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Acquisition of NetDimensions and organic growth drive 84% increase in revenue at LTG

publication date: Mar 30, 2018

Learning Technologies Group (LTG), the AIM-listed integrated eLearning services and technologies provider, has reported an adjusted EBIT of £14.0m for the year ended 31 December 2017 (2016: £7.0m), on revenue up 84% to £52.1m (2016: £28.3m). Adjusted EBIT margin increased from 24.6% in 2016, to 27.0% in 2017.

NetDimensions, the Hong Kong-based learning platform provider acquired in March 2017 for £53.6m (£45.7m net of cash acquired) contributed revenue of £12.9m and £3.5m profit before tax in 2017. The business achieved retention rates of almost 100% following acquisition, LTG said.

Underlying organic revenue grew 20% to £34.6m (2016: £28.7m) on a constant currency basis and excluding LTG’s Civil Service Learning (CSL) contract. The CSL contract contributed revenue of around £6.9m in 2017 (2016: £2.7m).

During 2017, the average revenue per customer increased 39% to £49k (2016: £35k), and the average revenue per customer with multiple relationships grew 9% to £117k (2016: £108k), LTG said.

Recurring revenue as a proportion of LTG’s total revenue increased from 27% in 2016 to 39% in 2017, driven by the NetDimensions acquisition, and the $23.6m acquisition of Rustici, which completed in January 2016. Both businesses, together with Gomo, LTG’s multi-device authoring tool, are the constituent parts of the company’s Platforms reporting unit. This reporting unit accounted for 41% (2016: 31%) of LTG’s 2017 revenue.

LTG’s other reporting unit – Content & Services - comprises LEO Learning, the company’s strategic eLearning consultancy, Eukleia, a specialist in governance, risk and compliance services, and Preloaded, a gamification specialist. LEO Learning, the company’s largest business, was created following the merger of Epic and LINE Communications in 2014, and now has offices in the UK and US, and in Brazil through a joint venture partnership. Most of LTG’s Content & Services projects are delivered on a non-recurring, fixed price basis. Content & Services accounted for 59% (2016: 69%) of LTG’s 2017 revenue.

In 2016, LEO, in partnership with KPMG, completed the roll out of a new core-curriculum to CSL. LTG reports that revenue relating to this contract will continue for the first half of 2018 and then drop significantly in the second half of 2018 and 2019, the last year of the current contract. LTG says it expects LEO to deliver a similar level of revenue in 2018 compared to the prior year, with the reduction in CSL revenue replaced by growth from other customers.

The company had net cash of £1.0m at 31 December 2017 (2016: £8.5m net debt).

Commenting on its 2017 results, Jonathan Satchell, CEO of LTG, said: "Learning Technologies Group enjoyed a very strong year in 2017, as we create a market leader in the fast growing digital learning industry. We continue to diversify our revenue streams across a range of technical and service capabilities, geographies, and market sectors. The growth in recurring revenue provides us with greater visibility and supports our investment for long-term shareholder value as we scale the group globally, broaden our capabilities and deepen our client relationships."

LTG was listed on AIM in November 2013 with the mission to consolidate the fast-growing eLearning sector and build a global eLearning business of scale, by growing its existing ventures and through strategic acquisitions. Since 2013, LTG has completed five strategic acquisitions, of which NetDimensions is the company’s largest transaction to date, and has taken a 27.3% equity stake in Watershed Systems, an eLearning analytics group that specialises in measuring the effectiveness of learning programmes.

In October 2017, LTG outlined its plans to double run-rate revenue to £100m and for run-rate EBIT to exceed £25m by the end of 2020, having achieved its previous target of run-rate revenue of £50m by end of 2018 one year ahead of plan.

LTG says it aims to achieve its new targets through a combination of organic growth as well as strategic acquisitions that complement the current business. The company plans to expand and deepen its presence outside the UK, principally in the US, mainland Europe, Middle East and Asia Pacific, where LTG says opportunities continue to arise, and to diversify into other domain-specialist sectors, particularly in pharma/healthcare, energy and aviation. The company is also looking to add new capabilities to its portfolio including adaptive personalised learning, social learning, content and video creation, and performance management tools.

Underlining its growth ambitions, LTG announced in February 2018 the appointment of Goldman Sachs as the company’s joint corporate broker alongside Numis Securities.

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