software and the promises in the contract are not highly interdependent, so these are separate performance obligations. Contracts may also include an on-premise software licence with support and maintenance services. The customer can benefit from both services on their own or with other readily-available resources and the software is functional upon transfer of the licence key, so these are separate performance obligations.

IFRS 9 Financial Instruments - Impact of adoption

The Group has assessed the impact of IFRS 9 on the impairment of its financial assets, including the trade receivables balance. The Group revised its impairment methodology to the simplified approach of the expected credit loss model and grouped the trade receivables based on shared characteristics, including line of business, and days past due. After identifying the impairment loss under this revised method, management have concluded that the change in the impairment is immaterial, so the prior year financial statements have not been restated.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

13.   Events since the reporting date

 

On 27 August 2018, LTG reduced its interest in LEO Brasil Tecnologia Educacional Ltda from 50% to 38% via a debt/equity swap.

 

 

Company information

 

Directors

Andrew Brode, Non-Executive Chairman

Harry Hill, Non-Executive Deputy Chairman

Leslie-Ann Reed, Non-Executive Director

Aimie Chapple, Non-Executive Director

Jonathan Satchell, Chief Executive Officer

Neil Elton, Chief Financial Officer and Company Secretary

Piers Lea, Chief Strategy Officer

Dale Solomon, Chief Operating Officer

 

Company number

07176993

 

Registered address

15 Fetter Lane

Ground Floor

London

England

EC4A 1BW

 

Independent auditors

Crowe U.K. LLP

Chartered Accountants and Statutory Auditors

St Bride's House

10 Salisbury Square

London

EC4Y 8EH

 

Nominated adviser and joint broker

Numis Securities Limited

10 Paternoster Square

London

EC4M 7LT

 

Joint broker

Goldman Sachs

Peterborough Court

133 Fleet Street

London

EC4A 2BB

 

Legal advisers

DWF LLP

Bridgewater Place

Water Lane

Leeds

LS11 5DY

 

Principal Bankers

Silicon Valley Bank

Alphabeta

14-18 Finsbury Square

London

EC2A 1BR

 

 

 

 

Registrars

Computershare Investor Services plc

The Pavilions

Bridgewater Road

Bristol

BS13 8AE

 

Communications consultancy

FTI Consulting LLP

200 Aldersgate

Aldersgate Street

London

EC1A 4HD


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