Final Results

RNS Number : 2684E

Learning Technologies Group PLC

08 April 2014

 



8 April 2014

Learning Technologies Group plc

Final Results for the 52 weeks ended 31 December 2013

Learning Technologies Group plc ("LTG") or ("the Company"), the leading e-learning company, announces its final results for the 52 weeks ended 31 December 2013. LTG's principal operating company in the year ended 31 December 2013, was Epic Learning Ltd, a specialist learning technologies provider.

Highlights

·      Successful listing on AIM via reverse takeover of In-Deed Online

·      Revenue for the Group grew 9% to £7.56m (2012: £6.95m)

·      Adjusted EBITDA increased by 42% to £1.45m (2012: £1.02m)

·      Record order book achieved  in each of the Group's three geographies, with new client wins including John Lewis, Mars and Logitech in 2013

o  Value of new contracts won across the Group increased by 12% in 2013

·      New contract wins were good in the US in the final few months of 2013 and are strong so far in 2014

·      Repeat business wins remained stable at 56% (2012: 61%)

·      Revenue from platforms increased by 42% to £960,000

·      gomo 2.0, LTG's Software as a Service (SaaS) product, launched on 2^nd April 2014 and is expected to generate significant recurring revenues over the next 3 years

·      £9.0m acquisition of LINE and associated placing (see separate announcement)

Jonathan Satchell, CEO of LTG, commented:

"This has been an exciting year for LTG with our listing on AIM.  Our business has continued to grow and take advantage of the significant opportunity in the e-learning space.  We have won good levels of business in the UK and have substantial repeat orders, our US office is profitable in its first year and our Brazil joint venture has gone from strength to strength.

We have today announced the acquisition of LINE.  This is a significant first step in our buy and build strategy, firmly establishing LTG as the UK market leader for custom e-learning solutions and delivering an excellent platform for the creation of a business in excess of £50m revenue."

Enquiries:

Learning Technologies Group plc	[phone]
Jonathan Satchell, Chief Executive Officer
Numis Securities Limited	[phone]
Stuart Skinner (Nominated Adviser)
James Serjeant (Corporate Broker)
Instinctif Partners	[phone]
Matthew Smallwood

Chairman's Statement

I am delighted to report Learning Technologies Group's ("LTG") maiden results for the financial year ended 31 December 2013. 

LTG was formed by the reverse takeover of In-Deed Online by Epic Group Limited in November 2013.  LTG's aim is to create a group of high quality companies, principally by acquisition, focused on the provision of learning technology services to global organisations.  The foundation of the group is Epic, a European market leader in the creation of customised learning solutions with a particular expertise in multi-device learning.

The learning technologies sector is growing fast globally and is at an exciting stage of development. This is as a result of the exponential proliferation of mobile devices and a much greater acceptance of digital learning as a high quality and convenient way to learn and support performance.

Epic, the principal operating company within LTG, made good progress throughout 2013 and delivered another strong year of growth with revenue up 9% to £7.56m (excluding our joint venture in Brazil) and adjusted EBITDA up 42% to £1.45m.  We won many substantial new contracts in 2013 including the hosting, support and ongoing development of Civil Service Learning's platform which delivers learning to 500,000 civil servants.

We opened our New York office in November 2012 and I am pleased that just 12 months later we began returning a modest monthly operating profit.  New contract wins were good in the final few months of 2013 and are especially strong so far in 2014 so I have positive expectations for our US operation this year.

I am delighted to announce the first significant step in the execution of the acquisition strategy outlined in LTG's AIM Admission Document.  We have acquired Line, the highly respected e-learning company founded by Piers Lea, an acknowledged industry thought leader.  Both Line and Epic are regarded as major European players and their combination will immediately create the UK market leader within the learning technologies sector.

The Boards of Line and Epic have known each other for many years and a lot of careful consideration and planning has enabled us to reach this point.  The businesses are very complementary and we are confident that both groups of highly talented and capable people will benefit from working together.  We are also hopeful of being able to realise substantial synergy benefits as the integration process progresses.

Our combined size and capabilities will allow us to bid for higher value strategic contracts with global organisations.  Furthermore, LTG will benefit from the considerable experience and expertise of Piers Lea who will become Chief Strategy Officer on the board of LTG shortly.

This all-important first acquisition has shown us how beneficial becoming a PLC has been.  The learning technologies sector is attracting major interest from financial investors who are competing to acquire high quality companies.  Given our sector understanding, LTG is viewed differently - our situation not only gives us access to capital, it also gives sellers the opportunity to participate in the upside of joining us to grow their business and of course LTG.

The Directors have decided not to pay a dividend in respect of the year ended 31 December 2013 however we expect to initiate the progressive dividend policy outlined in our AIM admission document. We expect to pay a maiden dividend at the time of our interim results for the six months to 30 June 2014.

As an expert services business, we are reliant on our highly talented and dedicated staff who deliver exceptional service and solutions to our customers.  I'd like to thank them all for their efforts and look forward to another exciting year of growth in 2014.

Andrew Brode

Chairman

Strategic report for the year ended 31 December 2013

Financial Results

LTG's only operating sub group during the year ended 31 December 2013 was Epic Group Limited which LTG acquired by way of a reverse takeover on 8 November 2013.

Epic made good progress during 2013 with revenue increasing by 9% to £7.56m (2012:£6.95m) with adjusted EBITDA increasing by 42% to £1.452m (2012:£1.019m).  The loss before tax of £0.926m has been caused by the non-trading items deemed cost of listing of £1.108m and acquisition costs of £0.950m. Adjusted earnings per share before deemed cost of listing and acquisition costs has risen to 0.368p (2012: 0.209p).

The reorganisation into Business Units in March 2011 has delivered more benefits than originally envisaged.  Most importantly, our consistent approach in striving to 'create a first class customer experience every time' has been very well received and has caused repeat business to increase to 56%.  Furthermore, great customer service is synonymous with high margins as demonstrated by our average gross margin of 60.6% (2012:58.7%). 

Through our investment in our tools, increasingly efficient processes and focus on getting our deliverables 'right first time' we believe our margins are substantially higher than our peers and they have now stabilised at an optimum level.  We are however, confident that we can apply our structure and processes to achieve similar improvements in the customer service and margins of businesses that we acquire.

The two main drivers of growth were multi-device learning (present in almost all our content solutions), where Epic is viewed as an innovator and market leader, and platforms which grew by 42% to £960k revenue.  We predict both areas of specialism will continue to drive growth for the foreseeable future.

Epicentre, our software testing division, had a challenging year with revenues down by 17% to £517k.  We reduced costs during the summer and appointed a new Business Unit Director in December who is focussing on growing its multi-device testing revenue.  We remain confident that it can deliver growth through increasing external revenue from customers as well as acting as the source of consistent, quality assurance for the output of all LTG companies.

Key Performance Indicators

The Board monitors key performance indicators on a monthly basis. The most important ones for the success of the business are:

·      The value of new contracts won. Across the group this rose by 12% in 2013.

·      The level of the order book which is defined as the proportion of contracts won but not yet delivered. The order book at the end of the year grew in all three territories in which the group operates in.

·      Gross profit margins based on direct costs attributable to projects. As stated above these improved to 60.6% in 2013. The Board believes this is the optimal level and is not looking to grow gross margins beyond this.

·      Utilisation, measured as the proportion of production staff cost charged directly to projects. The utilisation rate increased by 2% in 2013.

gomo learning

The growth of smartphone and tablet use over the last few years is an accepted phenomenon.  Epic has been in the vanguard of this fast moving segment since it developed mobile learning apps for iOS in 2010.  The experience we derived from creating that early mobile learning content was invaluable and we soon recognised that there was a demand for a mobile learning authoring tool to enable customers to create their own learning content that would work across multiple mobile devices.

To meet this demand Epic developed gomo - the learning content authoring tool based on our in-house multi-device content creation software.  When it was first launched in June 2011 it was unique in the way it published content from a single source to many devices including native iOS and Android Apps. 

Mobile technology has continued to advance at a stunning pace and devices are now virtually ubiquitous across adult workers in the advanced economies (with some developing economies not far behind).

We are therefore very excited by the launch of gomo 2.0 in April 2014.  Judging by the positive feedback and reviews we've received from prospective corporate customers and industry experts, we are confident that the team has designed an excellent SaaS tool which delivers on the multi-device authoring functionality users are seeking. 

Mike Alcock, an authoring tool pioneer who founded and led Atlantic Link before it was sold to Kaplan IT in 2010, has joined the Group as Managing Director of gomo Learning Limited. The Board is confident that with the right leadership now in place gomo will generate significant recurring revenue in the medium term.

We look forward to updating shareholders on its progress in due course.

The Business

The foundation business of Learning Technologies Group is Epic, a European market leader in e-learning and multi-device learning solutions. 

Founded in 1986, Epic was one of the first companies in Europe to develop training programmes on some of the earliest available PCs. Leading the way in interactive learning, we produced Europe's first ever laser-disc training programme, and have remained at the forefront of e-learning long after the advent of the CD ROM.

While our focus is still on enhancing learning with technology, we have come a long way from being just another e-learning company. We have a great commitment to both the immediate and longer-term strategic needs of our clients and everything we do is geared towards improving the performance of organisations, their people and their business aims.

Epic's clients

We pride ourselves on our customer service. Our clients come from a wide range of sectors, and include many Fortune 500 and FTSE 100 companies. Epic has forged successful relationships with organisations ranging from county councils, UN organisations and healthcare providers to airlines, banks and high street retailers - and they come back to us time and again.

It is this repeat business that underlines our commitment to ensuring we provide the best possible service that we can, irrespective of sectors or budgets.

Epic's awards

Our commitment to quality and our ability to measure the quantifiable effect of our solutions on organisations and their people, have won us over 70 industry awards including Gold for 'Mobile learning' at the 2012 International E-learning Association Awards. To top off a fantastic year for Epic, we also picked up an unprecedented five awards at the 2012 E-learning Age awards, including 'E-learning Development Company of the Year' followed by a further three awards at the 2013 E-learning Age awards. In July 2013 Elearnity, Europe's leading independent talent and learning analysts, rated Epic as the 'Strategic Leader' of our industry - the highest accolade achievable.

Global reach

From our humble beginnings delivering learning solutions from our Brighton office, Epic has since gone on to serve clients not only from the UK but from 70 countries around the globe. In 2011 we opened our first international office in Rio de Janeiro, Brazil, and in 2012 we opened our first US office in New York.

Our working culture is flavoured by our clients all around the globe. They have head offices in places such as: Brussels (Bridgestone Europe), New York (the UN), San Francisco (Cisco), Tokyo (Sony) and Switzerland (UEFA). As such, our designers don't create solutions for just one audience. For global clients we use non-colloquial language and scenarios that work whether the learner is at a PC in Paris or on the move in Miami. In addition, we are experienced with localisation and can provide translation through partnership with the global translation expert, RWS Group.

We started small, and although we've grown in the last 27 years, we pride ourselves on the same attention to detail that got us where we are today.

Epic's services

We consult carefully with our clients to get to the core of their requirement. If they need support compiling a business case, we can help them conduct a training needs analysis. Following this, we will help them build the perfect solution for their requirements. This could comprise a standalone piece of e-learning or mobile learning app to a full blend including; e-learning, mobile, interactive videos, authoring tools, learning portals, hosting, service desk support, classroom workshops and offline materials.

In addition to our broad range of services and products, we can work fast without compromising on quality. Clients such as Business Link, Civil Service Learning, the BBC, British Airways, Diageo, SHL and Deloitte have all benefitted from our expertise. With the right consultancy, stakeholder research and requirements gathering, we ensure that their solution will blend all content in an approach that is best suited to them, their organisation and their learners whilst also providing a great return on investment.

Our work has been recognised by over 70 industry awards and our clients are always driving us to innovate in new and exciting ways.

Current Trading

2014 has started well and is in line with the Board's expectations. The order book has continued to rise, particularly in the US operation and the Board is confident of another strong year.

Jonathan Satchell

Chief Executive Officer

7 April 2014

Learning Technologies Group Plc

Consolidated statement of comprehensive income

Year ended 31 December 2013

			Proforma Year ended 31 Dec	Proforma Year ended 31 Dec
			2013	2012
Continuing operations	Note		£'000	£'000
Revenue	3		7,557	6,945
Cost of sales			(2,978)	(2,869)
Gross profit			4,579	4,076
Administrative expenses			(3,422)	(3,287)
Share of losses of joint venture			(32)	(17)
Operating profit*			1,125	772
Adjusted EBITDA			1,452	1,019
Amortisation of intangibles			(75) (79) (173)	(49) (54) (144)
Depreciation
Share based payment costs
Operating profit*			1,125	772
Deemed cost of listing	7		(1,108)	-
Costs of acquisition			(950)	-
			7	10
Interest receivable
(Loss)/profit before taxation			(926)	782
Income tax expense	4		(182)	(250)
(Loss)/profit for the year			(1,108)	532
Other comprehensive income:			-	-
Total comprehensive (loss)/income for the year			(1,108)	532
(Loss)/earnings per share attributable to owners of the Parent:
Basic, (pence)	5		(0.429)	0.209
Diluted, (pence)	5		(0.429)	0.198

Adjusted earnings per share before deemed

cost of listing and acquisition costs:

Basic, (pence)	5		0.368	0.209
Diluted, (pence)	5		0.335	0.198

*Operating profit before costs of acquisition and deemed cost of listing

All amounts stated above are attributable to the equity owners of Learning Technologies Group Plc.

Learning Technologies Group Plc

Consolidated statement of financial position

As at 31 December 2013

			Proforma
		31 Dec	31 Dec
		2013	2012
	Note	£'000	£'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment		250	266
Intangible assets	6	150	148
Investments		-	32
		400	446
CURRENT ASSETS
Trade receivables		1,237	809
Other receivables, deposits
and prepayments		86	31
Amounts recoverable on contracts		947	702
Deferred tax assets		1	-
Fixed deposits with licensed banks		-	1,000
Cash and bank balances		1,170	692
		3,441	3,234
TOTAL ASSETS		3,841	3,680
EQUITY AND LIABILITIES
Share capital		1,034	77
Share premium account		1,159	1,218
Capital redemption reserve		-	28
Merger relief reserve		22,269	275
Reverse acquisition reserve		(22,933)	(524)
Share-based payment reserve		547	144
(Accumulated losses)/retained profits		(588)	695
TOTAL EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT		1,488	1,913
CURRENT LIABILITIES
Trade and other payables		2,206	1,555
Corporation tax		87	74
Amount owing to related parties		30	30
Deferred tax liabilities		-	22
Provisions		30	86
		2,353	1,767
TOTAL LIABILITIES		2,353	1,767
TOTAL EQUITY AND LIABILITIES		3,841	3,680

Learning Technologies Group Plc

Consolidated statement of changes in equity

Year ended 31 December 2013

			Share capital	Share premium	Capital redemption reserve	Merger relief reserve	Reverse acquisition reserve	Share based payments reserve	Retained profits/  (losses)	Profoma Total equity
	Note		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2012			77	1,218	28	275	(524)	-	563	1,637
Profit for the year			-	-	-	-	-	-	532	532
Total comprehensive income for the year			-	-	-	-	-	-	532	532
Share based payment charge credited to equity			-	-	-	-	-	144	-	144
Dividend paid prior to group reconstruction			-	-	-	-	-	-	(400)	(400)
Balance at 31 December 2012			77	1,218	28	275	(524)	144	695	1,913
Group reconstruction			957	23	(28)	21,994	(22,409)	-	-	537
Costs of issuing shares			-	(82)	-	-	-	-	-	(82)
Loss for the year			-	-	-	-	-	-	(1,108)	(1,108)
Total comprehensive (loss) for the year			-	-	-	-	-	-	(1,108)	(1,108)
Dividend  paid prior to group reconstruction			-	-	-	-	-	-	(300)	(300)
Share based payment charge credited to equity			- -	- -	- -	- -	- -	528 (125)	-   125	528 -
Transfer on exercise and lapse of options
Balance at 31 December 2013			1,034	1,159	-	22,269	(22,933)	547	(588)	1,488

For the purpose of preparing the consolidated financial statements of the Group, the share capital represents the nominal value of the issued share capital of 0.0375p per share. Share premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses of the share issue. 

The reverse acquisition reserve relates to the reverse acquisition between Learning Technologies Group Plc and Epic Group Limited on 7 November 2013.

Learning Technologies Group PLC

Consolidated statement of cash flows

Year ended 31 December 2013

		Proforma Year ended	Proforma Year ended
		31 Dec	31 Dec
		2013	2012
	Note	£'000	£'000
Cash flow from operating activities
(Loss)/  profit before taxation		(926)	782
Adjustments for:-
Share option charge		173	144
Deemed cost of listing		1,108	-
Non-cash costs of acquisition		950	-
Amortisation of intangible assets		75	49
Depreciation of plant and equipment		79	54
Share of loss of joint venture		32	17
Interest income		(7)	(10)
Operating cash flow before working capital changes		1,484	1,036
Increase in trade and other receivables		(444)	(226)
Increase in amount recoverable on contracts		(245)	(156)
Increase in payables		578	362
		1,373	1,016
Interest received		7	10
Income tax paid		(192)	(127)
Net cash flow from operating activities		1,188	899
Cash flow used in investing activities
Purchase of property, plant and equipment		(63)		(254)
Development of intangible assets		(77)		(109)
Cash acquired on reverse acquisition		705		-
Cash costs of acquisition		(652)
Cash consideration on reverse acquisition		(1,323)		-
Investment in joint venture		-		(30)
Net cash flow used in investing activities		(1,410)		(393)
Dividends paid prior to group reconstruction		(300)		(400)
Net cash flow used in financing
activities		(300)		(400)
Net (decrease)/increase in cash and cash
equivalents		(522)		106
Cash and cash equivalents at beginning of the year		1,692		1,586
Cash and cash equivalents at end of the year		1,170		1,692

Learning Technologies Group PLC

Notes to the consolidated financial information for the year ended 31 December 2013

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 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.   

2.       Basis of preparation

The consolidated financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") issued by the International Accounting Standards Board ("IASB") including related interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") and using the accounting policies which are consistent with those adopted in the admission document as well as applying the following accounting policy in respect of the basis of consolidation.

On 8 November 2013 the Company, then named In-Deed Online Plc, became the legal parent of Epic Group Limited.  The consolidated financial statements are presented as proforma to present the substance of the transaction. The comparative results to 31 December 2012 represent the consolidated position of Epic Group Limited prior to the reverse acquisition.

This transaction is deemed outside the scope of IFRS 3 (Revised 2008) and not considered a business combination because the Directors have made a judgement that prior to the transaction, In-Deed Online Plc was not a business under the definition of IFRS 3 Appendix A and the application guidance in IFRS 3.B7- B12 due to In-Deed Online Plc being a shell company that had no processes or capability for outputs (IFRS 3.B7).

On this basis, the Directors have developed an accounting policy for this transaction, applying the principles set out in IAS 8.10-12, in that the policy adopted is: 

·      relevant to the users of the financial information;

·      more representative of the financial position, performance and cash flows of the Group;

·      reflects the economic substance of the transaction, not merely the legal form; and

·      free from bias, prudent and complete in all material aspects. 

The accounting policy adopted by the Directors applies the principles of IFRS 3 in identifying the accounting acquirer and the presentation of the consolidated financial statements of the legal parent (Learning Technologies Group Plc) as a continuation of the accounting acquirer's financial statements (Epic Group Limited). This policy reflects the commercial substance of this transaction as follows: 

the original shareholders of the subsidiary undertakings are the most significant shareholders post initial public offering, owning 92.45 per cent. of the issued share capital; and

the cash consideration paid as part of the initial public offering returned equity to the original shareholders of the legal subsidiary undertaking and as a consequence diluted their shareholding.

Accordingly, the following accounting treatment and terminology has been applied in respect of the reverse acquisition:

the asset and liabilities of the legal subsidiary Epic Group Limited are recognised and measured in the Group financial statements at the pre-combination carrying amounts, without reinstatement to fair value;

the retained earnings and other equity balances recognised in the Group financial statements reflect the retained earnings and other equity balances of Epic Group Limited immediately before the business combination, and the results of the year from 1 January 2013 to the date of the business combination are those of Epic Group Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the business combination; the cost of the combination has been determined from the perspective of Epic Group Limited.

The fair value of the shares in Epic Group Limited has been determined from the admission price of the Learning Technologies Group Plc shares on re-admission to trading on AIM for 9 pence per share. The value of the consideration shares was £22,950,000.  The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is 7.41 per cent of the market value of the shares after issues, being £1,836,000. The difference between the notional consideration paid by Learning Technologies Group Plc for Epic Group Limited and the Learning Technologies Group Plc net assets acquired of £728,000 has been charged to the Consolidated Statement of Comprehensive Income as a deemed cost of listing amounting to £1,108,000 with a corresponding entry to the reverse acquisition reserve. 

Transaction costs of equity transactions relating to the issue and re-admission of the Company's shares are accounted for as a deduction from equity where they relate to the issue of new shares and listing costs are charged to the Group Income Statement.

The consolidated financial statements are presented as proforma to present the substance of the transaction. The comparative results to 31 December 2012 represent the consolidated position of Epic Group Limited prior to the reverse acquisition.

The financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future.

The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 December 2013, but is derived from those accounts. The statutory accounts will be delivered following the Company's Annual General Meeting. The Auditors have reported on those accounts; their reports were unqualified and did not contain any statements under Companies Act 2006 section 498 (2) or (3).

The directors do not recommend the payment of a dividend.

The financial information set out in this announcement was approved and authorised for issue by the board of directors on 7 April 2014.

3.      Segment 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 consummate 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 each of the two years ended 31 December 2013.

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 net assets by geographical location are detailed below.

					Proforma
	UK	Europe	America	Other	Total
	£'000	£'000	£'000	£'000	£'000
31 December 2013
Revenue	6,534	808	215	-	7,557
Net assets	1,365	-	123	-	1,488
31 December 2012
Revenue	6,665	248	26	6	6,945
Net assets	1,857	-	24	32	1,913

Information about major customers

In the year ended 31 December 2013, one customer generated revenues of £760,000 and in the year ended 31 December 2012 one customer generated revenues of £973,000. No other customers accounted for more than 10 per cent of reported revenues.

4.      Income tax

	Proforma	Proforma
	31 Dec	31 Dec
	2013	2012
	£'000	£'000
Current tax expense:
- for the financial year	205	200
- under/(over)provision in the
previous financial year	-	-
	205	200
Deferred tax assets:
- for the financial year	(28)	28
Deferred tax liabilities:
- for the financial year	5	22
Deferred tax (release)/expense	(23)	50
Income tax expense	182	250

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

		Proforma	Proforma
		31 Dec	31 Dec
		2013	2012
		£'000	£'000
(Loss)/profit before taxation		(926)	782
Tax at the applicable statutory tax rates of 23% and 24% (2012: 24%)		(215)	188
Tax effects of:-
Non-deductible expenses		489	(16)
Capital allowances and other short term differences not recognised for tax purposes		(18)	(10)
Share-based payments not recognised for tax purposes		40	35
Other permanent differences		(120)	(21)
Overseas losses not subject to UK tax relief		22 7	20 4
Results of joint venture
Income tax expense for the  financial year		205	200

5.      Earnings per share

Basic earnings per share is calculated by dividing the loss/profit 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.  The calculation of earnings per share is based on the following earnings and number of shares.

In calculating the weighted average number of ordinary shares outstanding (the denominator of the earnings per share calculation) during the period in which the reverse occurs:

(a)  The number of ordinary shares outstanding from the beginning of that period to the acquisition date shall be computed, on the basis of the weighted average number of ordinary shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement; and

(b)  The number of ordinary shares outstanding from the acquisition date to the end of that period shall be the actual number of ordinary shares of the legal acquirer (the accounting acquiree) outstanding during that period.

The basic earnings per share for each comparative period before the acquisition date presented in the consolidated financial statements following a reverse acquisition shall be calculated by dividing:

(a)  The profit or loss of the legal acquiree attributable to ordinary shareholders in each of those periods by

(b)  The legal acquiree's historical weighted average number of ordinary shares outstanding multiplied by the exchange ratio established in the acquisition agreement.

A  reconciliation is set out below:

		Proforma	Proforma
		31 Dec	31 Dec
		2013	2012
		£'000	£'000
(Loss)/profit after tax attributable to owners  of the Group :		(1,108)	532
Weighted average number of shares: Basic		258,138,014	255,000,000
Diluted		258,138,014	268,766,765
Basic earnings per share  (pence)		(0.429)	0.209
Diluted earnings per share (pence)		(0.429)	0.198

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. The share options in issue during the year to 31 December 2013 are anti-dilutive and therefore are not included in the above calculation.

Adjusted earnings per share before deemed cost of listing and costs of acquisition (pence):

(Loss)/profit after tax attributable to owners  of the Group :		(1,108)	532
Adjustments for:
Deemed cost of listing		1,108	-
Costs of acquisition		950	-
Adjusted earnings		950	532
Weighted average number of shares: Basic		258,138,014	255,000,000
Diluted		283,746,935	268,766,765
Adjusted basic earnings per share  (pence)		0.368	0.209
Adjusted diluted earnings per share (pence)		0.335	0.198

6.      Intangible assets - development expenditure

			Proforma
		31  Dec	31 Dec
		2013	2012
		£'000	£'000
Cost
At 1 January - brought forward		290	181
Additions		77	109
At 31 December		367	290
Accumulated amortisation:
At 1 January - brought forward		142	93
Charge for the year		75	49
At 31 December		217	142
Net Book Value
At 31 December		150	148

Development costs

Development costs principally comprise expenditure incurred on major software development projects where it is reasonably anticipated that the costs will be recovered through future commercial activity.

Amortisation

Capitalised development costs are amortised over the estimated useful life of 3 years. The amortisation charge is recognised in administrative expenses.

7.      Business combinations

On 7 November 2013 In-Deed Online Plc became the legal parent of Epic Group Limited by way of reverse acquisition. The cost of the acquisition is deemed to have been incurred by Epic Group Limited, the legal subsidiary in the form of cash and equity instruments issued to the owners of the legal parent. This acquisition has been accounted for as a reverse acquisition as described in Note 2(a), Basis of Preparation.

The fair value of the shares in Epic Group Limited has been determined from the admission price of the Learning Technologies Group Plc shares on re-admission to trading on AIM for 9 pence per share. The value of the consideration shares was £22,950,000.  The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is 7.41 per cent of the market value of the shares after issues, being £1,836,000. The difference between the notional consideration paid by Learning Technologies Group Plc for Epic Group Limited and the Learning Technologies Group Plc net assets acquired of £728,000 has been charged to the Consolidated Statement of Comprehensive Income as a deemed cost of listing amounting to £1,108,000 with a corresponding entry to the reverse acquisition reserve. 

Details of net assets acquired and the deemed cost of listing are as follows:

		£'000
Consideration effectively transferred		1,836
Less net assets acquired:
Trade and other receivables		35
Cash and cash equivalents		705
Trade and other payables		(12)
		728
Deemed cost of listing		1,108

8.      Subsequent events

(a)  Acquisition of Line Communications Holdings Limited

On 7 April 2014, the Company completed the acquisition of 100% of the issued share capital of Line Communications Holdings Limited (Line), a company incorporated in England and Wales, and its subsidiary undertakings. Line devises, designs and delivers fully blended learning solutions that incorporate elements such as e-learning, collaborative learning, just-in-time performance support, classroom or e-tutoring. Line has clients from both the public and private sectors. Consideration for the acquisition was as follows:

·        £5,130,000 payable in cash at completion;

·        £3,870,000 by way of an issue and allotment of ordinary shares in the Company on completion; and

·        additional cash consideration equal to any excess working capital (including cash) in the Line Group as determined by completion accounts. 

The acquisition of Line is the first step in the Company's stated aim to consolidate the eLearning sector, will add considerable critical mass to the Company's activities, enable the combined entities to leverage their activities and commercial contacts across a broad range of sectors and achieve revenue and cost synergies.

An estimate of the financial effect of the acquisition has not been included as the initial accounting for the business combination was incomplete at the time the financial statements were authorised for issue.

The Company has raised £8m through a placing of 50,000,000 new ordinary shares with institutional and other investors at a price of 16p each. Following this placement, the Company's issued share capital is increased to 325,825,000 ordinary shares of 0.375p.

(b)   Grant of share options

On 17 February 2014, the Company granted the following share options over the Company's Ordinary Shares of £0.00375 each to certain executive directors. These new share options supersede the proposals for Management Incentive Shares which were set out in the Company's AIM Admission Document. 

Dale Solomon, Commercial Director of Epic Group Limited, was granted 16,002,451 new share options at an exercise price of 5.88p per share. Peter Mountford, Executive Deputy Chairman of the Company was granted 6,785,295 new share options at an exercise price of 5.88p per share.

The new share options are subject to the achievement of demanding performance criteria based upon significant share price increases.

 

END

 

 

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