Final Results 2015

RNS Number : 4662T

Learning Technologies Group PLC

30 March 2016

 

30 March 2016

Learning Technologies Group plc

(AIM: LTG)

Final Results 2015

Learning Technologies Group plc ("LTG" or the "Group"), the global integrated e-learning technology and services business, is pleased to announce its audited results for the year ended 31 December 2015, which show strong growth in revenue and margins.

Financial highlights:

·       Revenue increased to £19.9 million (2014: £14.9 million) - up 33%

·       Adjusted EBITDA more than doubled to £4.3 million (2014: £2.1 million) - up 107%

·       Significantly improved adjusted EBITDA margin of 21% (2014: 14%) - up 50%

·       Adjusted diluted earnings per share of 0.756p (2014: 0.375p per share) - up 102%

·       Proposed dividend for the full year of 0.15p per share (2014: 0.10p) - up 50%

·       Balance sheet strengthened further -  £7.3 million cash and no debt

Operational highlights:

·       Acquisition of Eukleia to LTG portfolio in July 2015 for initial consideration of £8.3 million:

-  adds governance, risk and compliance expertise and specialist financial services sector offering

-  business now fully integrated and operating to plan

·       Landmark contract win delivered in a strategic alliance with KPMG UK LLP for UK Civil Service:

-  delivering blended learning for over 400,000 staff over next three years

-  demonstrating credibility and scale of LTG's offering and capabilities

·       Post year end acquisition of Rustici and investment in Watershed:

-  places LTG at the heart of global e-learning interoperability standards

-  ability to ascertain the impact and effectiveness of learning programmes

Andrew Brode, Chairman of LTG, said:

"The last 18 months have been transformational for the Group.  Our strategy of creating a group of market-leading businesses providing global, complementary services in the fast growing learning technologies sector is rapidly taking shape." 

Jonathan Satchell, Chief Executive Officer of LTG, said:

"We have established a strong platform on which we can build and the Group is delivering to plan.  I believe that LTG is very well placed to achieve a prominent position in a highly fragmented, growing market, currently estimated to be worth £140 billion.  We see the ability to measure the impact of learning as the next major disruption to the e-learning industry.  LTG's acquisition of Rustici and investment in Watershed in January 2016 places us at the vanguard of this crucial and exciting change.  We view the future with confidence."

Enquiries:

Learning Technologies Group plc Jonathan Satchell, Chief Executive Officer Neil Elton, Group Finance Director	[phone]
Numis Securities Limited Stuart Skinner/Michael Wharton (Nominated Adviser) Ben Stoop (Corporate Broker)	[phone]
Hudson Sandler Limited Cat Valentine / Katie Matthews	[phone]

Notes to Editors

LTG was created with the purpose of building a market-leading business of substance and scale within the exciting and fast-growing learning technologies sector and the Group's award-winning businesses are at the forefront of innovation and best-practice in this sector.

It is LTG's aim to create a broad capability, international learning technologies business with revenues in excess of £50m, which it will achieve through organic growth complemented by strategic acquisitions.

Since LTG listed on the AIM in November 2013, it has made a number of strategic acquisitions to grow its business:

April 2014 LINE

May 2014 Preloaded

July 2015 Eukleia

January 2016 Rustici and 27% equity stake in Watershed

LINE was merged with the original business, Epic, to form LEO, a market-leading learning technologies firm with unrivalled capability to provide custom solutions to its corporate and government clients. It is joined by BAFTA award-winning applied games studio Preloaded, who bring learning games specialism to the Group and by Eukleia, experts in governance, risk and compliance (GRC) in the financial services sector.  Most recently, Rustici brings the global leader in the support and development of the universal technical standards for the entire e-learning industry.

Chairman's Statement

I am pleased to report a successful year in the development of Learning Technologies Group plc ("LTG") as a market-leader in the fast growing learning technologies sector. We made a number of important strategic acquisitions and investments to build our end-to-end offer, whilst also driving good organic growth through our enhanced capabilities.  As a result, the Group delivered strong growth in revenue, operating profit and earnings for the financial year ended 31 December 2015. 

Market opportunity

In an increasingly fast moving global service-based economy, organisations are becoming more aware of the significant impact that incremental improvements in staff performance can have on their businesses, particularly in efficiency, customer service and profitability.

The global market for the adult workplace e-learning market, which LTG is targeting, is estimated to be worth £140 billion in 2016 with a five year compound annual growth rate (CAGR) of 23%. Organisations are now looking to measure more precisely which learning interventions are most effective, using adaptive models which draw data from multiple sources to establish returns on e-learning investment. 

The e-learning industry is highly fragmented, comprising a multitude of small operators with each offering a limited range of services.  There are few providers that are able to offer clients a truly comprehensive solution, which meets their evolving requirements for data driven solutions, and have the scale and in-depth experience to service large corporations and government organisations.  We believe LTG is the only player to provide such a broad service offering.

The market opportunity for LTG is to build the leading end-to-end workplace e-learning solution, which partners its global clients through the creation, implementation and maintenance of their integrated e-learning strategies.

Strategic progress

In 2015, we built on the foundations laid in 2014 with the acquisitions of LINE and Preloaded.  In July, the Group acquired Eukleia Training Limited ('Eukleia'), a provider of e-learning services to the financial services sector.  This acquisition marked LTG's first move into a vertical sector specialism, which complements the Group's existing expertise in e-learning strategy and implementation.

After the year end, we announced on 29 January 2016 that LTG had acquired the entire issued share capital of Rustici Software LLC ('Rustici'), the expert in digital learning interoperability.  Rustici is the acknowledged global leader in SCORM conformance (the de facto industry standard for e-learning interoperability), which enables online learning content and management systems to communicate and work together.  At the same time, we acquired a 27.3% stake in Watershed Systems Inc ('Watershed').  Watershed has developed a SaaS-based learning analytics capability, which evaluates the impact and effectiveness of learning programmes, which is a significant advance for the e-learning industry. The acquisition of Rustici and our investment in Watershed have substantially enhanced the Group's ability to capture rich data about the learner and analyse and assess the impact of e-learning on organisational performance.

We are beginning to see the benefits of our blended service strategy, through increasing take-up by our customers.  Our consultative and comprehensive approach is driving organic growth and, with the integration of our businesses and implementation of best practice, we realised impressive increases in profits and margins in 2015.

The success of our strategy was best exemplified by the landmark deal announced in December 2015, to design and develop a new learning architecture and to create and deliver blended courses that incorporate a combination of digital, informal and classroom components for the entire UK Civil Service, alongside our strategic partner KPMG UK LLP.  Civil Service Learning ('CSL') delivers learning to more than 400,000 civil servants for whom we are designing and developing blended learning across 15 curriculum areas, from leadership & management, diversity, EU practices, through to project management and digital delivery.  This demonstrates the credibility and scale of LTG's offering and capabilities.

Dividend and Annual General Meeting

In light of the results for 2015 and to demonstrate our confidence in the prospects for the Group in 2016, the Board is recommending an increased final dividend of 0.10p per share (2014: 0.07p per share), giving a total dividend for the year of 0.15p per share (2014: 0.10p per share).  This final dividend is subject to shareholder approval at the forthcoming Annual General Meeting to be held on 19 May 2016.

If approved, the final dividend will be paid on 4 July 2016 to all shareholders on the register at 10 June 2016. 

People

The Group has enjoyed a transformational year in which we have seen margins improve and the benefits of our blended offering begin to have a marked effect.  This could not have been achieved without the skill, passion and hard work of all of our staff.  On behalf of the Board, I would like to thank them for their efforts during the year.

Board changes

I am delighted to announce that Peter Gordon will join the Board as a Non-executive Director with effect from 1 April 2016 (see appendix).  Peter brings with him 20 years of venture and private capital expertise at 3i Group plc and over the past year has assisted LTG in the successful acquisitions of Eukleia and Rustici.

Current trading and outlook

The Group has enjoyed a strong start to 2016 and is trading in line with management's expectations.  We expect the current financial year to benefit from a healthy order book, increased sales resulting from our compelling blended learning capability and continuing strong margins. The acquisition of Rustici and the investment in Watershed firmly places LTG at the heart of a rapidly evolving e-learning industry.

The CSL contract will require a significant "up-front" cash investment in 2016. The financial returns on this investment are expected to begin accruing in the second half of the current financial year with substantial returns expected in 2017 and 2018.

The Board is therefore confident in the Group's prospects and expects to report further progress during 2016.

Andrew Brode

Chairman

29 March 2016
 

Strategic Report for the year ended 31 December 2015

Financial results

During 2014, LTG made its first two acquisitions, LINE Communications Holdings Limited ('LINE') and Preloaded Limited ('Preloaded').  On 31 July 2015, LTG acquired Eukleia Training Limited ('Eukleia'). 

In the year ended 31 December 2015, the Group generated revenue of £19.9 million (2014: £14.9 million), a 33% increase.

Adjusted EBITDA increased by 107% to £4.3 million (2014: £2.1 million).  To provide a better understanding of the underlying business performance, adjusted EBITDA excludes the amortisation of acquisition-related intangible assets, the amortisation of internal capitalised development costs, depreciation, share based payment charges and other exceptional items.

Unadjusted operating profit increased by 441% to £1.8 million (2014: £0.3 million).

The implementation of operational best practice across the Group, a restructuring of the delivery teams in the second half of 2015 and increased economies of scale contributed towards a significant improvement in adjusted EBITDA margins in the year to 21% (2014: 14%). 

On a like-for-like basis, as if the businesses that LTG owned at the end of 2015 had been owned at the end of 2014, the order book is broadly in line with the prior year. The order book is defined as the value of contracts won but not yet delivered.  The Civil Service Learning (CSL) multi-year contract win should add substantially to the order book during 2016 and we will update the market on this in due course.

The amortisation charge for acquisition-related intangible assets was £1.2 million (2014: £0.6 million) and is discussed further in Note 7. The amortisation charge for internally generated development costs was £0.2 million (2014: £0.1 million) and relates to the development of 'gomo', the Group's award-winning multi-device authoring tool, various software tools used within the Eukleia business and an internally generated library of governance, risk and compliance ('GRC') materials used to service clients. The share-based payment charge increased from £0.6 million in 2014 to £0.8 million in 2015.

Integration costs of £0.1 million (2014: £0.3 million) relate to restructuring costs following the acquisition of Eukleia in July 2015.

Profit before tax was £1.5 million (2014: loss of £0.1 million) and adjusted profit before tax increased by 113% to £3.8 million in 2015 (2014: £1.8 million). Costs of acquisitions in 2015 were £0.2 million (2014: £0.3 million) and finance charges related to contingent consideration of the acquisitions of Preloaded and Eukleia, were £0.2 million (2014: £0.2 million).

The income tax expense of £0.1 million in 2015 (2014: £35,000) is stated after adjusting for the effect of the release of deferred tax on the amortisation of acquired intangibles and a deferred tax asset related to the anticipated vesting of share options. Further details are provided in Note 4.

On a statutory basis, basic and diluted earnings per share ('EPS') increased to 0.382 pence (2014: loss of 0.049 pence). Based on the average number of shares in issue and adjusted operating profit during the year, adjusted basic EPS from continuing operations increased by 106% to 0.809 pence (2014: 0.393 pence).  Further details are provided in Note 5.

On 31 July 2015 the Group acquired 100% of the issued share capital of Eukleia, a specialist provider of governance, risk and compliance services to the financial services sector.  Initial consideration comprised £6.8 million cash and £1.5 million in LTG equity.  A capped earn-out of up to £3.5 million over 2 years is subject to demanding revenue growth targets.  Goodwill on acquisition has been calculated at £4.6 million with acquisition-related intangible assets of £4.7 million represented mainly by customer relationships.  Eukleia contributed £2.5 million revenue and £0.4 million profit before tax to the Group in the final five months of 2015.  Further details of the acquisition are provided in Note 16.

LTG partly funded its acquisition of Eukleia through the placing of 35,714,286 shares at 21 pence per share, raising £7.5 million.

Subsequent to the financial year end, on 29 January 2016, LTG acquired Rustici, the global market leader in digital learning interoperability, for an initial consideration of USD 26.0 million of which USD 20.0 million was paid in cash and USD 6.0 million in newly issued LTG shares at 29.19 pence per share.  Further performance based payments, capped at USD 11.0 million, are payable based on ambitious revenue growth targets over the next 3 years.  80% of Rustici's current revenues are from recurring subscription fees.  LTG also acquired a 27.3% investment in Watershed, the developer of the next generation learning analytics platform, for USD 3.0 million.  Further details are provided in Note 17.

The Group has a strong balance sheet with shareholders' equity at 31 December 2015 of £25.5 million, equivalent to 6.3 pence per share (2014: shareholders' equity of £14.4 million, equivalent to 4.1 pence per share). The gross cash position at 31 December 2015 was £7.3 million (2014: £4.4 million).  The Group had no debt at 31 December 2015.

As a result of strong cash conversion the net cash generated from operating activities was £4.0 million (2014: £0.9 million) and the operating cash conversion rate (the percentage by which cash generated from operations covers adjusted EBITDA) was 105%.  Corporation tax payments were £0.5 million (2014: £32,000).  Cash outflows from investing activities were £6.2 million (2014: £4.9 million) and included £1.9 million in contingent consideration payments to Preloaded vendors following the strong performance of the company in 2014.  Cash inflows from financing activities were £5.1 million (2014: £7.2 million) and are stated after dividend payments which increased to £0.4 million following a maiden dividend payment of £0.1 million in 2014.  Debtor days were 64 days (2014: 49 days), reflecting the extended payment terms agreed with some clients but combined debtor and WIP days were 34 days (2014: 34 days), following the implementation of accelerated invoicing.

On 3 March 2015, the Group incorporated Learning Technologies Group (Trustee) Limited, a wholly owned subsidiary of Learning Technologies Group plc. The purpose of the company is to act as an Employee Benefit Trust ('EBT') for the benefit of current and previous employees of the Group.  At 31 December 2015 the EBT holds 404,340 ordinary shares in LTG.  These shares are held in treasury. 

Our strategy

LTG's aim is to create a group of market-leading businesses providing complementary services in the fast growing learning technologies sector to form an international business of size and scale that is able to meet the demanding expectations of corporate and government customers.  This strategy is being delivered through a mixture of 'best in class' acquisitions that will help us create a comprehensive e-learning solution for our customers, as well as through targeted investment in internally generated intellectual property and the extension of best working practices to deliver strong organic growth.

We continue to pursue our strategy of helping organisations adopt learning at a strategic level. 'Moving learning to the heart of business strategy' is achieved through our end-to-end service offering which enables us to partner with global clients throughout the creation, implementation and maintenance of their learning strategies. We deliver transformational results through learning innovation and the effective use of learning.  However the vital piece that has been missing is the ability to accurately measure and assess the impact of learning on the performance of an organisation's people.

This is similar to the challenge faced by the marketing profession a decade ago, when they began the measurement revolution which has allowed marketeers to track individual responses to campaigns through to eventual sale.  We believe the learning industry is at the same tipping point; finally we are in the position where enough sufficiently rich data about the learner can be captured and assimilated to analyse and quantify the organisational impact. 

 

Our capabilities

LTG offers a wide range of learning solution capabilities which enables us to offer a comprehensive service to our customers.  These capabilities range from industry-leading strategic consultants, through implementation advisory services, bespoke e-learning content, Learning Management Systems platform implementation and management, to learning game design and cloud-based authoring products.

LEO is the Group's main operating business which brings together these capabilities.  During 2015, the business restructured its operations to focus on account management, bringing the most effective solutions to its customers.  Although LEO had some tough comparatives from 2014 to beat, it delivered impressive margin improvements in the year. 

The Group's increased breadth of offering enabled LEO to provide more comprehensive solutions to its customers and to help position the Group as a strategic partner to its clients, helping them realise their strategic ambitions from base principles all the way through to compelling blended learning solutions.  The CSL contract win in December 2015 highlighted LEO's thought leadership and wholly scalable e-learning solutions for large corporates and government.

'Gamification' or more particularly games with purpose, is one of many exciting developments in the e-learning industry.  LTG is at the forefront of this development through its BAFTA award-winning business, Preloaded.

Preloaded, had an exceptional year delivering learning game solutions to the British Museum and MyCognition.  In October 2015, Preloaded finished the development of a learning application for McDonalds.  This game was successfully launched in 42 countries across Europe and has achieved phenomenal take-up and retention rates.  We are continuing to build on this work in 2016.  Preloaded has seen early success in 2016 in diversifying its client base and leveraging the wider LTG network.     

LTG's cloud-based multi device authoring tool, gomo, made good progress in 2015, following the launch of gomo 3.0 in March.  gomo won the prestigious 2015 Brandon Hall Gold Award for the Best Advance in Content Authoring Technology.  The SaaS tool enables a variety of users, from single authors to large multi-national enterprise solution clients, to collaborate and publish rich and compelling learning content to a variety of platforms (including PCs, tablets and smartphones) in real-time.  Clients include Nike, United Healthcare and J.P. Morgan and we are seeing strong retention rates as clients renew their annual licences.

Alongside expanding LTG's functional capabilities, which are applied across a wide variety of markets, LTG is also looking to invest in specific sector specialisms, particularly in more regulated markets such as pharmaceuticals, healthcare and resources.

The acquisition of Eukleia in July 2015 was the Group's first move into subject-matter specialism; governance, risk and compliance.  Eukleia is an industry leader in the GRC space specialising in the financial services sector.  The integration of Eukleia is already complete and the business is operating to plan.

The acquisition of Rustici and investment in Watershed post year end in January 2016 has moved LTG to the heart of the e-learning industry.  Rustici is the acknowledged global leader in SCORM, the de facto industry standard for e-learning interoperability, enabling online learning content and learning management systems to communicate and work together. As the global market leader, Rustici was asked by Advanced Distributed Learning, a US Government body, to lead the industry in creating the next generation of learning interoperability standards.  It created a global standard to capture rich data on every aspect of learning experiences - xAPI. 

Watershed focuses on developing learning analytics that provide actionable insights to customers who want to adapt their learning strategy, creating more effective learning experiences and ultimately generating verifiable business results.  We view the ability to measure the impact of learning as the next major disruption in the learning profession and LTG is placed in the vanguard of this crucial change.

LTG is also looking to develop its capabilities, in particular through the ability to further personalise the learning experience, through more social learning environments and technology advances such as augmented reality.

 

Our market sectors

Through its established operating companies LTG has extensive experience in a variety of market sectors. 

These include the Defence sector where during 2015, LEO continue its support of the Defence Learning Environment, Virtual Task Trainer and redesigned and delivered a Chief Petty Officer training programme.

In the Automotive sector, LEO has produced mobile delivered sales enablement tools to teach staff and support customers on the new Jaguar Land Rover range, and create product launch training for Volvo.

LEO's expertise across government is extensive.  In addition to the transformational contract that was won with CSL in December 2015, building on long-standing relationships going back to 2011, LEO has undertaken projects for the Department for Education, National Health Service, and the Department for Work & Pensions.

LEO has a growing presence in the FMCG and luxury goods markets with Mars, Anheuser-Busch, L'Oreal, and IwC amongst LEO's clients.  In addition infrastructure and transport industry sector business remains buoyant with HS2, Brambles and British Airways leveraging LEO's extensive expertise.

The Group has strengthened its presence in the financial services sector through the acquisition of Eukleia.  Alongside Eukleia's specialist bespoke content services, the company offers blended learning solutions such as generic content and instructor-led training given by industry-leading experts.  Clients include HSBC, Barclays and Deutsche Bank.  The company is looking to extend its compliance offering into other industry sectors and in the past few months has won contracts with clients such as Novartis and Brambles to deliver anti-bribery and code of conduct training. 

LTG is seeking opportunities to strengthen its position in other market sectors, including retail, media and pharmaceuticals.

Our international reach

With offices in London, Brighton and Sheffield, LTG is the leading e-learning business in the UK and through its office in Zurich LTG is able to service clients throughout Europe.

LEO has also set up operations in North and South America.

LEO Learning Inc was established in New York in 2012.  After a successful 2014, the company had a slow start to 2015.  Following the appointment of a new Senior Vice President in March 2015, the company has seen impressive growth with new clients such as Amazon, SAP and Anheuser-Busch.  In November, the company opened an office in Bloomington, Indiana to provide a new production facility, and with the acquisition of Rustici in Nashville, Tennessee, the Group is further cementing its position in the world's largest e-learning market - the US. 

In 2011, LEO established a joint venture in Brazil, LEO Brazil.  The JV has had success in winning projects with Brazilian firms such as Instituto Unibanco and Unicarioca, as well as the local operations of a number of multi-nationals including TIM, Shell and Coca-Cola.  Headquartered in Rio de Janeiro, the company had a particularly strong sales year, and our production investment programme in the first half of the year had a marked impact on improving margins in the second half of the year.  The company continues to invest in sales and marketing in order to grow the top line and opened a second sales office in Sao Paulo. 

Over the medium term, LTG is focused on strengthening its presence in the US and European markets and on leveraging its industry-leading capabilities for the benefit of its global clients.

Jonathan Satchell

Chief Executive Officer

29 March 2016

Consolidated Statement of Comprehensive Income

Year ended 31 December 2015

			Year ended 31 Dec	Year ended 31 Dec
			2015	2014
	Note		£'000	£'000
Revenue	3		19,905	14,920
Operating expenses			(18,075)	(14,433)
			1,830	487
Share of losses of joint venture			(62)	(160)
Operating profit			1,768	327
Adjusted EBITDA			4,276	2,065
Depreciation	6		(214)	(171)
Amortisation of intangibles	7		(1,419)	(659)
Share-based payment costs			(776)	(583)
Integration costs			(99)	(325)
Operating profit			1,768	327
Fair value movement on contingent consideration			198	-
Costs of acquisition	16		(234)	(296)
Finance expense			(195)	(162)
Interest receivable			12	4
Profit/(loss) before taxation			1,549	(127)
Income tax expense	4		(120)	(35)
Profit/(loss) for the year			1,429	(162)
Profit/(loss) per share attributable to owners of the Parent:
Basic (pence)	5		0.382	(0.049)
Diluted (pence)	5		0.357	(0.049)

 

Consolidated Statement of Comprehensive Income

Year ended 31 December 2015 (continued)

		Year ended 31 Dec	Year ended 31 Dec
	Note	2015 pence	2014 pence
Adjusted earnings per share:
Basic	5	0.809	0.393
Diluted	5	0.756	0.375

		Year ended 31 Dec	Year ended 31 Dec
		2015	2014
		£'000	£'000
Profit/(loss) for the year		1,429	(162)
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations		33	17
Total comprehensive income/(loss) for the year attributable to owners of the parent Company		1,462	(145)

Consolidated Statement of Financial Position
		31 Dec 2015 £'000	31 Dec 2014 £'000
	Note
Non-current assets
Property, plant and equipment	6	543	339
Intangible assets	7	19,803	11,364
Deferred tax assets	10	1,029	618
Investments		-	16
		21,375	12,337
Current assets
Trade receivables	8	4,201	2,762
Other receivables, deposits and
prepayments	9	554	337
Amounts recoverable on contracts		1,853	1,806
Cash and bank balances		7,305	4,358
		13,913	9,263
Total assets		35,288	21,600
Current liabilities
Trade and other payables	11	5,835	4,832
Corporation tax		309	352
Amount owing to related parties		2	-
		6,146	5,184
Non-current liabilities
Deferred tax liabilities	10	1,182	446
Other long term liabilities	12	2,382	1,512
Provisions	13	99	49
		3,663	2,007
Total liabilities		9,809	7,191
Net assets		25,479	14,409
Shareholders' equity
Share capital	14	1,506	1,329
Share premium account		21,839	13,098
Merger relief reserve		22,269	22,269
Reverse acquisition reserve		(22,933)	(22,933)
Share-based payment reserve		2,273	1,203
Foreign exchange translation reserve		50	17
Accumulated profits/(losses)		475	(574)
Total equity attributable to the owners of the parent		25,479	14,409

Consolidated Statement of Changes in Equity

Year ended 31 December 2015

		Share capital	Share premium	Merger relief reserve	Reverse acquisition reserve	Share based payments reserve	Translation reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1  January 2014		1,034	1,159	22,269	(22,933)	547	-	(588)	1,488
Loss for period		-	-	-	-	-	-	(162)	(162)
Exchange  differences on
translating foreign operations		-	-	-	-	-	17	-	17
Total  comprehensive  loss
for the period		-	-	-	-	-	17	(162)	(145)
Issue of shares		295	12,211	-	-	-	-	-	12,506
Costs of issuing  shares		-	(272)	-	-	-	-	-	(272)
Share based  payment
charge credited to  equity		-	-	-	-	583	-	-	583
Deferred tax credit  on share
options		-	-	-	-	356	-	-	356
Transfer on  exercise and
lapse of options		-	-	-	-	(283)	-	283	-
Dividend paid		-	-	-	-	-	-	(107)	(107)
Transactions with owners		295	11,939	-	-	656	-	176	13,066
Balance at  31 December 2014		1,329	13,098	22,269	(22,933)	1,203	17	(574)	14,409
Profit for the period		-	-	-	-	-	-	1,429	1,429
Exchange  differences on
translating foreign operations		-	-	-	-	-	33	-	33
Total  comprehensive
income for the  period		-	-	-	-	-	33	1,429	1,462
Issue of shares		177	8,958	-	-	-	-	-	9,135
Costs of issuing  shares		-	(257)	-	-	-	-	-	(257)
Sale of treasury  shares		-	40	-	-	-	-	-	40
Share based  payment
charge credited to  equity		-	-	-	-	776	-	-	776
Deferred tax credit  on share
options		-	-	-	-	362	-	-	362
Transfer on  exercise and
lapse of options		-	-	-	-	(68)	-	68	-
Dividends paid		-	-	-	-	-	-	(448)	(448)
Transactions  with owners		177	8,741	-	-	1,070	-	(380)	9,608
Balance at  31 December 2015		1,506	21,839	22,269	(22,933)	2,273	50	475	25,479

Consolidated Statement of Cash Flows
		Year ended 31 Dec	Year ended 31 Dec
		2015	2014
		£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation		1,549	(127)
Adjustments for:
Share based payment charge		776	583
Amortisation of intangible assets		1,419	659
Depreciation of plant and equipment		214	171
Share of loss of joint venture		62	160
Finance expense		195	162
Fair value movement on contingent consideration		(198)	-
Interest income		(12)	(4)
Operating cash flows before working capital changes		4,005	1,604
(Increase)/decrease in trade and other receivables		(49)	507
(Increase) in amount recoverable on contracts		(62)	(668)
Increase/(decrease) in payables		607	(507)
		4,501	936
Interest received		12	4
Income tax paid		(483)	(32)
Net cash flows from operating activities		4,030	908
Cash flows used in investing activities
Purchase of property, plant and equipment		(232)	(123)
Development of intangible assets		(310)	(198)
Acquisition of subsidiaries, net of cash acquired		(5,617)	(4,407)
Investment in joint venture		(46)	(179)
Net cash flows in investing activities		(6,205)	(4,907)
Dividends paid		(448)	(107)
Issue of ordinary share capital net of share issue costs		7,379	7,756
Repayment of bank loans		-	(465)
Sale of treasury shares		40	-
Contingent consideration payments in the period		(1,882)	-
Net cash flows from/(used) in financing activities		5,089	7,184
Net increase in cash and cash equivalents		2,914	3,185
Cash and cash equivalents at beginning of the year		4,358	1,170
Exchange gains on cash		33	3
Cash and cash equivalents at end of the year		7,305	4,358

 

 

Notes to the Consolidated Financial Information for the year ended 31 December 2015

1.         General information

Learning Technologies Group plc ('the Company') and its subsidiaries (together, 'the Group') provide a range of e-learning services and technologies to corporate and government clients. 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 52 Old Steine, Brighton, East Sussex, BN1 1NH. The registered number of the Company is 07176993.

The Group's financial statements for the year ended 31 December 2015, from which this financial information has been extracted, and for the comparative year ended 31 December 2014, are prepared in accordance with International Financial Reporting Standards ('IFRS') adopted for use in the EU. 

The financial information shown in the announcement for the year ended 31 December 2015 and the year ended 31 December 2014, as set out above, do not constitute statutory accounts, within the meaning of Section 435 of the Companies Act 2006, but is derived from those accounts.  The results have been prepared using accounting policies consistent with those used in the preparation of the statutory accounts.  Statutory accounts for the year ended 31 December 2014 have been delivered to the Registrar of Companies and those for the year ended 31 December 2015 will be delivered shortly, having been approved by the Directors on 29 March 2016.  The auditors have reported on the accounts for the years ended 31 December 2014 and 31 December 2015; their reports were unqualified, did not contain statements under Section 498 (2) or (3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report.

2.         Summary of significant accounting policies

The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied unless otherwise stated.

a)                Basis of preparation

The Consolidated Financial Statements of Learning Technologies Group plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), issued by the International Accounting Standards Board (IASB), including interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), and the Companies Act 2006 applicable to companies reporting under IFRS. The Consolidated Financial Statements have been prepared under the historical cost convention, as modified for any financial assets which are stated at fair value through profit or loss. The Consolidated Financial Statements of Learning Technologies Group plc are presented in pounds sterling, which is the presentation currency for the Consolidated Financial Statements. The functional currency of each of the group entities is the local currency of each individual entity and figures have been rounded to the nearest thousand.

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

Going concern

At 31 December 2015 the Group had £7.3 million of net cash and good cash conversion. Having undertaken a detailed budgeting exercise, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the annual Financial Statements.

Adoption of new and revised International Financial Reporting Standards

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.

The directors do not expect that the adoption of these standards will have a material impact on the financial statements of the company in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments, IFRS 15 may have an impact on revenue recognition and related disclosures and IFRS 16 will have an impact on the recognition of operating leases. At this point it is not practicable for the directors to provide a reasonable estimate of the effect of these standards as their detailed review of these standards is still ongoing.

(b)       Basis of consolidation

   A subsidiary is defined as an entity over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The share for share acquisition of Epic Performance Improvement Limited and its subsidiary companies by Epic Group Limited on 10 May 1996 was that of a re-organisation of entities which were under common control. As such, that combination also falls outside the scope of IFRS 3 'Business Combinations' (Revised 2008). The Directors have therefore decided that it is appropriate to reflect the combination using the merger basis of accounting in order to give a true and fair view. No fair value adjustments were made as a result of that combination.

The basis of consolidation of the acquisition of Epic Group Limited by the Company in November 2013 is described below:

The substance of the share for share acquisition of Epic Group Limited and its subsidiary companies by In-Deed Online plc on 8 November 2013 was outside the scope of IFRS 3 'Business Combinations' (Revised 2008) on the basis that the Directors made a judgement that prior to the transaction, In-Deed Online plc was not a business under IFRS 3 Appendix A. The Directors have therefore decided that it is appropriate to reflect the combination using the merger basis of accounting in order to give a true and fair view. No fair value adjustments were made as a result of that combination.

Business combinations other than noted above are accounted for under the acquisition method.

Under the acquisition method, the results of the subsidiaries acquired or disposed of are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries' net assets are determined and these values are reflected in the Consolidated Financial Statements. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Any excess of the purchase consideration of the business combination over the fair value of the identifiable assets and liabilities acquired is recognised as goodwill. Goodwill, if any, is not amortised but reviewed for impairment at least annually. If the consideration is less than the fair value of assets and liabilities acquired, the difference is recognised directly in the statement of comprehensive income.

Acquisition-related costs are expensed as incurred.

Intra-group transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the Financial Statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

3.         Segmental analysis

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker (which takes the form of the Board of Directors of the Company) as defined in IFRS 8, in order to allocate resources to the segment and to assess its performance.

The Directors of the Company consider the principal activity of the Group to be the production of interactive multimedia programmes, and to constitute one reportable segment, that of the production of interactive multimedia programmes. A majority of sales were generated by the operations in the United Kingdom in the two years ended 31 December 2014 and 2015.

 

All other segments primarily comprise income and expenses relating to the Group's administrative functions. Interest income and interest expense are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. Accordingly, this information is not separately reported to the Board of Directors.

Geographical information

All revenues of the Group are derived from its principal activity, the production of interactive multimedia programmes. The Group's revenue from external customers and non-current assets by geographical location are detailed below.

	UK	Switzerland	Italy	Rest of Europe	United States	Canada	Rest of the world	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
31 December 2015
Revenue	17,528	539	-	20	1,638	110	70	19,905
Non-current assets	21,354	-	-	-	21	-	-	21,375
31 December 2014
Revenue	12,246	339	170	135	1,977	-	53	14,920
Non-current assets	12,315	-	-	-	6	-	16	12,337

Information about major customers

In both the year ended 31 December 2014 and the year ended 31 December 2015, no customer accounted for more than 10 per cent of reported revenues.

4.         Income tax

	31 Dec	31 Dec
	2015	2014
	£'000	£'000
Current tax expense:
-  UK Current Tax on profits for the year	546	176
-  Adjustments in respect to prior years	(169)	-
-  Foreign Current Tax on profits for the year	56	38
Total current tax	433	214
Deferred tax (Note 10):
-  Origination and reversal of temporary differences	(341)	(210)
-  Adjustments in respect to prior years	28	31
Total deferred tax	(313)	(179)
Income tax expense	120	35

 

A reconciliation of income tax expense applicable to the loss before taxation at the statutory tax rate to the income tax expense at the effective tax rate of the Group is as follows:

	31 Dec	31 Dec
	2015	2014
	£'000	£'000
Profit/(loss) before taxation	1,549	(127)
Tax calculated at domestic tax rates applicable to profits in respective countries:	332	(35)
Tax effects of:-
Income not subject to tax	(70)	(60)
Expenses not deductible for tax purposes	121	54
Joint venture results reported net of tax	13	44
Re-measurement of deferred tax - change in share option value	(138)	-
Difference of deferred rate and current tax rate	3	1
Adjustments in respect to prior years	(141)	31
	120	35

The weighted average statutory applicable tax rate was 21.43% (2014: 27.70%). The decrease in the weighted average statutory applicable tax rate reflects a relative increase in profits generated in the UK which are subject to lower rates of tax than in the US.

Deferred tax directly credited to equity amounted to £362,000 (2014: £356,000).

5.         Earnings per share

		31 Dec	31 Dec
		2015 pence	2014 pence
Basic profit/loss per share		0.382	(0.049)
Diluted profit/loss per share		0.357	(0.049)
Adjusted basic earnings per share		0.809	0.393
Adjusted diluted earnings per share		0.756	0.375

Basic earnings per share is calculated by dividing the profit/loss after tax attributable to the equity holders of the Group by the weighted average number of shares in issue during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potential dilutive shares, namely share options.

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/(loss) after tax attributable to equity holders of the Group for certain charges as set out in the table below. 

The calculation of earnings per share is based on the following earnings and number of shares.

 

	2015			2014
	Profit after tax	Weighted average number of shares	Pence per share	(Loss)/profit after tax	Weighted average number of shares	Pence per share
	£'000	'000		£'000	'000
Basic earnings per ordinary share	1,429	373,505	0.382	(162)	332,027	(0.049)
Effect of adjustments:
Amortisation of acquired intangibles	1,203			570
Share based payment costs	776			583
Integration costs	99			325
Cost of acquisitions	234			296
Fair value movement on contingent consideration	(198)			-
Interest receivable	(12)			(4)
Finance expense	195			162
Income tax expense	120			35
Effect of adjustments	2,417	-	0.647	1,967	-	0.592
Adjusted profit before tax	3,846	-	-	1,805	-	-
Adjusted weighted tax charge 21.43% (27.70%)	(824)	-	(0.220)	(500)	-	(0.150)
Adjusted basic earnings per ordinary share	3,022	373,505	0.809	1,305	332,027	0.393
Effect of dilutive potential ordinary shares:
Share options	-	26,406	(0.053)	-	16,063	(0.018)
Adjusted diluted earnings per ordinary share	3,022	399,911	0.756	1,305	348,090	0.375

 

6.         Property, plant and equipment

	Computer equipment	Fixtures and fittings	Leasehold improvements	Total
	£'000	£'000	£'000	£'000
Cost
At 1 January 2014	867	201	90	1,158
Additions on acquisitions	101	22	13	136
Additions	114	3	1	118
Foreign exchange differences	6	-	-	6
At 31 December 2014	1,088	226	104	1,418
Additions on acquisitions	48	21	117	186
Additions	160	58	14	232
Foreign exchange differences	-	-	-	-
At 31 December 2015	1,296	305	235	1,836
Accumulated Depreciation
At 1 January  2014	718	111	79	908
Charge for the year	102	54	15	171
At 31 December 2014	820	165	94	1,079
Charge for the year	135	62	17	214
At 31 December 2015	955	227	111	1,293
Net book value
At 31 December 2014	268	61	10	339
At 31 December 2015	341	78	124	543

7.         Intangible assets

		Goodwill	Customer contracts and  relationships	Branding	IP and Software development	Total
		£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2014		-	-	-	367	367
Additions		9,615	1,880	180	198	11,873
At 31 December 2014		9,615	1,880	180	565	12,240
Additions on acquisition		-	-	-	252	252
Additions		4,637	4,411	248	310	9,606
At 31 December 2015		14,252	6,291	428	1,127	22,098

 

Accumulated amortisation
At 1 January 2014		-	-	-	217	217
Amortisation charged in year		-	546	24	89	659
At 31 December 2014		-	546	24	306	876
Amortisation charged in year		-	1,063	140	216	1,419
At 31 December 2015		-	1,609	164	522	2,295
Carrying amount
At 31 December 2014		9,615	1,334	156	259	11,364
At 31 December 2015		14,252	4,682	264	605	19,803

Goodwill and acquisition-related intangible assets recognised have arisen from acquisitions.  Refer to Note 16 for further details of acquisitions undertaken during the year.  IP and software development reflects the recognition of development work undertaken in-house.

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units ('CGUs') that are expected to benefit from that business combination. The Group has three CGUs.  Following the acquisition of LINE and its merger with Epic in July 2014, to form LEO, management have determined that LEO represents one CGU. The carrying amount of goodwill has been allocated as follows:

CGU	Goodwill	Growth rate	Pre-tax discount rate
	£'000	%	%
LEO	7,435	8%	11.0%
Preloaded	2,180	9%	12.5%
Eukleia	4,637	9%	12.5%
	14,252

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and future operating margins. The Group monitors its pre-tax Weighted Average Cost of Capital and those of its competitors using market data. In considering the discount rates applying to CGUs, the Directors have considered the relative sizes, risks and the inter-dependencies of its CGUs. The impairment reviews use a discount rate adjusted for pre-tax cash flows. The Group prepares cash flow forecasts derived from the most recent financial plan approved by the Board and extrapolates revenues, net margins and cash flows for the following four years based on forecast growth rates of the CGUs. Cash flows beyond this five-year period are also considered in assessing the need for any impairment provisions. The growth rates are based on internal growth forecasts of between 8% and 9% for the first five years. The terminal rate used for the value in use calculation thereafter is 2.25%.

No reasonably possible change in a key assumption would produce a significant movement in the carrying value of goodwill allocated to a CGU and therefore no sensitivity analysis is presented.

Customer contracts, relationships and branding

These intangible assets include the Group's aggregate amounts spent on the acquisition of industry-specific knowledge, software technology, branding and customer relationships. These assets arose from acquisition as part of business combinations.

The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset where no active market for the assets exists.

The cost of these intangible assets is amortised over the estimated useful life of each separate asset of between two and five years.

IP and software development

IP and software development costs principally comprise expenditure incurred on major software development projects and the production of generic e-learning content where it is reasonably anticipated that the costs will be recovered through future commercial activity.

Capitalised development costs are amortised over the estimated useful life of between three and five years.

8.         Trade receivables

		31 Dec	31 Dec
		2015	2014
		£'000	£'000
Trade receivables		4,241	2,772
Allowance for impairment losses		(40)	(10)
		4,201	2,762

Impairment losses:

At 1 January		10	10
Additions		30	-
Amounts written-back		-	-
At 31 December		40	10

The Group's normal trade credit term is 30 days. Other credit terms are assessed and approved on a case-by-case basis.

The fair value of trade receivables approximates their carrying amount, as the impact of discounting is not significant. No interest has been charged to date on overdue receivables.

9.         Other receivables, deposits and prepayments

		31 Dec	31 Dec
		2015	2014
		£'000	£'000
Sundry receivables		38	12
Prepayments		516	325
		554	337

10.       Deferred tax assets/(liabilities)

		31 Dec	31 Dec
		2015	2014
Deferred tax assets		£'000	£'000
At 1 January		618	1
Acquisition of subsidiaries		-	69
Deferred tax charge directly to the income statement		49	192
Deferred tax charge directly to equity		362	356
At 31 December		1,029	618

	31 Dec	31 Dec
	2015	2014
Deferred tax liabilities	£'000	£'000
At 1 January	(446)	-
Deferred tax on acquired intangibles and via acquisition	(1,000)	(433)
Deferred tax charge directly to the income statement	264	(13)
At 31 December	(1,182)	(446)

The deferred tax balances relate to temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Deferred tax assets are recognised to the extent that it is probable that the future taxable profits will allow the deferred tax assets to be recovered. An analysis of deferred tax assets and liabilities is as follows:

	31 Dec	31 Dec
	2015	2014
Deferred tax assets	£'000	£'000
Deferred tax on share options	1,029	548
Temporary differences	-	70
Deferred tax assets	1,029	618
	31 Dec	31 Dec
Deferred tax liabilities	2015	2014
	£'000	£'000
Deferred tax on intangible assets	(996)	(313)
Temporary differences	(186)	(133)
Deferred tax liabilities	(1,182)	(446)

11.      Trade and other payables

	31 Dec	31 Dec
	2015	2014
	£'000	£'000
Trade payables	814	546
Payments received on account	1,858	1,505
Tax and social security	1,140	672
Contingent consideration	405	1,290
Accruals and others	1,618	819
	5,835	4,832

            The contingent consideration relates wholly to the acquisition of Preloaded Limited.

12.      Other long-term liabilities

	31 Dec	31 Dec
	2015	2014
	£'000	£'000
Contingent consideration	2,382	1,512
	2,382	1,512

Of the contingent consideration balance, £430,000 relates to Preloaded Limited and is payable over the period 2017 to 2019.  The balancing contingent consideration balance of £1,952,000 relates to the acquisition of Eukleia Training Limited.  Further details are provided in Note 16.

13.       Provisions

	31 Dec	31 Dec
	2015	2014
	£'000	£'000
Property costs
At 1 January - brought forward	49	30
Paid in the year	-	-
Addition via acquisition	50	-
Addition	-	19
At 31 December	99	49

The provision relates to the Group's share of dilapidation costs in respect of costs to be incurred at the end of property leases. 

14.      Share capital

Shares were issued during the year as follows:

	Number of shares	Share capital	Share premium	Total
		£'000	£'000	£'000
At 1 January 2015	354,495,446	1,329	13,098	14,427
Placing of shares	35,714,286	134	7,366	7,500
Issuance costs	-	-	(257)	(257)
Issue of shares to acquire Eukleia Training Limited	6,818,182	26	1,474	1,500
Sale of Treasury shares	-	-	40	40
Shares issued on the exercise of options	4,651,903	17	118	135
At 31 December 2015	401,679,817	1,506	21,839	23,345

The par value of all shares is £0.00375. All shares in issue were allotted, called up and fully paid.

On 31 July 2015, the Company announced that it had agreed to acquire the entire issued share capital of Eukleia Training Limited ('Eukleia'). The cash element of the acquisition consideration was funded from part of the proceeds of the placing of 35,714,286 new shares in the Company to raise £7.5 million at 21 pence per share. A further 6,818,182 new shares were issued in the Company in part consideration of the acquisition of Eukleia.  Further details are provided in Note 16.

4,651,903, ordinary shares were issued during the course of the year as a result of the exercise of employee share options. 

On 3 March 2015 the Group incorporated Learning Technologies Group (Trustee) Limited, a wholly owned subsidiary of the Company.  The purpose of the company is to act as an Employee Benefit Trust ('EBT') for the benefit of current and previous employees of the Group.  During the year the EBT received 604,340 existing shares in the Company for nominal value and sold 200,000 shares for a net gain of £40,000.  At 31 December 2015 the EBT holds 404,340 ordinary shares in the Company.  These shares are held in treasury.  

15.       Dividends paid

	31 Dec	31 Dec
	2015	2014
	£'000	£'000
Final dividend paid Interim dividend paid	248 200	- 107
	448	107

On 30 October 2015, the Company paid an interim dividend of 0.05 pence per share (2014: 0.03 pence per share). The Directors propose to pay a final dividend of 0.10 pence per share for the year ended 31 December 2015, equating to a total payout in respect of the year of 0.15 pence per share (2014: 0.10 pence per share). The final dividend paid in 2015 relates to the year ending 31 December 2014.

16.       Acquisitions

Eukleia Training Limited

On 31 July 2015, the Company acquired 100% of the issued share capital of Eukleia Training Limited ('Eukleia'), a provider of e-learning services to the financial services sector.

The initial consideration comprised £6,822,000 cash, and £1,500,000 in newly issued LTG shares.

Further performance based payments, capped at £3,500,000 are payable on the achievement of demanding revenue growth targets in each of the years ending 31 December 2016 and 2017. Of this contingent consideration up to £3,150,000 is payable to the vendors of Eukleia.

Of the potential contingent consideration payable to the vendors of Eukleia, £1,872,000 has been recognised as a cost of acquisition, reflecting the discounted value of future estimated payments over the next 2 years.  A finance expense of £80,000 in the year reflects the prorated finance charge for the discounted element of the contingent deferred consideration, discounted at 10%.  Together these liabilities of £1,872,000 are held on the balance sheet under long-term liabilities (see Note 12).  Contingent consideration to vendors is payable in cash with LTG having the option to settle 25% of the consideration in LTG shares.

The remaining £350,000 of contingent consideration is payable to Eukleia staff, the earnout criteria being aligned with the same revenue targets as the vendors.  This earnout bonus will be charged to the Statement of Comprehensive Income as the benefit accrues and does not form part of the capitalised consideration.

Acquisition costs of £234,000 were expensed in the year.

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

	Book value	Fair value
Consideration	£'000	£'000
Cash		6,822
Equity instruments (6,818,182 ordinary shares)		1,500
Contingent consideration due in 2017		819
Contingent consideration due in 2018		1,053
Total consideration		10,194
Recognised amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	1,204	1,204
Property, plant and equipment	186	186
Internally generated intangible assets	252	252
Gross trade and other receivables	1,608	1,608
Trade and other payables	(1,330)	(1,330)
Amount recoverable on contracts	(14)	(14)
Corporation tax	(8)	(8)
Deferred tax liabilities	(68)	(68)
Deferred tax liabilities on acquisition	-	(932)
Intangible assets identified on acquisition	-	4,659
Total identifiable net assets	1,830	5,557
Goodwill		4,637
Total		10,194

The goodwill arising is attributable to the acquired workforce, anticipated future profit from expansion opportunities and synergies of the business. Fair value adjustments have been recognised for acquisition-related intangible assets and related deferred tax and in alignment with accounting policies.

Acquisition related intangible assets of £4.4 million relate to the valuation of the customer relationships which are amortised over a period of five years and £0.3 million which relates to the value of the Eukleia brand and is amortised over five years.

A deferred tax liability of £0.9 million in respect of the acquisition-related intangible assets was established on acquisition (refer to Note 10). None of the goodwill is expected to be deductible for income tax purposes.

Goodwill arising from the acquisition has been allocated to the Eukleia CGU.

Eukleia contributed £2.5 million of revenue for the period between the date of acquisition and the balance sheet date and £0.4 million of profit before tax. If the acquisition of Eukleia had been completed on the first day of the financial year, Group revenues would have been £3.7 million higher and group profit attributable to equity holders of the parent would have been £0.5 million higher.

Details regarding the strategic decision to acquire 'Eukleia' can be found in the Chairman's statement and Strategic report.

17.       Events since the reporting date

On 29 January 2016, LTG acquired the entire issued share capital of Rustici Software LLC ('Rustici'), the global market leader in digital learning interoperability for an initial consideration of USD 26.0 million of which USD 20.0 million was paid in cash and USD 6.0 million in newly issued LTG shares.  Cash consideration was adjusted to take account of surplus cash in Rustici at completion.

Further performance based payments, capped at USD 11.0 million, are payable to Rustici vendors and key employees based on ambitious revenue growth targets in each of the years ending 31 December 2016, 2017 and 2018, payable with up to 25% in new LTG shares at the option of the Company, and the remainder in cash.

On an estimated equivalent basis to LTG's accounting policies under IFRS, Rustici generated unaudited revenues of USD 6.6 million and EBITDA of USD 2.7 million in the year-ended 31 December 2015.

It is anticipated that there will be Goodwill arising on the acquisition.

On 29 January 2016, LTG also invested USD 3.0 million in cash in Watershed Systems Inc ('Watershed'), the developer of the next generation learning analytics platform.  Following an additional investment of USD 1.0 million by Launch Tennessee, a public-private partnership, LTG's investment represents 27.3% of the share capital of the company.  Watershed will be accounted for as an associate.

The above transactions were part funded by a USD 20.0 million term loan provided by Barclays Bank plc.  The loan is amortised over 5 years and repayable in quarterly instalments with a final bullet payment in January 2019.  Interest is payable based on USD LIBOR, plus a 2.0% margin and the loan is subject to various financial covenants. 

Appendix

Appointment of Peter Gordon to the Board with effect from 1 April 2016:

Other than set out below, there are no disclosures required pursuant to paragraph (g) of Schedule 2 of the AIM Rules for Companies.

Peter Gordon (aged 53) has a beneficial interest in 2,000,000 ordinary shares which represents 0.48% of the share capital of the Company. 

Peter Gordon's directorships in the last five years are as follows:

Current:

Carabid Consultants LLP

Previous:

In-Deed Online PLC

Runnett & Co Limited

Asia Brands Limited

Bluethroat Limited

Commercial Property Digital Limited

Albemarle (Shoreham) LLP

Vulture LLP

 

 

END

 

 

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