REG - Learning Technol.Grp - FULL YEAR RESULTS 2021
03/05/2022 07:00
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RNS Number : 9792J Learning Technologies Group PLC 03 May 2022
03 May 2022
Learning Technologies Group plc
FULL YEAR RESULTS 2021
Strong organic revenue growth
Transformational GP Strategies acquisition progressing ahead of plan
Learning Technologies Group plc ("LTG" or the "Company"), a market leader in
digital learning and talent management, announces full year results for the
twelve months ended 31 December 2021.
Strategic and operational highlights
· Sustained momentum and organic growth across the business, with high quality
earnings from SaaS and long-term contracts
· Transformational GP Strategies acquisition significantly broadens scale,
offering and cross-selling opportunities - delivering earlier than anticipated
with EBIT margin expected to be 12% in FY 2022
· New go-to-market strategy to support greater breadth and depth of offering and
geographical reach and faster growing markets
· Q1 2021 acquisitions (Reflektive, PDT Global and Bridge) fully integrated and
achieving substantially improved profit margins
Financial highlights and summary
· Strong organic revenue growth, up 8%
o Content & Services recovered strongly, organic growth of 25%, and now back
to 2019 levels, as expected
o Software & Platforms organic growth of 2% and 17% excluding PeopleFluent,
continuing its track record of high-margin growth; PeopleFluent decline more
than offset by organic growth in the remainder of the segment including strong
contributions from Rustici and Breezy
· Excellent profit growth, as a result of strong organic revenue growth,
contribution from recent acquisitions and a continued focus on EBIT margin
improvement as the Group expands
· As expected, Group margins have reduced driven by a change in revenue mix from
acquisitions
· Net debt of £141.4m and good cash generation; on target for leverage c.1.0x
by FY2022
· 17% increase in adjusted diluted EPS driven by organic growth and contribution
from acquisitions
· The Board is proposing a final dividend of 0.7p, an increase of 40%, leading
to a full year dividend of 1.0p, an increase of 33%
£m unless otherwise stated 2021 2020 Change
Revenue 258.2 132.3 +95%
Adjusted EBIT 54.8 40.3 +36%
Adjusted EBIT margin 21.2% 30.5%
Adjusted diluted EPS (pence) 5.01 4.29 +17%
Proposed final dividend per share (pence) 0.7 0.5 +40%
Net debt/(cash) 141.4 (70.2)
Statutory results
Profit before tax 9.3 13.5
Basic EPS (pence) 1.96 2.45
Current trading and outlook
· Current trading in Q1 2022 is strong, in line with management expectations
· Upgrade to FY 2022 margin expectations following progress ahead of plan with
GP Strategies' integration
· Following the transformational GP Strategies acquisition, LTG has:
o Opportunities for significant margin enhancement and cross-selling, as a
global business
o Increased reach in the c.$100bn addressable market in digital learning and
talent management
· While mindful of the current macro environment, strong business momentum
continuing into the new financial year and a robust balance sheet that
supports further software company acquisitions in due course, underpinning the
Board's confidence of significant progress in FY 2022.
Jonathan Satchell, Chief Executive of LTG, said:
"2021 was another exciting and successful year for LTG. Our strong organic
revenue growth reflects the pressing and growing need for organisations to
recruit, train, motivate and retain talent and LTG's ability to meet these
demands. We have also continued our track record of improving the operating
model and performance of businesses we acquire.
Our transformational GP Strategies' acquisition is progressing ahead of plan
and enables us to upgrade our margin expectation for FY 2022. The enlarged
Group provides a platform to capture a greater proportion of the circa $100
billion and growing addressable market in digital learning and talent
management. Following the acquisition we have a deeper offering to serve a
global customer base facing greater complexity and change, creating further
margin enhancement and cross-sell opportunities for LTG.
While mindful of the current macro environment, strong business momentum has
continued into the new financial year and we have a robust balance sheet that
will support further software company acquisitions in due course, underpinning
the Board's confidence of significant progress in FY 2022."
Analyst and investor presentation:
LTG will host an analyst and investor webcast at 09.30 BST today, Tuesday 3
May 2022.
To join the call, please pre-register using the following link:
https://attendee.gotowebinar.com/register/6688990460749452557
(https://attendee.gotowebinar.com/register/6688990460749452557)
After registering, you will receive a confirmation email containing
information about joining the webinar.
If you prefer to use your phone, you must select "Use Telephone" after joining
the webinar and call in using the numbers below:
United Kingdom: +44 20 3713 5012
Access Code: 398-823-358
Audio PIN: Shown after joining the webinar
Enquiries:
Learning Technologies Group plc +44 (0)20 7402 1554
Jonathan Satchell, Chief Executive
Kath Kearney-Croft, Chief Financial Officer
Numis Securities Limited (NOMAD and Corporate Broker) +44 (0)20 7260 1000
Stuart Skinner, Nick Westlake, Ben Stoop
Goldman Sachs International (Joint Corporate Broker) +44 (0)20 7774 1000
Bertie Whitehead, Adam Laikin
FTI Consulting (Public Relations Adviser) +44 (0)20 3727 1000
Rob Mindell, Jamie Ricketts, Jamille Smith
About LTG:
LTG is a leader in the growing workplace digital learning and talent
management market. The Group offers end-to-end learning and talent solutions
ranging from strategic consultancy, through a range of content and platform
solutions to analytical insights that enable corporate and government clients
to close the gap between current and future workforce capability.
LTG is listed on the London Stock Exchange's Alternative Investment Market
(LTG.L) and headquartered in London. The Group has offices in Europe, North
America, LATAM and Asia-Pacific.
Chief Executive's Review
Introduction
We have seen sustained business momentum through 2021 and this has helped us
deliver strong Group organic revenue growth of 8% in the year, with both the
Software & Platforms and Content & Services divisions contributing. We
have also seen a significant increase in adjusted EBIT and adjusted diluted
Earnings per Share, supported by the contribution of acquisitions in 2021.
For many of our customers, COVID-19 has resulted in increased remote and home
working and there is a reduced appetite for business travel. As a result, we
believe the long-term, favourable trends in our markets which define our
strategy - namely a long-term shift towards digital learning, blended with
expert facilitation - are accelerating to our benefit.
In addition to our excellent operational performance in the year, we have made
significant strategic progress. We acquired Bridge, Reflektive and PDT Global
in the first quarter of 2021 and integrated them during the year. They are now
meaningful contributors to Group adjusted EBIT.
We completed the transformational acquisition of US-listed GP Strategies in
October 2021, which is progressing ahead of plan. GP Strategies adds new
blue-chip commercial and government customers, new and deepened customer
verticals, expanded capabilities and given us a global reach, and it has
brought embedded customer relationships underpinned by long-term contracts.
On a pro forma basis, 71% of 2021 Group revenue is related to Software as a
Service (SaaS)-based subscriptions and long-term contracts.
We have an excellent track record of delivering value from acquisitions and
after the first months of ownership of GP Strategies, we are very confident
that it will create significant shareholder value. It provides an
outstanding margin enhancement opportunity and rich cross-selling prospects,
some of which are already starting to show results. We continue to expect
the combination to be significantly earnings accretive and there has been a
swifter than anticipated improvement in GP Strategies' margins. The task of
integrating and unlocking its growth potential remains our primary focus for
2022.
These acquisitions offer added strength and resilience to our business model,
continuing the evolution we've seen over the last several years.
As a result of the significant strategic and operational progress we made in
2021, we have exceeded our 2022 strategic financial goals, previously set in
2020. These were c.£230 million of run-rate revenue and c.£66 million
run-rate adjusted EBIT.
Results and Operations
The Group generated revenue of £258.2 million (2020: £132.3 million). This
included organic revenue growth of 8% and the initial contribution from our
2021 acquisitions. Both divisions contributed to the organic growth with
Software & Platforms delivering 2% growth - 17% excluding PeopleFluent -
and 25% in Content and Services.
Adjusted EBIT increased by 36% to £54.8 million (2020: £40.3 million),
driven by the contribution from acquisitions and organic revenue growth.
Statutory operating profit was £11.7 million (2020: £14.9 million),
including adjusting items of £43.1 million (2020: £25.5 million).
We have a strong track record of cash generation, and this remains a top
priority for us with net cash generated from operating activities of £37.5
million (2020: £39.9 million), equivalent to an adjusted operating cash flow
conversion rate of 76% (2020: 85%).
After acquisitions, and partially offset by cash generated, net debt was
£141.4 million (31 December 2020: £70.2 million - net cash) at 31 December
2021, excluding £21.8 million (31 December 2020: £10.3 million) of lease
liabilities. The covenant net debt/adjusted EBITDA ratio was 1.8 times
(2020: n/a). We remain confident in achieving our target of a net
debt/adjusted EBITDA ratio of circa 1.0x by 31 December 2022, excluding the
impact of any potential acquisitions.
Market Opportunity
We operate within a very large global learning and talent market, estimated to
be worth approximately $378 billion in 2021(1). This market comprises
internal, external and tuition markets although we are primarily focused on
the estimated circa $100 billion external corporate training segment of this
market.
We also operate in the smaller, complementary talent management market. This
is the future evolution of learning and development, encompassing software
applications that enable all facets of the employee 'life-cycle' to be brought
together in one place. It includes recruitment, performance management,
learning and development, diversity and inclusion and compensation management.
It represents a logical progression from the disparate systems and processes
that prevent businesses from aligning strategy with workforce learning and
development.
Our main focus overall is on the faster-growing digital training and
development segment. As a result of the range of services and software
products available to us, we are able to offer comprehensive learning and
development solutions. We partner with our corporate and government
customers in a way that others cannot, in what remains a fragmented market.
Our suite of analytic tools enable us to track the performance of our learning
and development solutions, demonstrating to customers the cost effectiveness
of the services and software we provide. We are able to selectively bolt-on
technology capabilities, additional geographic reach or differentiated service
offerings to further enhance our customer proposition. The Learning Services
market is forecast to grow between 5-6% in 2022(2).
We continue to believe that there are five forces that are rapidly evolving
our marketplace, underpinning its attractiveness by increasing the need for
the range of learning and development solutions we provide. These five
forces are driving the need for corporates and governments to continually
reskill and transform their workforces, as follows.
· The growing complexity of business and work
Work and business are becoming more complicated with regulations, specialisms
and other complexity increasing. For example, the US Code of Federal
Regulations has expanded from 21,000 pages in 1962 to over 180,000 pages in
2019(3). Corporates need to train their employees to remain compliant with
this list of rules and regulations to avoid penalties, comply with accounting
and tax policies and recruit and successfully manage talent. Technical and
professional specialisms have also increased alongside the complexity of the
tools used to perform our work.
· The pace of change
The pace of change in work is accelerating, in part driven by the revolution
in technology, including digitalisation and automation. A recent survey(4)
concluded that skills required for a single job are increasing 10% per
annum. Furthermore, over 30% of the skills needed three years ago will soon
be irrelevant(4). ( )For employees to remain productive and effective,
employers need to provide training so they can keep pace with changing roles.
· Unprecedented demographic shifts
As populations get older, the pool of talent available is contracting - a
pattern that is expected to accelerate, leaving an estimated deficit of 85
million workers globally(5). As a result, there will be intense competition
to hire and retain employees, a dynamic which has proven to be particularly
prevalent since COVID-19. A business has to make itself an employer of
choice, and development and progression opportunities offered by training are
vital.
· The need to compete through productivity
Labour shortages and an ageing population mean that around 90% of future
growth will have to come from productivity improvements(6). Technology is
needed to drive productivity, and learning is needed to develop and maintain
human expertise. Steps needed to address global warming and other societal
pressures mean business travel for face-to-face training is becoming gradually
less acceptable, with more digital training and consolidation in face-to-face
training provision.
· The changing relationship to work
Younger workers want meaningful work and autonomy. For this to happen, they
need training to understand what they do and what the organisation needs(7).
COVID-19 has shifted the relationship between home and work. The expectation
is of a hybrid work-world and, in this context, how we support learning and
development is important, with the onus on employers to help employees thrive
in this remote-working world.
We continue to be excited by our markets and the huge opportunities they
provide.
(1) Training Industry, Inc. Research Data 2021 estimated totals.
(2) Training Industry, Inc. Learning Services Market 2021.
(3) George Washington University Regulatory Studies Center. (June 2019).
(4) Baker, M. (Aug 2020). Stop Training Employees in Skills They'll Never Use.
Gartner.
(5) Korn Ferry Institute. (May 2018). The $8.5 Trillion Talent Shortage.
(6) Bughin, J., Dimson, J., Hunt, V., et al. (Sep 2018). Solving the United
Kingdom's productivity puzzle in a digital age. McKinsey Global Institute.
7 Oh, J. (Jan 2020). Three rules for engaging millennial and Gen Z talent in the
workplace. World Economic Forum.
Creating Value Through Investment in Innovation
Investment in innovation is a high capital allocation priority, and we have a
strong track record of creating value in this area. We make our investments
in partnership with customers, informed by a known customer need.
Part of our investment strategy is to leverage value from complementary
technologies acquired through our selective M&A programme. We invest to
consolidate products to provide integrated and cohesive solutions. In this
way, our investment is aligned to the strategy of providing differentiated and
comprehensive capabilities to customers. Where possible, we adopt a
lower-risk approach to innovation by applying our existing technology to
different markets.
During 2021, we have continued to make investments consistent with our
strategy. Examples include:
· In our Rustici business, we delivered a test suite representing a significant
step forward in the provision of the tools and resources needed to continue
modernising standards across industry and government. This supports the
development of more advanced approaches to learning and training, including
simulation and extended reality.
· We have integrated our Open LMS technology with that of eCreators and eThink
to create a shared code base, with the consolidation of the technology and
hosting services enabling more efficient customer service.
· We have integrated the Reflektive product line with PeopleFluent's enterprise
talent management and talent marketplace to create modern performance
management and engagement capabilities. In addition, we have integrated
streamlined performance capabilities in the fast-growing Breezy HR brand, as
well as an enhanced user experience.
· Within PeopleFluent, we have worked closely with customers to enhance its
function-rich capabilities. These include people analytics, calibration,
skills ontology, inclusion and bias filtering for recruitment, and content
management for extended enterprise learning providers.
Our ability to integrate our offerings enables us to offer holistic solutions
and cross-sell to customers. We have had a particularly notable success
providing a learning eco-system for the partners, distributors and third-party
audiences of a global energy business. This involved services and integrated
software provision from six of our businesses, working together in close
collaboration.
Creating Value Through Acquisitions - GP Strategies
Alongside organic growth, we create value from acquisitions to help build our
position as a global market leader in the growing digital learning and talent
management sector. These bring quality software or services offerings,
enabling us to provide holistic learning and development solutions to our
global customer base. We also invest in businesses with strong underlying
assets where we can significantly improve the business model. To drive
value, we integrate our core capabilities, manage costs, including IT systems
and back-office, and increase staff utilisation. These actions improve
execution and delivery and increase operating margins and cash generation.
Consistent with our strategy, in October 2021 we completed the
transformational acquisition of US-listed GP Strategies. This is a global
provider of organisational and technical performance solutions which
transforms organisational effectiveness through innovative and superior
training, consulting and business improvement services.
Total consideration for GP Strategies was $392 million (£288 million),
representing an enterprise value on completion of $370 million (£271
million), including lease liabilities. The acquisition was partially funded
by a mix of debt and an equity placing with gross proceeds of approximately
£85 million (44.3 million shares). The acquisition is financially
compelling and brings many strategic and customer benefits, including new and
complementary capabilities; expertise in target customer markets in
highly-regulated, complex industries; an expanded geographic footprint
including in the US and faster growing Asian markets; and an outstanding
reputation servicing 125 of the US Fortune 500 and 121 of Global 500
constituents. Almost three-quarters of its revenue is from customers of more
than 10 years standing.
GP Strategies offers a significant opportunity to cross-sell products and
services to a combined base of over 6,100 customers. We continue to work
towards - and are confident we will achieve - our target of launching our
combined strategic customer offer by the second half of 2022.
With limited areas of service overlap, the cross-selling focus is primarily a
means by which we can combine GP Strategies' compelling services offerings
with LTG's software platforms, to provide a value-add solution to customers of
both businesses. We have seen encouraging early customer interest in our
combined service and software offerings. There are also some early
cross-selling successes including a significant multi-year contract with a
major US professional association in the financial services industry who
delivers learning and accreditation services to more than 400,000 members
worldwide. Neither business would have been able to provide the suite of
services won, had it not been for the combined services and software within
the Group.
We have an excellent track record of enhancing our margin over many years,
including from acquisitions. The near-term priority for GP Strategies
management has been to deliver cost efficiencies and savings from a range of
actions, including improved commercial governance and enhanced procurement
controls, shared procurement efficiencies and a reduction of spend on
third-party subcontractors.
Since the acquisition completed, listing costs have been eliminated and other
corporate overheads reduced. GP Strategies' management has put in place new
commercial and supplier approvals and controls, and it has made substantial
progress on the rationalisation of the supplier base, achieving significant
supplier cost efficiencies.
Billable utilisation of customer-facing employees is also a focus, with work
previously carried out by subcontractors now being done increasingly
in-house. There is also a greater focus on winning higher value-add
business. This includes, for example, a focus on work requiring more
creative content and technical services.
In late 2021 there was a senior management reorganisation, and, in January
2022, there was a planned reduction in staff, impacting 45 employees across GP
Strategies. This has removed a layer of management and reduced back-office
costs and underutilised staff. The reduction has helped efficiency without
impacting the ability to serve customers.
Overall, we have seen a swifter-than-anticipated improvement in operational
performance, with excellent progress being made. It is important to
acknowledge the collegiate and co-operative approach of our GP Strategies'
colleagues in this crucial commercial initiative. As a result, we expect a
GP Strategies' adjusted EBIT margin of 12% in 2022. We remain confident
there is further margin improvement potential for the business beyond this,
such that we expect the run rate adjusted EBIT margin at the end of 2022 to be
in the mid-teens.
During the year, GP Strategies incurred non-recurring costs of £2.9
million. This includes costs relating to the senior management
reorganisation in late 2021, as well as legal, insurance and audit costs
related to the transaction.
As a result of the acquisition of GP Strategies, LTG owned a 10% stake in
National Aerospace Solutions LLC ("NAS"). Among other activities, NAS supports
US Air Force test facilities at Arnold Engineering Development Complex, which
operates 28 aerodynamic and propulsion wind tunnels and rocket and turbine
engine test units. This shareholding was not considered core and on 18 April
2022 we divested it for $3.0 million proceeds. The GP Strategies' employees
supporting this business have transferred to NAS and, as such, LTG no longer
holds an interest in NAS and its employees no longer support it.
Creating Value Through Acquisitions - Reflektive, PDT Global and Bridge
As well as GP Strategies, and the small acquisition of Moodle News in August
2021, we announced the Reflektive, PDT and Bridge acquisitions in the first
quarter of 2021. These bring complementary software products as well as
training and consulting in Diversity & Inclusion, enabling us to expand
our offering to customers as follows:
· Reflektive completed in January 2021 for a cash consideration of $13.7 million
(c.£10.0 million)
Reflektive brings agile performance management software, including engagement
and analytics tools to the Group. It enables collaborative goal setting,
continuous feedback and analytics, providing measurable results for boosting
productivity, engagement and improving employee retention. It serves the
mid-market corporate customer base, complementing Bridge (see below).
· PDT Global completed in February 2021 for an initial cash consideration of
£13.4 million, with further performance payments of up to £6.1 million
payable in the three years to 2023
PDT Global brings Diversity & Inclusion offerings and is managed alongside
our existing Affirmity brand, which offers affirmitive action planning in the
US. The two businesses' highly complementary offerings enable customers to
objectively measure and track their performance and implement the tools,
processes and learning required to drive appropriate change.
· getBridge LLC (Bridge) also completed in February 2021 for a cash
consideration of $47.5 million (c.£34.2 million)
Bridge is a learning, performance and skills development platform for
mid-enterprise organisations which operates on a single, easy-to-use,
SaaS-based platform. It complements our PeopleFluent learning and talent
platform for the large enterprise market. The addition of Bridge enables us
to cover a broader corporate market and creates opportunities for further
cross-selling across our customer base.
We have removed overheads across our acquisitions as appropriate and
implemented LTG's well-tested, rigorous commercial and operational processes.
As a result of our actions, we have moved Reflektive and Bridge, which were
significantly loss-making at the time of acquisition, quickly and sustainably
into profit. There has also been initial success with our cross-selling
strategy. We are pleased to be creating value from these acquisitions in the
first year of ownership.
During 2022, our primary focus will continue to be on the successful
transformation of GP Strategies, ahead of its integration into LTG. The
Group will continue to look for additional bolt-on acquisition opportunities
with an emphasis on the Software & Platforms division.
People
Kath Kearney-Croft joined us as Chief Financial Officer and Board member on 1
December 2021, replacing Neil Elton after seven years in the role. Kath
brings extensive public company experience in senior finance roles across a
range of industries with operations in international markets.
The acquisition of GP Strategies brought 4,000 new colleagues, alongside LTG's
1,100 people. Given the scale of this cultural integration, we decided to
hire a new Chief People Officer with large, global company experience. Liz
Freedman will join us on 23 May 2022, arriving from IHG Hotels & Resorts
where she was
Head of Global Talent. Prior to IHG, she held regional and global leadership
roles at The Coca-Cola Company and Procter & Gamble.
Liz brings a unique combination of sales and customer marketing, operations,
human capital management and large-scale transformational change experience
with some of the world's largest multinational companies. I look forward to
welcoming her to LTG's Executive Team.
Environmental, Social and Governance (ESG)
What we provide to our customers enables them to manage and develop their
human capital and is therefore fully aligned with ESG principles. We also
focus on our own performance, including environmental sustainability. We
report on our scope 1, 2 and 3 Greenhouse Gas (GHG) emissions and there was a
17% decrease in our total GHG emissions in 2021. In part, this was due to
the mitigating actions taken, as well as the impact of reduced office use
during COVID-19. While our GHG emissions will increase in the short term,
due to our significantly increased scale following the acquisition of GP
Strategies, we have now committed to an ambition of Net Zero by 2050, or
sooner. During 2022, we will be developing actions to support this ambition
and we will provide an update in our 2022 results.
Update on Russia
Thankfully, LTG has no staff or contractors based in Russia or Ukraine and we
do minimal business in either market. In response to the conflict, we have
decided not to conduct business with any customer which is Russian domiciled
or predominantly Russian owned.
Outlook
2021 was another exciting and successful year for LTG. Our strong organic
revenue growth reflects the pressing and growing need for organisations to
recruit, train, motivate and retain talent and LTG's ability to meet these
demands. We have also continued our track record of improving the operating
model and performance of businesses we acquire.
Our transformational GP Strategies' acquisition is progressing ahead of plan
and enables us to upgrade our margin expectation for FY 2022. The enlarged
Group provides a platform to capture a greater proportion of the circa $100
billion and growing addressable market in digital learning and talent
management. Following the acquisition we have a deeper offering to serve a
global customer base facing greater complexity and change, creating further
margin enhancement and cross-sell opportunities for LTG.
Current trading in Q1 2022 is strong, in line with management expectations.
While mindful of the current macro environment, strong business momentum has
continued into the new financial year and we have a robust balance sheet that
will support further software company acquisitions in due course, underpinning
the Board's confidence of significant progress in FY 2022.
Jonathan Satchell
Chief Executive
29 April 2022
Chief Financial Officer's Review
Revenue
The Group's revenue increased by 95% to £258.2 million (2020: £132.3
million). This included organic revenue growth of 8% and the initial
contributions from Bridge, Reflektive, PDT Global, Moodle News and GP
Strategies, which were acquired during the year. These favourable impacts
were partially offset by adverse currency translation of £8.8 million.
There was 2% organic revenue growth in the Software & Platforms
division. This comprised the expected lower revenue in the more mature
PeopleFluent talent management product line, which is focused on large and
complex corporate customers, being more than offset by continued strong growth
from the Rustici e-learning standards business, growth in Open LMS, a
combination of three open-source software companies acquired in 2020 and
strong growth in Breezy HR, a leading edge talent acquisition platform.
Organic revenue growth in the Content and Services division was strong at 25%,
driven by a recovery in demand through the year with revenue now back at 2019
levels, as expected. All businesses in the division delivered organic
growth with a particularly strong performance from LEO and PRELOADED, the
Group's digital learning specialists with content and design capabilities.
Affirmity, the US-market leader in affirmative action planning, also delivered
strong organic growth. This included the benefit from a renewed focus on
retaining existing customers, as well as new client wins, and there have been
some encouraging cross-selling wins with PDT Global, which was acquired in the
first quarter of 2021.
SaaS-based subscription and long-term contract revenue was 75% (2020: 81%) of
total Group revenue, reflecting a change in revenue mix primarily from GP
strategies.
Adjusted Earnings Before Interest and Tax (EBIT) and Operating Profit
Adjusted EBIT(8) increased by 36% to £54.8 million (2020: £40.3 million),
driven by the contribution from acquisitions and organic revenue growth. The
Group's adjusted EBIT margin was lower as anticipated at 21.2% (2020: 30.5%),
including the initial contribution from GP Strategies, a service-related
business, which has a lower adjusted EBIT margin. In addition, the 2021
Bridge and Reflektive acquisitions were loss-making when acquired and there
was an overall lower margin portfolio mix resulting from varying growth rates
across the business.
In the short term, there will be an adverse impact from the lower GP
Strategies' margin with an expected gradual improvement, in part driven by
efficiencies and synergies and from incremental returns due to operational
leverage. We intend to continue to invest in the business on an organic
basis to drive revenue and adjusted EBIT with the aim of delivering Group
adjusted EBIT margins of around twenty per cent in the medium term.
Included within adjusted EBIT was a share-based payment charge which increased
to £5.2 million (2020: £3.3 million), of which £1.2 million relates to the
grant of new options to Executive Directors, and the remainder as a result of
new, unapproved options issued during the year.
Also included within adjusted EBIT was an amortisation charge for internally
generated development costs which increased to £5.6 million (2020: £4.2
million), as set out in Note 10. As relevant projects are completed, they
are amortised over their useful economic lives, with the increase in the
amortisation charge reflecting the increased investment in capitalised
development costs in prior years.
The Group's statutory operating profit was £11.7 million (2020: £14.9
million), with adjusting items of £43.1 million (2020: £25.5 million), which
included:
· An amortisation charge for acquisition-related intangible assets of £26.2
million (2020: £21.4 million);
Goodwill and other intangible assets arising on business combinations are
recognised as a result of the purchase price allocation on acquisition of
subsidiaries. While goodwill is not amortised, other intangible assets
acquired are amortised over their useful economic lives. The increased
amortisation charge was driven by increased acquired intangible assets,
comprising software and IP, customer contracts and relationships and branding
assets.
· Acquisition and integration costs of £10.1 million (2020: £0.9 million);
The costs of acquiring and integrating subsidiaries purchased in the year or
in prior periods. In 2021, this includes £6.1 million costs of acquisition
and £4.0 million of integration costs, primarily related to acquisitions
completed in the year. Within integration costs was £2.9 million relating to
GP Strategies, which includes costs relating to the senior management
reorganisation in late 2021, as well as legal, insurance and audit costs
related to the transaction.
· Acquisition-related contingent consideration, share based payments and
earn-out charges of £5.4 million (2020: £3.5 million) relating to;
The cost of contingent earn-out mechanisms included in the purchase agreements
of business combinations in the year, relating to eThink, eCreators, PDT
Global and Breezy HR, which are awarded based on the achievement of
substantial incremental revenue growth. The former owners of each respective
business are required to remain employed by the Group and as such the earn-out
is considered to be post-combination remuneration, rather than contingent
consideration which would be included in the purchase consideration of each
respective acquisition. In 2020, this charge related primarily to Breezy HR.
· A £0.7 million net foreign exchange gain (2020: £1.1 million charge);
The net foreign exchange gain arose from the movement in the USD/GBP exchange
rate relating to cash held specifically for the GP Strategies acquisition.
In 2020 the net foreign exchange loss was related to the acquisition of Open
LMS, reflecting the movement in the USD/GBP exchange rate between the
revolving credit facility being drawn and completion of the acquisition.
· A £2.1 million (2020: nil) impairment of right-of-use assets;
The impairment charge relates to an onerous lease inherited from the
acquisition of Reflektive in 2021. On acquisition, the Group was required to
measure the right-of-use asset arising from the lease as an amount equal to
the lease liability. As the office space has been vacated, with the Group
unable to successfully sub-let it, it has immediately impaired the
right-of-use asset.
For details of the items excluded from statutory operating profit, see Note 5.
(8) Alternative performance measures used by the Group are defined in the
Glossary.
Divisional Review
Following the acquisition of GP Strategies, we have disclosed this entity as a
separate division within the business.
Software & Platforms
The Software & Platforms division comprises SaaS and on-premises solutions
as well as hosting, support and maintenance services.
£ million 2021 2020 Change
Revenue 130.5 100.0 31%
Adjusted EBIT 36.4 32.2 13%
Adjusted EBIT margin 27.9% 32.2% (4.3%) pts.
Software & Platforms comprised 51% (2020: 76%) of 2021 Group revenue. On
a proforma basis, assuming a full year revenue contribution from Bridge,
Reflektive and GP Strategies, Software & Platforms would represent 25% of
Group revenue.
Revenue increased to £130.5 million (2020: £100.0 million) largely
reflecting organic growth of 2% and the initial contributions from Bridge and
Reflektive, which were purchased in the first quarter of 2021. Excluding the
more mature PeopleFluent, organic growth was 17%. In addition, this division
was impacted by adverse currency translation of £7.2 million.
The organic result was driven by continued strong growth from Breezy HR, the
division's cloud-based software product for talent acquisition for small and
mid-size customers. In addition, there was also continued strong organic
growth from the Rustici e-learning standards business, as it continued to
benefit from increasing demand for digital learning tools from new customers
and from existing customers purchasing extra functionality. The Open LMS
business, a combination of three companies acquired in 2020, also delivered
growth with customers continuing to benefit from its open-source software.
This uses a platform that is customisable to specific needs with customers
including universities and educational establishments.
Partially offsetting this, revenue in the more mature PeopleFluent talent
management product line, an integral part of the Group's differentiated
software offering, was lower as expected. The product, which has good
functionality and is highly configurable, continues to be well-embedded with
its larger and more complex corporate customers. It is expected that
customers requiring its more complex functionality will continue to use the
product while those with less complex needs will migrate over the coming years
to the division's fast-growing talent management solutions, including
Bridge. Accordingly, we are bringing together our complementary talent
related brands, including PeopleFluent, Bridge, Breezy, Reflektive, Gomo and
Instilled, to form a new Talent Solutions division, enabling an enhanced
go-to-market strategy.
In 2021, 97% (2020: 97%) of the revenue in Software & Platforms was
related to SaaS-based subscriptions and long-term contracts.
Adjusted EBIT increased in the year to £36.4 million (2020: £32.2 million)
driven by the 2021 acquisitions of Reflektive and Bridge and the full year
contribution from Open LMS, which was acquired in 2020. Underpinning this
was a strong performance from Breezy HR and Rustici which was partially offset
by the lower performance in PeopleFluent. The adjusted EBIT Margin was 27.9%
(2020: 32.2%) driven by a combination of lower EBIT margins from Bridge and
Reflektive due to being loss making upon acquisition, and now profitable, and
a lower margin portfolio mix as new and growing businesses are partially
offset by PeopleFluent.
Statutory profit before tax was £5.8 million (2020: £8.9 million) after
deducting adjusting items including amortisation of acquisition-related
intangible assets, acquisition and integration costs, acquisition-related
contingent consideration and earn-out charges and impairment of right-of-use
assets.
Demonstrating PeopleFluent's continuing customer relevance, an existing
customer, a global technology company based in the US, expanded its use of the
PeopleFluent compensation system. Using PeopleFluent, it paid salary, bonus
and other variable compensation remuneration to its global employee population
for the first time, disbursing some $5 billion in total.
We successfully deployed in 2021 our Reflektive performance product to a
global investment bank with some 40,000 employees worldwide, representing a
highly successful large enterprise deployment of this product line.
During 2021 and following a rigorous tender process, Open LMS along with
partner Seidor, was selected to provide the learning management system for the
Universidad Nacional de Educacion a Distancia. This is the largest
university in Spain and second largest in Europe, with more than 200,000
students. It continues Open LMS' growth in Spain, where customers include
University of Barcelona, University Pompeu Fabra, and Universidad Pontifica
Comillas.
Content & Services
The Content & Services division includes LEO and PRELOADED. LEO is the
Group's innovative digital learning consultancy, strategy, and content
generation specialist, whereas PRELOADED is LTG's highly-regarded games
studio. The division also includes PDT Global, a leading provider of diversity
and inclusion training solutions, which operates alongside Affirmity, LTG's
affirmative action specialist.
£ million 2021 2020 Change
Revenue 44.8 32.2 39%
Adjusted EBIT 10.6 8.0 33%
Adjusted EBIT margin 23.7% 24.9% (1.3%) pts.
Content & Services comprised 17% (2020: 24%) of 2021 Group revenue. On a
proforma basis, assuming a full year revenue contribution from PDT Global and
GP Strategies, Content & Services would represent 8% of Group revenue.
Revenue increased to £44.8 million (2020: £32.2 million) largely reflecting
organic growth of 25% and the initial contribution from PDT Global, which was
purchased in the first quarter of 2021. There was growth from all businesses
in the division, with a particularly strong performance from LEO and
PRELOADED. These were partially offset by adverse currency translation of
£1.6 million.
LEO's strong organic result was driven by a recovery in demand through the
year. Within the organic result LEO benefited from significant increases in
work for a blue-chip, international bank and, following an initial contract
award in 2020, from a well-known international consultancy practice.
Adjusted EBIT also increased to £10.6 million (2020: £8.0 million), driven
by the contribution from increased revenue and the initial contribution from
PDT Global. The adjusted EBIT margin was 23.7% (2020: 24.9%) reflecting a
change in portfolio mix.
Statutory profit before tax was £5.0 million (2020: £4.5 million), after
deducting adjusting items including amortisation of acquisition-related
intangible assets, acquisition and integration costs and acquisition-related
contingent consideration and earn-out charges.
LEO's market is anticipated to benefit from the ongoing move to on-line
learning over the medium term, following COVID-19, as large corporates look to
advance their talent development programmes in an environment where employees
increasingly work remotely. The market is also expected to benefit as
traditional face-to-face training models, involving business travel, are
impacted by environmental and sustainability issues.
Affirmity, the US-market leader for affirmative action planning, also
delivered strong organic growth. This included the benefit from a new focus
on existing customers, new client wins and cross-selling wins from PDT Global,
which as a leading international provider of diversity and inclusion training
solutions, brings complementary offerings to Affirmity.
GP Strategies
GP Strategies is a global workforce transformation provider of organisational
and technical performance solutions. It improves the effectiveness of
organisations by delivering innovative and superior training, consulting, and
business improvement services, customised to meet the specific needs of its
clients. Clients include Fortune 500 companies, automotive, financial
services, technology, aerospace and defence industries, and other commercial
and government customers.
£ million 2021* 2020 Change
Revenue 82.9 - n/a
Adjusted EBIT 7.7 - n/a
Adjusted EBIT margin 9.2% - n/a
*Acquired 14 October 2021.
GP Strategies comprised 32% (2020: nil) of 2021 Group revenue. On a proforma
basis, assuming a full year revenue contribution from all acquisitions made in
2021 GP Strategies would represent 67% of revenue.
The acquisition of GP Strategies completed on 14 October 2021 and
post-completion revenue was £82.9 million (2020: £nil). The strength of its
global business model was demonstrated with significant, new post-acquisition
awards from blue-chip customers in Asia, the Middle East and South America.
In 2021, 68% (2020: n/a) of the revenue in GP Strategies was from long-term
contracts.
Post-acquisition adjusted EBIT was £7.7 million (2020: £nil), resulting in
an adjusted EBIT margin of 9.2% (2020: n/a). The expected post-acquisition
margin increase is ahead of schedule, driven by the swifter than anticipated
improvement in operational performance as management actions, including
enhancing controls, reducing costs, and increasing staff utilisation rates,
show early results. Work is ongoing, and we remain confident GP Strategies
will achieve a low double-digit adjusted EBIT margin in FY 2022, with the run
rate adjusted EBIT margin at the end of 2022 expected to be in the mid-teens
per cent.
The statutory loss before tax was £1.6 million (2020: nil) after adjusting
items including amortisation of acquisition-related intangible assets,
acquisition and integration costs and a net foreign exchange gain.
The quality of the customer service provided by GP Strategies within its
embedded relationships is demonstrated, with the business being awarded
Supplier of the Year by General Motors in the US for a fifth consecutive year.
This is a significant achievement, being one of only 125 companies chosen
out of 20,000 of its suppliers. Feedback indicates that satisfaction levels
from other major customers also continues to be high.
We are encouraged by this early progress and GP Strategies' management remains
on track to deliver against initial targets. These include embedding new
ways of working and supplier rationalisation by the end of H1 2022 and the
launch of a combined customer offer by the end of H2 2022.
As a result of the acquisition of GPS, LTG owned a 10% stake in National
Aerospace Solutions LLC (NAS). This shareholding was not considered to be
core. Consequently, on 18 April 2022 we disposed of it for $3.0 million
proceeds. The GPS employees supporting this business have transferred to NAS
as part of the transaction.
Net Finance Charge and Profit Before Tax
The net finance charge was £2.3 million (2020: £1.4 million), with the
increase driven by the higher average level of debt in the year, due to
acquisition-related cash outflows.
After the net finance charge, adjusted profit before tax was £52.4 million
(2020: £38.9 million) and statutory profit before tax was £9.3 million
(2020: £13.5 million).
Taxation Charge
The adjusted tax charge was £12.7 million (2020: £8.2 million), resulting in
a tax rate of 24% (2020: 21%). The statutory tax credit was £5.6 million
(2020: £3.9 million credit).
Previously the Group had adopted a prudent approach by placing valuation
allowances against deferred tax assets arising in the US. The Group did not
recognise these assets in 2020 but subsequently finalised computations with
allocation of losses and other timing differences that enabled amounts to be
claimed in respect of 2020. It is now clear that the Group will make
sufficient profits to enable it to further utilise these assets in 2021 and
future periods, resulting in credits to prior years corporation tax and
deferred tax of £4.7m and £7.6 million respectively.
The Group has recognised the balance of net deferred tax assets carried
forward, other than losses, of £4.7 million, but continues to adopt a prudent
approach in respect of the balance of losses carried forward of £25.4
million. The losses remain with valuation allowances applied pending
completion of a tax study to confirm their availability in future, hence these
losses have not been recognised as an asset at this stage. The Group
anticipates completion of the study prior to the filing of the 2021 tax return
during 2022. Further details are provided in Notes 6 and 14.
The tax impact of the adjusted basic earnings per share is stated primarily
after adjusting for deferred tax on the amortisation of acquired intangibles,
earnouts, integration costs, tax deductible goodwill and recognition of prior
year deferred tax assets.
Earnings per Share
Adjusted diluted EPS increased to 5.010 pence (2020: 4.294 pence), driven by
the increase in adjusted EBIT. This was partially offset by the higher
average number of shares outstanding, following the equity placings in May
2020 and July 2021.
On a statutory basis, basic EPS decreased to 1.959 pence (2020: 2.450 pence).
In addition to the factors set out above for adjusted EPS, this also reflected
the increase in adjusting items.
Cash Generation
Net cash flows from operating activities were £37.5 million (2020: £39.9
million). This is equivalent to an adjusted operating cash flow conversion
rate of 76% (2020: 85%). The adjusted operating cash flow is net operating
cash flows after adjusting for acquisition-related contingent consideration
and earn-out payments, transaction and integration costs, interest and tax
paid and payments of lease liabilities, expressed as a proportion of adjusted
EBITDA.
There was a cash outflow of £11.6 million (2020: £4.3 million) from
working capital with increased trade and other receivables and amounts
recoverable on contracts, partially offset by increased payables in the
year. Driving this, debtor days increased marginally to 91 days (2020: 87
days) and combined debtor work-in-progress and deferred income days (combined
days) increased to 57 days (2020: minus 48 days), reflecting the change in
portfolio mix following the acquisition of GP Strategies. The combined days
metric benefits from payments being received annually in advance for recurring
software licences.
Net corporation tax payments increased to £9.4 million (2020: £3.4 million),
with net finance payments of £0.3 million (2020: £0.6 million).
There were cash outflows from investment activities of £320.2 million (2020:
£45.2 million). These primarily comprised payments, net of cash acquired in
2021 relating to the acquisitions of Bridge, Reflektive, PDT Global, Moodle
News and GP Strategies of £311.2 million (2020: £39.0 million). In 2020,
acquisitions comprised Open LMS, eCreators, eThink, Patheer and JCA. In
addition, there was £8.4 million (2020: £6.1 million) of outflows relating
to capitalised investment in internally generated IP, as well as £0.6 million
(2020: £0.1 million) from investment in property, plant and equipment.
The 2021 cash outflow of £311.2 million relating to acquisitions, is stated
net of cash acquired of £34.2 million and other closing adjustments.
Included in the acquisition-related cash outflows were intangible assets of
£309.4 million, including goodwill of £176.5 million, as well as other net
assets and liabilities of £36.0 million at fair value. Further details are
set out in note 9.
Net cash inflows from financing activities were £277.6 million (2020: £53.2
million). This was driven by net proceeds from borrowings of £203.7 million
(2020: net payment £18.5 million), comprising £221.8 million (2020: £18.1
million) proceeds from borrowings, net of £18.1 million (2020: £36.6
million) repayment of bank loans. The proceeds from borrowings relate to the
acquisition of GP Strategies, which was partly funded by $305 million of
incremental debt financing, with further details on the Group's current debt
facilities within 'Net Debt and Gearing' below.
In addition, there were £85.6 million (2020: £80.6 million) of proceeds from
the issue of ordinary share capital, net of share issue costs. This was
primarily the equity placing in July 2021 which part funded the acquisition of
GP Strategies, as well as the exercise of employee stock options. In 2020,
this related to the May equity placing and the exercise of employee stock
options.
Offsetting these items, there were also payments for lease liabilities of
£4.4 million (2020: £2.9 million), interest of £0.7 million (2020: £0.4
million), as well as deferred contingent consideration of £0.5 million (2020:
£0.1 million) relating to the Breezy HR and Watershed acquisitions, and
dividends of £6.1 million (2020: £5.5 million).
Capital Allocation, Funding Priorities and Dividend
The Board remains committed to a capital allocation policy that prioritises
investment in the business to drive growth, a progressive dividend policy, and
selectively acquiring value-enhancing businesses.
The Board's progressive dividend policy, while taking into account earnings
cover, also takes into account other factors such as the expected underlying
growth of the business, its capital and other investment requirements. The
strength of the Group's balance sheet and its ability to generate cash are
also considered.
Given the robust operational performance during the year, the Board is
recommending a final dividend of 0.7 pence per share (2020: 0.5 pence). The
total cash cost of the final dividend is approximately £5.5 million.
Together with the interim dividend of 0.3 pence, this gives a total dividend
for the year of 1.0 pence, an increase of 33% on the prior year.
If approved, the final dividend will be paid on 21 July 2022 to all
shareholders on the register at 1 July 2022.
Net Debt and Gearing
At 31 December 2021, the Group's net debt was £141.4 million (31 December
2020: £70.2 million - net cash), excluding £21.8 million (31 December 2020:
£10.3 million) of lease liabilities.
The Group's net debt comprised £225.3 million of debt (31 December 2020:
£18.4 million) and £83.9 million of cash (31 December 2020: £88.6 million).
On the acquisition of GP Strategies, the existing debt facility with Silicon
Valley Bank ('SVB') was repaid and a new facility with SVB, Barclays Bank,
Fifth Third Bank, HSBC UK Bank, and the Bank of Ireland was entered into. This
is made up of two variable rate committed term loans. The Term Facility A of
$265.0 million (£196.3 million at the year-end exchange rate) is available to
the Group until October 2025 with the Term Facility B of $40.0 million (£29.6
million at year-end exchange rates) available to the Group until April 2022.
The Term Facility B was repaid in March 2022. The facilities also include a
$50.0 million (£37.0 million at year end exchange rates) Revolving Credit
Facility and a $50.0 million (£37.0 million at year-end exchange rates)
uncommitted accordion, both available to July 2025. For further details of
the Group's debt facility see Note 17.
The Group's covenant basis net debt/adjusted EBITDA ratio was 1.8 times (2020:
n/a).
Prior Year Adjustment
We have identified the need to make a correction to the presentation of the
2020 and 2019 balance sheets where trade receivables and contract liabilities
(deferred income) of £6.2 million at 31 December 2020 and £7.4 million at 31
December 2019 had been presented 'gross' but should have been presented 'net,'
in accordance with IFRS15. This relates to the timing of recognition of trade
receivable balances which are not due for payment until the following year and
revenue recognition has not commenced.
The Group has restated the presentation of the balance sheet and cash flow
statement for the year, to reflect this requirement. For details of the
presentational changes made, refer to note 3.
The presentational changes made have no impact on reported revenue, profit,
net assets or cash generation in the year.
Balance Sheet
The Group has a strong balance sheet with total shareholder equity of £371.3
million at 31 December 2021 (31 December 2020: £269.1 million), reflecting
the acquisition of GP Strategies and the other 2021 acquisitions. This is
equivalent to 47.1 pence per share (2020: 26.2 pence per share).
Key Performance Indicators (KPIs)
The Group's KPIs are revenue and organic revenue growth, adjusted EBIT, cash
conversion and adjusted, diluted EPS. A discussion of performance against
each KPI is contained within the narrative above.
The profitability of the business, which has a relatively low fixed-cost base,
is managed primarily via the divisional revenue review, with secondary
measures addressing employee utilisation and project margin reviews in Content
& Services and in GP Strategies.
Cash flow is reviewed at a Group level, aided by rolling cash forecasts.
There is a focus on working capital which is reviewed primarily against debtor
days and combined debtor, WIP and deferred income days measures.
Adjusted diluted EPS, as well as incorporating all the elements of the above
KPI's, is additionally impacted by the Group's treasury and taxation
activities. These activities are carried out within the Group's finance team
and seek to manage the Group's net finance and taxation charge.
Kath Kearney-Croft
Chief Financial Officer
29 April 2022
Consolidated Statement of Comprehensive Income
Year ended 31 December 2021
Year ended 31 Dec Year ended 31 Dec
2021 2020
Note £'000 £'000
Revenue 4 258,226 132,324
Operating expenses (241,443) (114,130)
Share based payment charge (5,244) (3,340)
Share of profit from equity accounted investment 5 124 -
Operating profit 11,663 14,854
Analysed as:
Adjusted EBIT 54,754 40,348
Adjusting items included in Operating profit 5 (43,091) (25,494)
Operating profit 11,663 14,854
Finance expense (2,582) (1,525)
Finance income 253 140
Profit before taxation 9,334 13,469
Income tax credit 6 5,586 3,935
Profit for the year 14,920 17,404
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations 1,736 (6,616)
Total comprehensive income for the year attributable to owners of the parent
Company
16,656 10,788
Earnings per share attributable to owners of the parent:
Basic (pence) 7 1.959 2.450
Diluted (pence) 7 1.878 2.382
Adjusted earnings per share:
Basic (pence) 7 5.226 4.417
Diluted (pence) 7 5.010 4.294
Consolidated Statement of Financial Position
As at 31 December 2021
31 Dec 31 Dec
2021 2020
£'000 £'000
Note
(Restated)
Non-current assets
Property, plant and equipment 8 3,232 1,025
Right of use assets 8 17,245 8,806
Intangible assets 10 546,237 256,284
Deferred tax assets 14 22,558 7,614
Other receivables, deposits and prepayments 13 3,541 76
Investments accounted for under the equity method 11 1,018 -
Amounts recoverable on contracts 1,200 624
595,031 274,429
Current assets
Trade receivables 12 122,844 26,805
Other receivables, deposits and prepayments 13 15,242 4,219
Amounts recoverable on contracts 31,604 3,879
Inventory 1,096 -
Corporation tax receivable 2,392 -
Amount owing from related parties 241 54
Cash and bank balances 83,850 88,614
Restricted cash balances 2,987 682
260,256 124,253
Total assets 855,287 398,682
Current liabilities
Lease liabilities 18 6,755 2,536
Trade and other payables 15 172,982 61,836
Borrowings 17 37,503 7,339
Provisions 19 4,855 -
Corporation tax payable - 4,591
ESPP scheme liability 507 562
222,602 76,864
Non-current liabilities
Lease liabilities 18 15,090 7,722
Deferred tax liabilities 14 52,336 25,617
Other long-term liabilities 16 2,940 7,635
Borrowings 17 187,759 11,073
Corporation tax payable 6 1,711 -
Provisions 19 1,511 701
261,347 52,748
Total liabilities 483,949 129,612
Net assets 371,338 269,070
Shareholders' equity
Share capital 3,034 2,853
Share premium account 317,114 231,671
Merger reserve 31,983 31,983
Reverse acquisition reserve (22,933) (22,933)
Share-based payment reserve 11,148 7,439
Foreign exchange translation reserve (5,232) (6,968)
Retained earnings 36,224 25,025
Total equity attributable to the owners of the parent 371,338 269,070
Consolidated Statement of Changes in Equity
Year ended 31 December 2021
Share Share Merger reserve Reverse acquisition reserve Share-based Translation Retained earnings Total equity
capital Premium payments reserve
reserve
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2020 2,509 148,216 31,983 (22,933) 4,413 (352) 11,707 175,543
Profit for the period - - - - - - 17,404 17,404
Exchange differences on translating foreign operations - - - - - (6,616) - (6,616)
Total comprehensive profit for the period - - - - - (6,616) 17,404 10,788
Issue of shares net of share issue costs 344 83,455 - - - - - 83,799
Share-based payment charge credited to equity - - - - 3,340 - - 3,340
Tax credit on share options - - - - - - 1,137 1,137
Transfer on exercise and lapse of options - - - - (314) - 314 -
Dividends paid - - - - - - (5,537) (5,537)
Transactions with owners 344 83,455 - - 3,026 - (4,086) 82,739
Balance at 31 December 2020 2,853 231,671 31,983 (22,933) 7,439 (6,968) 25,025 269,070
Profit for the period - - - - - - 14,920 14,920
Exchange differences on translating foreign operations - - - - - 1,736 - 1,736
Total comprehensive profit for the period - - - - - 1,736 14,920 16,656
Issue of shares net of share issue costs 181 85,443 - - - - - 85,624
Share-based payment charge credited to equity - - - - 5,244 - - 5,244
Share-based payment charge treated as consideration, credited to equity - - - - 120 - - 120
Tax credit on share options - - - - - - 689 689
Transfer on exercise and lapse of options - - - - (1,655) - 1,655 -
Dividends paid 20 - - - - - - (6,065) (6,065)
Transactions with owners 181 85,443 - - 3,709 - (3,721) 85,612
Balance at 31 December 2021 3,034 317,114 31,983 (22,933) 11,148 (5,232) 36,224 371,338
Consolidated Statement of Cash Flows
Year ended 31 December 2021
Year ended Year ended
31 Dec 31 Dec
2021 2020
Note £'000 £'000
(Restated)
Cash flows from operating activities
Profit before taxation 9,334 13,469
Adjustments for:
Loss/(gain) on disposal of PPE and right-of-use assets 202 (122)
Share-based payment charge 5,244 3,340
Amortisation of intangible assets 10 31,787 25,639
Depreciation of plant and equipment 8 780 769
Depreciation of right-of-use assets 8 2,829 2,476
Impairment of right-of-use assets 8 2,120 -
Finance expense (including IFRS 16 finance charge) 517 614
Interest on borrowings 2,065 911
Net foreign exchange (gain)/loss on borrowings (246) -
Acquisition-related contingent consideration and earn-outs 5 5,207 3,511
Fair value movement on contingent consideration 5 22 (1,357)
Payment of acquisition-related contingent consideration and earn-outs (1,180) (1,006)
Share of (profit)/loss in equity accounted investment (124) -
Interest income (7) (140)
Operating cash flows before working capital changes 58,550 48,104
(Increase)/decrease in trade and other receivables (18,377) 1,443
Increase in inventory (64) -
Increase in amount recoverable on contracts (169) (3,427)
Increase/(decrease) in payables 6,988 (2,296)
46,928 43,824
Interest paid - (750)
Interest received - 140
Income tax paid (9,403) (3,359)
Net cash flows from operating activities 37,525 39,855
Cash flows used in investing activities
Purchase of property, plant and equipment 8 (572) (114)
Development of intangible assets 10 (8,390) (6,115)
Acquisition of subsidiaries, net of cash acquired 9 (311,234) (38,988)
Net cash flows used in investing activities (320,196) (45,217)
Cash flows from financing activities
Dividends paid 20 (6,065) (5,537)
Proceeds from borrowings 17 221,853 18,182
Repayment of bank loans 17 (18,143) (36,640)
Interest paid(1) (316) -
Interest received(1) 7 -
Issue of ordinary share capital net of share issue costs 85,624 80,581
Contingent consideration payments in the period (520) (121)
Interest paid on lease liabilities(1) 18 (434) (418)
Payments for lease liabilities 18 (4,420) (2,899)
Net cash flows from financing activities 277,586 53,148
Net (decrease)/increase in cash and cash equivalents (5,085) 47,786
Cash and cash equivalents at beginning of the year 88,614 42,032
Exchange gains/(losses) on cash 321 (1,204)
Cash and cash equivalents at end of the year 83,850 88,614
(1) In 2021, interest paid and received on financial assets and liabilities has
been presented within financing activities, whereas in the prior year it was
shown partly within operating activities and partly within financing
activities.
1. General information
The financial information for the year ended 31 December 2021 and the year
ended 31 December 2020 does not constitute the company's statutory accounts
for those years.
Statutory accounts for the year ended 31 December 2020 have been delivered to
the Registrar of Companies. The statutory accounts for the year ended 31
December 2021 will be delivered to the Registrar of Companies in due course.
The auditors' reports on the accounts for 31 December 2021 and 31 December
2020 were unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006.
Learning Technologies Group plc ('the Company') and its subsidiaries
(together, 'the Group') provide a range of talent and learning solutions;
content, services and digital platforms, 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 15 Fetter Lane, London, EC4A 1BW. The registered number
of the Company is 07176993.
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 have been prepared in accordance with
UK-adopted international accounting standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into the UK law and became UK-adopted international accounting
standards, with future changes being subject to endorsement by the UK
Endorsement Board. The group transitioned to UK-adopted international
accounting standards in its consolidated financial statements on 1 January
2021. There was no impact or changes in accounting from the transition.
Going concern
The Directors report that the going concern basis is appropriate from at least
12 months from the approval of these financial statements. The Group meets
its day-to-day working capital requirements from the positive cash flows
generated by its trading activities and its available cash resources. These
are supplemented when required by additional drawings under the Group's
committed $50.0 million revolving credit facility (RCF) and an uncommitted
$50.0 million accordion facility, which are available until 2025. In July
2021, the Group repaid the outstanding balance of the existing term loan and
associated accrued interest totalling $20.2 million (£14.6 million) in
July. The Group has also agreed to a new multicurrency senior term and
revolving facilities agreement. This new debt facility which is with Silicon
Valley Bank ('SVB'), Barclays Bank, Fifth Third Bank, HSBC UK Bank and the
Bank of Ireland, comprises two committed term loans, Term Facility A of $265.0
million (£196.3 million at the year-end exchange rate), Term Facility B of
$40.0 million (£29.6 million at the year-end exchange rate), a $50.0 million
(£37.0 million at the year-end exchange rate) committed RCF and a $50.0
million (£37.0 million at the year-end exchange rate) uncommitted accordion
facility. Term Facility B was fully repaid in March 2022 and Term Facility A
is repayable by quarterly instalments of $9.6 million from December 2022 until
October 2025, with the remaining balance payable therein. In addition, a 12
month extension request is available to the Group for Term Facility A and the
RCF.
The Group continues to hold a strong liquidity position overall at 31 December
2021, with gross cash and cash equivalents of £83.9 million and net debt of
£141.4 million (see Note 17) (31(st) December 2020: gross cash was £88.6
million and net funds £70.2 million). Whilst there are a number of risks to
the Group's trading performance, including from the COVID-19 pandemic and its
impact on the global economy, the Group is confident of its ability to
continue to access sources of funding in the medium term.
The Directors report that they have re-assessed the principal risks, reviewed
current performance and forecasts, combined with expenditure commitments,
including capital expenditure, business acquisitions, and borrowing
facilities. The Group's forecasts demonstrate it will generate profits and
cash in the year ending 31(st) December 2022 and beyond. In addition,
following the completion of the acquisition of GP Strategies (refer to Note 9)
in October 2021 for a total of £287.6 million, the Group continues to have
sufficient cash reserves to enable it to meet its obligations as they fall
due, as well as operate within its banking covenants, for a period of at least
12 months from the date of signing of these financial statements.
The Group has also assessed a range of downside scenarios to assess if there
is a significant risk to the Group's liquidity position. The forecasts and
scenarios prepared consider our trading experience to date and we have
modelled downside scenarios such as:
I. 10% and 25% reductions in revenues;
II. customer payment days (DSO) of 100 days;
III. combining 10% reduction in revenues and DSO of 100 days;
IV. increasing staff costs by 7% and other costs by 8% from H1 2022; and
V. modelling high cost inflation above that in (IV) above to determine the level
where a covenant breach could occur.
The directors have concluded that it is appropriate to adopt the going concern
basis of accounting in preparing the Annual Report, having undertaken a review
of a detailed forecast for 2022 and the impact this forecast has on the
Group's gross cash, net debt and ability to meet bank covenants under the
existing facilities agreement.
Changes in accounting policies
(i) New standards, interpretations and amendments adopted from 1 January
2021
New standards impacting the Group that have been adopted in the annual
financial statements for the year ended 31 December 2021 are:
Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform - Phase 2
The Group has considered the above new standards and amendments and has
concluded that, they are either not relevant to the Group or they do not have
a significant impact on the Group's consolidated financial statements.
(ii) New standards, interpretations and amendments not yet effective
At the date of authorisation of these consolidated Group financial statements,
the following standards and interpretations, which have not been applied in
these financial statements, were in issue but not yet effective (and in some
cases had not yet been adopted by the EU). Management are currently
assessing the impact of these new standards on the group.
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use
Amendments to IFRS 3 References to Conceptual Framework
Amendments to IFRS 1, 9, 16 and 41 Annual Improvements to IFRS Standards 2018-2020
Alternative performance measures
The Group has identified certain alternative performance measures ("APMs")
that it believes will assist the understanding of the performance of the
business. The Group believes that Adjusted EBIT, adjusting items,
Shareholders' funds and net cash / debt provide useful information to users of
the financial statements. The terms are not defined terms under IFRS and may
therefore not be comparable with similarly titled measures reported by other
companies. They are not intended to be a substitute for, or superior to, IFRS
measures and are discussed further in the Glossary.
Adjusting items
The Group has chosen to present an adjusted measure of profit and earnings per
share, which excludes certain items which are separately disclosed due to
their size, nature or incidence, and are not considered to be part of the
normal operating costs of the Group. These costs (refer to Note 5) may include
the financial effect of adjusting items such as, inter alia, restructuring
costs, impairment charges, amortisation of acquired intangibles, costs
relating to business combinations, one-off foreign exchange gains or losses,
integration costs, acquisition related share based payments charges,
contingent consideration and earn-outs, joint venture profits and losses and
fixed asset or right-of-use asset disposal gains or losses.
(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.
Business combinations other than the share for share acquisition of Epic Group
Limited by In-Deed Online plc in 2013 are accounted for under the acquisition
method and merger relief has been taken on recognising the shares issued on
acquisition, where applicable.
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. 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. Intragroup losses may indicate an impairment which may require
recognition in the consolidated financial statements. Where necessary,
adjustments are made to the Financial Statements of subsidiaries to ensure
consistency of accounting policies with those of the Group.
3. Prior year adjustment
The Company has identified the need to make a correction to the 2020 and 2019
balance sheets where trade receivables and contract liabilities (deferred
income) amounting to £6.2 million as at 31 December 2020 and £7.4 million as
at 31 December 2019 should have been presented net in accordance with the
requirements of IFRS15 but had been presented gross. This relates to
non-cancellable trade receivable balances at each year end which are not due
for payment until after year end.
To correct the presentation of these balances in the prior year, the Group has
restated the balance sheet and associated note disclosures as at 31 December
2020 and cash flow statement for the year then ended as outlined below.
Statement of financial position adjustments 31 Dec Adjustments 31 Dec
2020 2020
£'000 £'000
(Restated)
Current assets
Trade receivables 32,984 (6,179) 26,805
Other receivables, deposits and prepayments 4,219 4,219
Amounts recoverable on contracts 3,879 3,879
Inventory - -
Corporation tax receivable - -
Amount owing from related parties 54 54
Cash and bank balances 88,614 88,614
Restricted cash balances 682 682
130,432 (6,179) 124,253
Total assets 404,861 (6,179) 398,682
Current liabilities
Lease liabilities 2,536 2,536
Trade and other payables 68,015 (6,179) 61,836
Borrowings 7,339 7,339
Provisions - -
Corporation tax payable 4,591 4,591
ESPP scheme liability 562 562
83,043 (6,179) 76,864
Total liabilities 135,791 (6,179) 129,612
Net assets 269,070 - 269,070
Statement of cash flows adjustments 31 Dec Adjustments 31 Dec
2020 2020
£'000 £'000
(Restated)
(Increase)/decrease in trade and other receivables (4,736) 6,179 1,443
(Decrease)/increase in payables 3,883 (6,179) (2,296)
Cash and cash equivalents at end of the year 88,614 - 88,614
Changes to associated note disclosures 31 Dec Adjustments 31 Dec
2020 2020
£'000 £'000
(Restated)
Note 4 - Segment analysis
Software & Platforms - Total assets 342,941 (6,179) 336,762
Group - Total assets 404,861 (6,179) 398,682
Note 12 - Trade receivables
Trade receivables 34,479 (6,179) 28,300
Allowance for impairment loses (1,495) - (1,495)
32,984 (6,179) 26,805
Changes to associated note disclosures 31 Dec Adjustments 31 Dec
2020 2020
£'000 £'000
(Restated)
Note 15 - Trade and other payables
Trade payables 2,335 2,335
Contract liabilities 51,679 (6,179) 45,500
Tax and social security 1,687 1,687
Contingent consideration 493 493
Acquisition-related contingent consideration and earn-outs 1,205 1,205
Accruals 10,616 10,616
68,015 (6,179) 61,836
Financial Instruments
Credit risk exposure
United Kingdom 3,510 3,510
North America 22,892 22,892
Europe 3,443 3,443
Asia Pacific 2,393 2,393
Middle East and Africa 755 755
South and Central America 1,486 1,486
Allowance for impairment losses (1,495) (1,495)
Contract liabilities netted off (see Note 12) - (6,179) (6,179)
32,984 26,805
Ageing analysis
Not past due 21,229 (6,179) 15,050
Past due:
- Less than three months 6,333 6,333
- Three to six months 4,241 4,241
- Past six months 2,676 2,676
Gross amount 34,479 (6,179) 28,300
Classification of financial instruments
Financial assets at amortised cost
Trade receivables 32,984 (6,179) 26,805
Amounts recoverable on contracts 4,503 4,503
Amount owing by related parties 54 54
Cash and bank balances 88,614 88,614
126,155 (6,179) 119,976
The impact on the 31 December 2019 balance sheet is to reduce trade
receivables and total assets by £7.4 million and trade and other payables
(contract liabilities) and total liabilities by £7.4 million. There is no
impact on net assets, cash flow or reserves in 2019.
4. 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), in order to allocate resources to the segment and to assess its
performance.
The Directors of the Company consider there to be four reportable segments,
being the Software & Platforms division, the Content & Services
division, the GP Strategies segment and an Other segment which includes rental
income. A majority of sales were generated by the operations in the United
States in the year ended 31 December 2021 and in the year ended 31 December
2020. The additional reportable segment of GP Strategies arose as a result
of the acquisition occurring in October 2021 and the fact that the GP
Strategies business is yet to be fully integrated operationally.
Income and expenses relating to the Group's administrative functions have been
apportioned to the operating segments identified based on revenue.
SaaS, long term contract and transactional revenue is defined in the in the
Glossary.
Geographical information
The Group's revenue from external customers and non-current assets by
geographical location are detailed below.
UK Mainland Europe United States Canada Asia Pacific Rest of the world Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
31 Dec 2021
Revenue 32,493 18,779 175,102 17,026 5,636 9,190 258,226
Non-current assets 46,638 439 504,689 153 20,442 112 572,473
31 Dec 2020
Revenue 21,501 6,184 92,281 4,344 3,508 4,506 132,324
Non-current assets 28,206 - 223,310 24 15,267 8 266,815
The total non-current assets figure is exclusive of deferred tax assets in
each of the periods above.
Revenue by nature
The Group's revenue by nature is analysed as follows:
Software & Platforms Content & Services GP Strategies Other
On-premise Software Licences Hosting & SaaS Support & Maintenance Total Content Platform Development Consulting & Other Total Global services Regional services Other technical Total Rental Income Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December 2021
SaaS and long term contracts 21,441 101,348 3,293 126,082 - 1,039 9,687 10,726 17,627 35,268 3,234 56,129 143 193,080
Transactional 1,046 1,979 1,367 4,392 19,151 4,916 9,962 34,029 1,742 18,324 6,659 26,725 - 65,146
22,487 103,327 4,660 130,474 19,151 5,955 19,649 44,755 19,369 53,592 9,893 82,854 143 258,226
Depreciation & amortisation (6,169) (2,117) (928) - (9,214)
Adjusted EBIT 36,365 10,591 7,655 143 54,754
Amortisation of acquired intangibles (20,126) (3,823) (2,233) (26,182)
Acquisition related adjusting items (6,220) (1,078) (8,158) - (15,456)
Other adjusting items (2,322) - 869 - (1,453)
Finance expenses (1,938) (637) 246 - (2,329)
Profit / (Loss) before tax 5,759 5,053 (1,621) 143 9,334
Additions to intangible assets* 65,175 12,549 240,066 - 317,790
Total Assets 348,741 75,665 430,881 855,287
*Includes additions from business combinations, refer to Note 10.
Software & Platforms Content & Services Other
On-premise Software Licences Hosting & SaaS Support & Maintenance Total Content Platform Development Consulting & Other Total Rental Income Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December 2020
SaaS and long term contracts 16,643 76,345 3,817 96,805 - 1,021 9,212 10,233 98 107,136
Transactional 1,129 1,033 1,053 3,215 12,906 3,541 5,526 21,973 - 25,188
17,772 77,378 4,870 100,020 12,906 4,562 14,738 32,206 98 132,324
Depreciation & amortisation (5,626) (1,811) - (7,437)
Adjusted EBIT 32,224 8,026 98 40,348
Amortisation of acquired intangibles (18,132) (3,315) (21,447)
Acquisition related adjusting items (3,099) - - (3,099)
Other adjusting items (978) 30 - (948)
Finance expenses (1,095) (290) - (1,385)
Profit / (Loss) before tax 8,920 4,451 98 13,469
Additions to intangible assets* 62,433 - - 62,433
Total Assets 336,762 61,920 - 398,682
(Restated)
*Includes additions from business combinations, refer to Note 10.
Adjusted EBIT is the main measure of profit reviewed by the Chief Operating
Decision Maker. The total assets figure is inclusive of deferred
tax assets in each of the periods above.
Total liabilities by Operating Segment are not regularly review by the Chief
Operating Decision Maker and as such, are not included in the
table above.
Information about major customers
In the year ended 31 December 2021 and the year ended 31 December 2020, no
customer accounted for more than 10 per cent of reported
revenues.
5. Adjusting items
These items are included in normal operating costs of the business, but are
significant cash and non cash expenses that are separately disclosed because
of their size, nature or incidence. It is the Group's view that excluding
them from Operating Profit gives a better representation of the underlying
performance of the business in the period. Further details of the adjusting
items are included in Note 2.
31 Dec 31 Dec
2021 2020
£'000 £'000
Adjusting items included in Operating profit:
Acquisition related costs:
Amortisation of acquired intangibles 26,182 21,447
Acquisition-related contingent consideration and earn-outs 5,207 3,511
Acquisition-related share based payment charge 123 -
Fair value movement on contingent consideration 22 (1,357)
Acquisition costs 6,067 715
Integration costs 4,037 230
Total acquisition related costs 41,638 24,546
Other adjusting items:
Impairment of right-of-use assets 2,120 -
Loss on disposal of fixed assets 272 21
Loss/(profit) on disposal of right-of-use assets (70) (143)
Net foreign exchange (gain)/loss arising due to business acquisition (745) 1,070
Share of (profit)/loss of joint venture (124) -
Total other adjusting items 1,453 948
Total adjusting items 43,091 25,494
As outlined above, the material adjustments are made in respect of:
- Amortisation of acquired intangibles - these costs are excluded from the
adjusted results of the Group since the costs are non-cash charges arising
from investment activities. As such, they are not considered reflective of the
core trading performance of the Group.
- Impairment of right-of-use assets - these costs are excluded from the adjusted
results of the Group since the costs are one-off, non-cash charges related to
an abandoned lease that cannot be sub-let.
- Acquisition-related share based payments, contingent consideration and
earn-outs - these costs are excluded from the adjusted results since these
costs are also associated with business acquisitions and represent
post-combination remuneration, which is not included in the calculation of
goodwill and also not considered part of the core trading performance of the
Group.
- Fair value movement on contingent consideration - similar to the above, any
adjustments to contingent consideration through profit or loss are excluded
from adjusted results on the basis that it is non-cash non-operational income
or costs.
- Foreign exchange (gains) or losses associated with business acquisitions -
excluded from the adjusted results of the Group since these costs relate to
investment activities and occur irregularly.
- Costs of acquisition and integration - the costs of acquiring and integrating
subsidiaries purchased in the year. These costs associated with completed
acquisitions are excluded from the adjusted results on the basis they are
directly attributable to investment activities, rather than the core trading
activities of the Group.
6. Income tax
31 Dec 31 Dec
2021 2020
£'000 £'000
Current tax expense:
- UK current tax on profits for the year 926 626
- Adjustments in respect to prior years (4,678) 376
- Foreign current tax on profits for the year 9,598 4,087
Total current tax 5,846 5,089
Deferred tax (Note 14):
- Origination and reversal of temporary differences (3,711) (4,703)
- Adjustments in respect to prior years (7,611) (4,025)
Change in deferred tax rate (110) (296)
Total deferred tax (11,432) (9,024)
Income tax (credit)/expense (5,586) (3,935)
In 2021 UK Government budget it was announced the UK corporation tax rate
would increase to 25% from 1 April 2023.
The Group has adopted a prudent approach in prior years regarding the
recognition of deferred tax assets and has made valuation allowances against
the majority of the assets. The Group has released the valuation allowances
except for those relating to trading losses as disclosed in Note 14 as it is
now clear the Group has made profits and should continue to make profits which
can utilise these assets. This has resulted in a credit to prior years
corporation tax and deferred tax of £4.7 million and £7.6 million
respectively.
The Group continues to apply a valuation allowance against losses acquired
with the PeopleFluent acquisition until a further tax study has been completed
to confirm their availability. £10.2 million of the losses have been claimed
in the 2020 US corporate tax returns and it is estimated that a further £10.4
million of the losses will be utilised in the 2021 returns. The tax effect of
claiming these losses is reflected in the credit to prior years.
The current year deferred tax credit of £3.7 million arises from the
origination and reversal of temporary differences and primarily relates to the
deferred tax liability release associated with acquired intangible
amortisation and other temporary differences such as accelerated depreciation,
share based payments, provisions and deferred revenue.
The £1.7 million non-current corporation tax liability is in relation to
amounts payable over eight years by GP Strategies Corporation and TTi Global,
Inc. in relation to US tax reform.
A reconciliation of income tax expense applicable to the profit 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
2021 2020
£'000 £'000
Profit before taxation 9,334 13,469
Tax calculated at the domestic tax rate of 19.00% (2020: 19.00%): 1,774 2,559
Tax effects of: -
Income not subject to tax 310 (482)
Expenses not deductible for tax purposes 3,968 872
Joint venture/associate results reported net of tax 29 -
Tax deductions not recognised as an expense (429) (353)
Tax losses in the year for which no deferred tax is recognised (640) (269)
Difference between deferred and current tax rate 378 (246)
Reversal of prior year deferred tax short term timing difference (12,289) (4,324)
Adjustment to unrecognised deferred tax assets - (1,549)
Difference in foreign exchange rates - -
Effect of different international tax rates 1,338 152
Changes in deferred tax rate (25) (295)
(5,586) (3,935)
The aggregate current and deferred tax directly credited to equity amounted to
£689,000 (2020: £1,137,000).
7. Earnings per share
31 Dec 31 Dec
2021 2020
Pence Pence
Basic earnings per share 1.959 2.450
1.878 2.382
Diluted earnings per share
5.226 4.417
Adjusted basic earnings per share
5.010 4.294
Adjusted diluted earnings per share
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 or deferred consideration payable in shares where
the contingent conditions have been met.
In order to give a better understanding of the underlying operating
performance of the Group, an adjusted earnings per share comparative has been
included. Adjusted earnings per share is stated after adjusting the profit
after tax attributable to equity holders of the Group for certain charges as
set out in the table below. Adjusted diluted earnings per share has been
calculated to also include the contingent shares payable as deferred
consideration on acquisitions where the future conditions have not yet been
met, as shown below.
Adjusted earnings per share is stated after the impact of the adjusting items
disclosed in Note 5, excluding profit or losses on disposal of fixed assets
and right-of-use assets and additional non-cash finance expenses and
non-operational interest income. This is to reflect the underlying operational
performance of the Group, and exclude interest income earned from cash
reserves held by the Group.
The calculation of earnings per share is based on the following earnings and
number of shares.
2021 2020
Profit after tax Weighted average number of shares Pence per share Profit after tax Weighted average number of shares Pence per share
£'000 '000 £'000 '000
Basic earnings per ordinary share attributable to the owners of the parent 14,920 761,627 1.959 17,404 710,348 2.450
Effect of adjustments:
Amortisation of acquired intangibles 26,182 21,447
Impairment of right-of-use assets 2,120 -
Integration costs 4,037 230
Cost of acquisitions 6,067 715
Fair value movement on contingent consideration 22 (1,357)
Contingent consideration and earn-outs from acquisitions 5,207 3,511
Shared based payment charge from acquisitions 123 -
Net foreign exchange differences on business acquisitions (745) 1,070
Interest receivable (7) (140)
Net foreign exchange gain on borrowings (246) -
Finance expense on contingent consideration 82 196
Finance expense on lease liabilities (IFRS 16) 435 418
Income tax expense (5,586) (3,935)
Effect of adjustments 37,691 - 4.949 22,155 - 3.119
Adjusted profit before tax 52,611 - - 39,559 - -
Tax impact after adjustments (12,811) - (1.682) (8,183) - (1.152)
Adjusted basic earnings per ordinary share 39,800 761,627 5.226 31,376 710,348 4.417
Effect of dilutive potential ordinary shares:
Share options - 32,804 (0.216) - 20,271 (0.123)
Adjusted diluted earnings per ordinary share 39,800 794,431 5.010 31,376 730,619 4.294
Diluted earnings per ordinary share attributable to the owners of the parent 14,920 794,431 1.878 17,404 730,619 2.382
8. Property, plant, equipment and right of use assets
Right of use assets
Computer equipment Fixtures Leasehold Total Total
and Improvements Computer equipment Property Motor vehicles
fittings
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
2,590 846 290 3,726 12,255 - 12,338
At 1 January 2020 83
Additions on acquisitions 4 - 5 9 - 36 - 36
Additions 102 12 - 114 - 2,219 - 2,219
Foreign exchange differences (9) 29 (15) 5 - (121) - (121)
Disposals (485) (30) (66) (581) - (1,002) - (1,002)
2,202 857 214 3,273 13,387 - 13,470
At 31 December 2020 83
Additions on acquisitions 657 224 1,713 2,594 181 12,429 134 12,744
Additions 278 28 266 572 315 982 - 1,297
Foreign exchange differences 12 (4) 21 29 (20) 36 - 16
Impairments - - - - - (2,120) - (2,120)
Disposals (1,345) (667) (597) (2,609) - (1,367) - (1,367)
1,804 438 1,617 3,859 23,347 134 24,040
At 31 December 2021 559
Accumulated Depreciation
7 2,039 2,414 - 2,474
At 1 January 2020 1,658 374 60
Charge for the year 539 167 63 769 23 2,453 - 2,476
Disposals (491) - (69) (560) - (286) - (286)
At 31 December 2020 1,706 541 1 2,248 83 4,581 - 4,664
Charge for the year 397 142 241 780 103 2,713 13 2,829
Transfers out (64) - - (64) - - - -
Disposals (1,758) (559) (20) (2,337) - (698) - (698)
At 31 December 2021 281 124 222 627 186 6,596 13 6,795
Net book value
At 31 December 2020 496 316 213 1,025 - 8,806 - 8,806
At 31 December 2021 1,523 314 1,395 3,232 373 16,751 121 17,245
The above property, plant and equipment and right-of-use assets are held as
security as part of the fixed and floating charge over the assets of the
Group, refer to Note 17 for further details of the Group's borrowings.
9. Acquisitions
We have outlined below a summary of the consideration paid, the provisional
fair value of acquired intangible assets, the provisional fair value of other
acquired assets and liabilities assumed at the acquisition date and the
resulting goodwill for each acquisition, with further detail provided for each
acquisition below.
Acquisition Goodwill Acquired customer relationships Acquired software and IP Acquired brand Acquired deferred tax liabilities Fair value of other identifiable assets and liabilities Consideration Cash acquired Non-cash elements Net cash outflow
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Reflektive 1,431 3,051 4,497 - (1,052) 2,057 9,984 3,322 6,662
PDT Global 7,577 4,060 430 170 (932) 2,112 13,417 2,148 11,269
Bridge 21,122 7,306 18,348 1,243 (7,112) (6,749) 34,158 - 34,158
Moodle News - 69 10 20 (27) - 72 - 36 36
GP Strategies 146,411 64,882 17,562 11,211 (23,591) 71,270 287,745 28,516 120 259,109
Total 176,541 79,368 40,847 12,644 (32,714) 68,690 345,376 33,986 156 311,234
Reflektive
On 1 February 2021, Learning Technologies Group Plc completed the acquisition
of Reflektive Inc ("Reflektive"), a leading performance management software
provider, from a group of institutional investors for cash consideration of
$13.7 million (c.£10.0 million), funded from LTG's cash resources.
Headquartered in San Francisco, Reflektive specialises in engagement and
analytics tools. It offers a collaborative goal setting, continuous feedback
and analytics platform used by corporate teams and individuals to provide
measurable results for boosting productivity, engagement, and retention.
Reflektive has joined LTG's PeopleFluent business, integrating its solution
with the existing PeopleFluent talent management portfolio. The combination
with LTG's other software solutions provides opportunities for cross-sell and
upsell-led growth.
The following table summarises the consideration paid for Reflektive, the fair
value of assets acquired and liabilities assumed at the acquisition date.
The right-of-use asset in relation to the acquired lease was recognised on
acquisition, as required by IFRS 3. Following this, the right-of-use asset
was immediately impaired as it related to an office space that was completely
abandoned at acquisition date and the Group was not able to sublet it, see
Note 5 for further details.
Consideration Fair Value
£'000
Cash paid 5,840
Adjustments and hold backs (513)
Payment for cash acquired 4,657
Total consideration 9,984
Recognised amounts of identifiable assets acquired and liabilities assumed Fair value
£'000
Cash and cash equivalents 3,322
Restricted cash 1,216
Property, plant and equipment 59
Right-of-use assets 2,120
Lease liabilities (2,120)
Trade and other receivables 2,954
Trade and other payables (5,065)
Provision (429)
Deferred tax assets 983
Deferred tax liabilities (2,035)
Customer relationships 3,051
Software and intellectual property 4,497
Total identifiable net assets 8,553
Goodwill 1,431
Total 9,984
The purchase price adjustments were for customary working capital adjustments.
The total consideration and fair value adjustments to the assets and
liabilities assumed are provisional and are management's best estimates at
this time.
The goodwill arising is attributable to the acquired workforce, anticipated
future profit from expansion opportunities and synergies of the business. The
goodwill arising from the acquisition has been allocated to the Software
Solutions CGU. Fair value adjustments have been recognised for
acquisition-related intangible assets and related deferred tax as well as
future liabilities which are in alignment with accounting policies.
Acquisition-related intangible assets of £3.1 million relate to the valuation
of the customer relationships which are amortised over a period of eight
years, and £4.5 million relates to the value of the acquired intellectual
property and software development which is amortised over ten years.
Provisions of £429,000 noted above are presented within additions arising
from acquisitions in Note 19.
Acquisition costs of £0.2 million have been charged to the statement of
comprehensive income in the year relating to the acquisition of Reflektive.
A deferred tax liability of £2.0 million in respect of the
acquisition-related intangible assets was established on acquisition (refer to
Note 14).
Reflektive contributed £9.0 million of revenue for the period between the
date of acquisition and the balance sheet date and £3.3 million of profit
before tax attributable to equity holders of the parent. As a preliminary
assessment, had the acquisition of Reflektive been completed on the first day
of the period Group revenues would have been approximately £0.9 million
higher and group profit before tax attributable to equity holders of the
parent would have been approximately £0.5 million lower.
PDT Global
On 5 February 2021, Learning Technologies Group Plc acquired UK-based The
People Development Team Limited ('PDT Global'), a leading provider of online
Diversity and Inclusion (D&I) training solutions, for cash consideration
of £13.4 million funded from LTG's cash resources.
Further performance based payments, capped at £6.1 million are payable in
cash to the PDT Global sellers based on ambitious revenue growth targets in
each of the years ending 31 December 2021, 2022 and 2023. These payments are
linked to continuous employment so are excluded from the acquisition
consideration and instead are recognised as an expense over the service period
within the Statement of Comprehensive Income.
The following table summarises the consideration paid for PDT Global, the fair
value of assets acquired and liabilities assumed at the acquisition date.
Consideration Fair Value
£'000
Cash paid 13,417
Total consideration 13,417
Recognised amounts of identifiable assets acquired and liabilities assumed Fair value
£'000
Cash and cash equivalents 2,148
Property, plant and equipment 30
Trade and other receivables 1,797
Trade and other payables (1,863)
Deferred tax liabilities (932)
Customer relationships 4,060
Intellectual property 430
Brand name 170
Total identifiable net assets 5,840
Goodwill 7,577
Total 13,417
The total consideration and fair value adjustments to the assets and
liabilities assumed are provisional and are management's best estimates at
this time.
The goodwill arising is attributable to the acquired workforce, anticipated
future profit from expansion opportunities and synergies of the business. The
goodwill arising from the acquisition has been allocated to the Diversity and
Inclusion CGU. Fair value adjustments have been recognised for
acquisition-related intangible assets and related deferred tax as well as
future liabilities which are in alignment with accounting policies.
Acquisition-related intangible assets of £4.1 million relate to the valuation
of the customer relationships which are amortised over a period of four years,
£0.4 million relates to the value of the acquired intellectual property which
is amortised over five years and £0.2 million relates to the value of the
acquired PDT Global brand, which is amortised over two years.
Acquisition costs of £0.1 million have been charged to the statement of
comprehensive income in the year relating to the acquisition of PDT Global.
A deferred tax liability of £0.9 million in respect of the
acquisition-related intangible assets was established on acquisition (refer to
Note 14).
PDT Global contributed £4.9 million of revenue for the period between the
date of acquisition and the balance sheet date and £2.2 million of profit
before tax attributable to equity holders of the parent. As a preliminary
assessment, had the acquisition of PDT Global been completed on the first day
of the financial period Group revenues would have been approximately £0.4
million higher and group profit before tax attributable to equity holders of
the parent would have been approximately £0.2 million higher.
Bridge
On 1 March 2021, Learning Technologies Group plc, acquired getBridge LLC and
related assets ("Bridge"), a leading learning and talent development software
provider, from Instructure Inc for a cash consideration of $47.5 million
(c.£34.2 million), funded from LTG's existing cash resources.
Bridge is a learning, performance and skills development platform for
mid-enterprise organisations, headquartered in the US with operations in the
UK and Hungary. Bridge provides a learning management system in addition to
performance, engagement and skills development products, on a single,
easy-to-use, SaaS-based platform.
The acquisition of Bridge significantly extends LTG's mid-enterprise learning
and talent offering. Bridge is highly complementary to PeopleFluent, which
serves the large enterprise market, and BreezyHR, which serves the small and
medium-sized business market. The acquisition is strategically important
because it enables LTG to provide a holistic learning and talent development
offering to meet the needs of small, mid-size and large enterprises, three
distinct groups with varying requirements. The combination and integration of
Bridge with LTG's other portfolio offerings, including the recently acquired
Reflektive engagement and analytics platform, will create opportunities for
cross-sell and upsell-led growth within the Group.
The following table summarises the consideration paid for Bridge, the fair
value of assets acquired and liabilities assumed at the acquisition date.
Consideration Fair Value
£'000
Cash paid 33,764
Adjustments and hold backs 394
Total consideration 34,158
Recognised amounts of identifiable assets acquired and liabilities assumed Fair value
£'000
Trade and other receivables 796
Trade and other payables (7,545)
Deferred tax assets 151
Deferred tax liabilities (7,263)
Brand name 1,243
Software 18,348
Customer relationships 7,306
Total identifiable net assets 13,036
Goodwill 21,122
Total 34,158
The adjustments to the purchase price were for customary working capital
adjustments.
The total consideration and fair value adjustments to the assets and
liabilities assumed are provisional and are management's best estimates at
this time.
The goodwill arising is attributable to the acquired workforce, anticipated
future profit from expansion opportunities and synergies of the business. The
goodwill arising from the acquisition has been allocated to the Software
Solutions CGU. Fair value adjustments have been recognised for
acquisition-related intangible assets and related deferred tax as well as
future liabilities which are in alignment with accounting policies.
Acquisition-related intangible assets of £7.3 million relate to the valuation
of the customer relationships which are amortised over a period of eleven
years, £18.3 million relates to the value of the acquired intellectual
property and software development which is amortised over ten years and £1.2m
relates to the value of the acquired Bridge brand which is amortised over five
years.
Acquisition costs of £0.3 million have been charged to the statement of
comprehensive income in the year relating to the acquisition of Bridge.
A deferred tax liability of £7.2 million in respect of the
acquisition-related intangible assets was established on acquisition (refer to
Note 14).
Bridge contributed £14.5 million of revenue for the period between the date
of acquisition and the balance sheet date and £2.5 million of profit before
tax attributable to equity holders of the parent. As a preliminary assessment,
had the acquisition of Bridge been completed on the first day of the financial
period Group revenues would have been approximately £2.8 million higher and
group profit before tax attributable to equity holders of the parent would
have been approximately £0.1 million higher.
Moodle News
On 3 August 2021, Learning Technologies Group plc, completed the acquisition
of the business and assets of Moodle News LLC ("Moodle News") for cash
consideration of USD $50,000 (£36,000) funded by the Group's existing cash.
Further performance based payments, capped at USD $50,000 are payable in cash
to the sellers based on growth targets in attendees at the eLearning Success
summit and annual organic website visitors in the two years following the
acquisition. These payments are not linked to continuous employment and are
included in the acquisition consideration.
Moodle News is an online news outlet based in Colorado that provides
discussions, reviews and tutorials about the technologies that make up
successful e-learning systems, as well as hosting the E-Learning Success
Summit.
The following table summarises the consideration paid for Moodle News, the
fair value of assets acquired and liabilities assumed at the acquisition date.
Consideration Fair Value
£'000
Cash paid 36
Contingent consideration 36
Total consideration 72
Recognised amounts of identifiable assets acquired and liabilities assumed Fair value
£'000
Deferred tax liabilities (27)
Brand name 20
Software 10
Customer relationships 69
Total identifiable net assets 72
Goodwill -
Total 72
All acquisition-related intangible assets of Moodle News are amortised over
one year.
GP Strategies
On 14 October 2021, Learning Technologies Group plc, acquired GP Strategies
Corporation ('GP Strategies') a leading global workforce transformation
provider with significant offerings in learning services, custom content and
consulting for a cash consideration of $392.0 million (c.£287.7 million),
part funded from the equity placing in July and incremental debt financing of
$305 million.
The addition of GP Strategies enables expansion of LTG's international
footprint, blue-chip client base and cross-sell strategy. GP Strategies will
also provide deep industry expertise, including targeted expansion sectors
(such as pharma, aerospace and automotive) and capabilities (such as
leadership development and technical training).
GP Strategies represents a transformational acquisition for the Group. It
creates a combination of award-winning technology, leading talent development
skills and a global delivery capability. As an enlarged business, the Group
will be well placed to enable a broadened array of corporate clients to
recruit, train, motivate and retain their people in a world of increasing
complexity and a rapidly changing relationship between talent and the
workplace
The following table summarises the consideration paid for GP Strategies, the
fair value of assets acquired and liabilities assumed at the acquisition date.
Consideration Fair Value
£'000
Cash paid 287,625
Replacement share options issued 120
Total consideration 287,745
Recognised amounts of identifiable assets acquired and liabilities assumed Fair value
£'000
Cash and cash equivalents 28,516
Property, plant and equipment 2,506
Right-of-use assets 10,606
Deferred tax assets 8,923
Trade and other receivables 111,169
Inventory 1,032
Investments accounted for under the equity method 1,162
Trade and other payables (86,575)
Provisions (6,069)
Deferred tax liabilities (23,591)
Brand name 11,211
Software and intellectual property 17,562
Customer relationships 64,882
Total identifiable net assets 141,334
Goodwill 146,411
Total 287,745
The total consideration and fair value adjustments to the assets and
liabilities assumed are provisional and are management's best estimates at
this time.
The Group has recognised a fair value adjustment on acquisition of GP
Strategies as outlined below. Trade and other receivables have been reduced by
£3.6 million to recognise a provision for 100 per cent of certain trade
receivable balances, where litigation has commenced for recovery
proceedings. The outcome of this litigation is expected during 2022.
Provisions of £6,069,000 noted above are presented within additions arising
on acquisitions in Note 19.
The goodwill arising is attributable to the acquired workforce, anticipated
future profit from expansion opportunities and synergies of the business. The
goodwill arising from the acquisition has been allocated to six CGUs (Global
Services, Americas, EMEA, APAC, Human Capital Technology ('HCT') and Skills
Funding Apprenticeships ('SFA')). Fair value adjustments have been recognised
for acquisition-related intangible assets and related deferred tax as well as
future liabilities which are in alignment with accounting policies.
Acquisition-related intangible assets of £64.9 million relate to the
valuation of the customer relationships, £17.6 million relates to the value
of the acquired intellectual property and software development and £11.2m
relates to the value of the acquired GP Strategies brand. The useful
economic lives of each of these acquisition related intangible assets is
outlined in the table below.
Useful economic lives in years by CGU
Global services Americas EMEA APAC HCT SFA
Customer relationships 8 8 7 8 8 7
Acquired IP - 7 - - - -
Acquired software 5 5 5 5 5 5
Brand name 5 5 5 5 5 5
Acquisition costs of £5.0 million have been charged to the statement of
comprehensive income in the year relating to the acquisition of GP Strategies.
A deferred tax liability of £23.6 million in respect of the
acquisition-related intangible assets was established on acquisition (refer to
Note 14).
GP Strategies contributed £82.9 million of revenue for the period between the
date of acquisition and the balance sheet date, £7.7 million of adjusted EBIT
and £1.6 million of a loss before tax attributable to equity holders of the
parent. As a preliminary assessment, had the acquisition of GP Strategies been
completed on the first day of the financial period Group revenues would have
been approximately an additional £280.8 million higher, adjusted EBIT would
have been approximately an additional £14.2 million higher and group profit
before tax would have been approximately £3.4 million higher.
Prior year acquisition measurement period adjustments
Outlined below are the retrospective adjustments to the provisional amounts
recognised as goodwill in relation to the acquisitions that occurred in 2020.
These adjustments have been made to reflect new information obtained about the
circumstances that existed at each respective acquisition date and would have
affected the measurement of goodwill at the time.
eCreators
Increase/(decrease) to recognised amounts Assets acquired and liabilities assumed Goodwill
£'000 £'000
Cash and cash equivalents 6 (6)
Trade and other receivables (19) 19
Trade and other payables 177 177
eThink
Increase/(decrease) to recognised amounts Assets acquired and liabilities assumed Goodwill
£'000 £'000
Trade and other payables (45) (45)
Details regarding the strategic decisions to acquire each of the above can be
found in the Strategic Report.
10. Intangible assets
Customer contracts and relationships Internal Software Development
Acquired software and IP
Goodwill Branding Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2020 134,985 92,532 2,524 39,680 12,289 282,010
Additions on acquisitions 27,390 18,754 - 10,174 - 56,318
Additions - - - - 6,115 6,115
Foreign exchange differences (5,515) (1,971) (39) (1,152) (301) (8,978)
At 31 December 2020 156,860 109,315 2,485 48,702 18,103 335,465
Additions on acquisition 176,541 79,368 12,644 40,847 - 309,400
Additions - - - - 8,390 8,390
Measurement period adjustments 145 - - - - 145
Foreign exchange differences 3,073 177 148 765 (294) 3,869
At 31 December 2021 336,619 188,860 15,277 90,314 26,199 657,269
Accumulated amortisation
At 1 January 2020 - 38,894 968 8,703 4,977 53,542
Amortisation charged in year - 15,460 260 5,727 4,192 25,639
At 31 December 2020 - 54,354 1,228 14,430 9,169 79,181
Amortisation charged in year - 16,593 840 8,749 5,605 31,787
Transfers in - - - - 64 64
At 31 December 2021 - 70,947 2,068 23,179 14,838 111,032
Carrying amount
At 31 December 2020 156,860 54,961 1,257 34,272 8,934 256,284
336,619 117,913 13,209 67,135 11,361 546,237
At 31 December 2021
The above intangible assets are held as security as part of the fixed and
floating charge over the assets of the Group, refer to Note 17 for further
details of the Group's borrowings.
Goodwill and acquisition-related intangible assets recognised have arisen from
acquisitions. Refer to Note 9 for further details of acquisitions undertaken
during the year. Internal software development reflects the recognition of
development work undertaken in-house.
The amortisation charge for the year of £31.8 million includes £26.2 million
relating to acquired intangibles. Amortisation is included within operating
expenses in the Statement of Comprehensive Income.
The goodwill acquired in each of the acquisitions is not expected to be
deductible for tax purposes.
Change of cash generating units identified by the Group
During the year, the Group has changed the methodology used to aggregate cash
inflows and assets for the purpose of identifying CGUs, this is as a result of
a fundamental shift in the Group's go-to-market strategy in recent years as
well as the significant acquisition of GP Strategies.
The Group used to identify and add CGUs based on each product or service
offered by businesses, as they were acquired. This was not reflective of the
underlying Group strategy to integrate businesses and cross-sell services and
products. The CGUs that were in existence in 2020 (i.e. the Group excluding
newly acquired GP Strategies CGUs) are now aggregated based on the overarching
types of services offered, which we have outlined in the table below:
Operating segments Content & services Software & Platforms
Service Offering Learning services & Content design Diversity, equity and inclusion services Talent solutions, learning management systems and add-ons
2021 CGUs Content & learning services Diversity & inclusion Software solutions
2020 CGUs LEO Affirmity VectorVMS
Preloaded Rustici
PeopleFluent
Watershed
BreezyHR
Open LMS
In determining the above CGUs, Senior Management assessed the independence of
revenue and assets of each CGU taking into consideration areas such as joint
projects, existing cross-selling and combined go-to-market strategies, shared
workforce usage, shared software delivery infrastructure and overlapping
market presence. Based on this assessment, it was concluded that the above
CGUs reflect aggregated assets that generate largely independent cash inflows
from distinct asset bases whilst also reflecting the gradual shift in strategy
where the focus is on cross selling to create holistic service and product
offerings to address the Human Capital Management sector.
Annual impairment review
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. Following a change in the aggregation of cash inflow and
assets for identifying CGUs discussed above, the Group has nine (2020: nine)
CGUs. The carrying amount of goodwill has been allocated as follows, with
2020 being restated to be comparable:
CGU Goodwill Growth rate for years 2 to 5 Post-tax discount rate
2021 2020 2021 2020 2021 2020
£'000 £'000 % % % %
Content & learning services 12,676 12,676 4% 4% 9.5% 12.0%
Diversity & inclusion 25,908 18,223 5% 4% 10.4% 12.3%
Software solutions 150,185 125,961 4% 6% 9.7% 12.0%
GP Strategies - Global Services 31,602 - 5% - 11.2% -
GP Strategies - Americas 95,256 - 5% - 10.3% -
GP Strategies - EMEA 3,341 - 5% - 13.0% -
GP Strategies - APAC 1,921 - 5% - 13.0% -
GP Strategies - HCT 10,906 - 6% - 13.0% -
GP Strategies - SFA 4,824 - 6% - 13.0% -
336,619 156,860
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 (being the
companies cost of capital), growth rates (based on Board approved forecasts
for 2022 and estimated growth rates in years 2 to 5) and future EBIT margins
(which are based on past experience). 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 post-tax cash flows. The
Group prepares cash flow forecasts derived from the 2022 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 4% and 6% for the first five years. The terminal rate
used for the value in use calculation thereafter is 2.5%.
For all CGUs there is substantial headroom between the calculated value-in-use
and the net book value.
Sensitivity analysis
A reduction to 0% for the terminal rate applied to the cash flows (with other
assumptions remaining constant) would not result in an impairment to any
CGU.
A 10% decrease in the 2022 cash flows used in the discounted cash flow model
for the value-in-use calculation (with other assumptions remaining constant)
would not result in an impairment to any CGU.
A 250bps increase in discount rates used in the discounted cash flow model for
the value-in-use calculation (with other assumptions remaining constant) would
not result in an impairment to any CGU.
A 10% decrease in the 2022 cash flows and a 250bps increase in the discount
rates used in the discounted cash flow model for the value-in-use calculation
(with other assumptions remaining constant) would result in an impairment in
the Americas CGU of c. £4.2 million. Our sensitivity analysis has concluded
that, with the exception of the Americas CGU, these changes would not result
in an impairment to any other CGU.
Management do not consider that any reasonably possible changes in the
assumptions for the above CGUs would result in an impairment.
As disclosed in Note 2, Accounting policies, the forecast cash flows used
within the impairment model are based on assumptions which are sources of
estimation uncertainty and it is possible that significant changes to these
assumptions could lead to an impairment of goodwill and acquired intangibles.
Given the uncertainty surrounding the macroeconomic factors including the
impact of COVID-19, geopolitical uncertainties and inflationary pressures on
the Group's operations and on the global economy, management have considered a
range of sensitivities on each of the key assumptions, with other variables
held constant. The sensitivities which were each assessed in isolation
include; applying a 10 per cent reduction in the revenue assumption in the
next financial year from the base cash flow projections, representing a slower
recovery from the impact of COVID-19; increases in the discount rate by 1 per
cent and reductions in the long-term growth rates to 0 per cent. Under these
severe scenarios, the estimated recoverable amount of goodwill and acquired
intangibles still exceeded the carrying value of all CGUs.
The sensitivity analysis showed that no reasonably possible change in
assumptions would lead to an impairment.
Customer contracts, relationships, branding and Acquired IP
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 twelve years.
Internal software development
Internal 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 two and ten years.
11. Investments accounted for using the equity method
Joint ventures
The joint venture has share capital consisting solely of ordinary shares,
which are held directly by the Group. The nature of the investment at 31
December 2020 and 31 December 2021 is listed below.
Name of entity Country of Registration or Incorporation Principal activity Percentage of ordinary shares held by Group
LEO Brasil Tecnologia Educacional Ltda (formerly Epic Brasil Brazil Bespoke e-learning 17%
TecnologiaEducacional Ltda)
National Aerospace Solutions, LLC United States Engineering services 10%
LEO Brasil Tecnologia Educacional Ltda
On 27 August 2019, the Group entered into a debt for equity swap agreement
whereby Epic Group Limited and the other 50% investor agreed to convert debts
due from Leo Brasil Tecnologia Educacional Ltda ('LEO Brazil') to equity in
the proportion to amounts owed at that date. Epic Group Limited had a total of
$268,000 (equivalent to approximately £200,000) converted to equity and,
following such conversion, its shareholding was reduced from 50% to 38%. A
further reduction of the proportionate ownership was made during the year
ended 31 December 2020 by a debt/equity conversion reducing the Group's
proportional ownership to 19%. During the year ended 31 December 2021, an
additional investor was acquired by issuing further equity into the joint
venture, which reduced the Group's proportional ownership to 17%. As all
amounts receivable from the investee had been written off by the Group, there
was no financial impact, either on the carrying value of the investment or the
results for the year.
LEO Brazil is a private company and there is no quoted market price available
for its shares.
The accounting reference date of LEO Brazil is coterminous with that of the
Company.
There are no contingent liabilities or commitments relating to the Group's
interest in LEO Brazil.
Where the Group's share of losses in LEO Brazil exceeds its interests in the
company, the Group does not recognise further losses as it has no further
obligation to make payments on behalf of the company.
No further disclosures are provided on the grounds of materiality.
National Aerospace Solutions, LLC
Share of joint venture's net assets Share of joint venture's net assets
2021 2020
£'000 £'000
Cost
At 1 January - -
Additions from acquisitions 1,162 -
Additions - -
Share of profit after tax 124 -
Disbursements (305) -
Foreign exchange differences 37 -
At 31 December 1,018 -
The joint venture was acquired through the acquisition of GP Strategies and
represents the Group's investment in National Aerospace Solutions, LLC, which
has a Test Operations and Sustainment (TOS) Contract for the management and
operations of the Arnold Engineering Development Complex in Tullahoma,
Tennessee.
The accounting reference date of National Aerospace Solutions is coterminous
with that of the Group.
There are no contingent liabilities or commitments relating to the Group's
interest in National Aerospace Solutions.
On 18th April 2022, the Group sold its 10% investment in National Aerospace
Solutions, see Note 21 for further details.
12. Trade receivables
31 Dec 31 Dec
2021 2020
£'000 £'000
(Restated))
Trade receivables 125,387 28,300
Allowance for impairment losses (2,543) (1,495)
122,844 26,805
Impairment losses:
2021 2020
£'000 £'000
At 1 January 1,495 904
Additions on acquisition - 43
Additions/(disposals) 1,017 576
Foreign exchange 31 (28)
At 31 December 2,543 1,495
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.
In accordance with IFRS 15, the Group has disclosed trade receivable balances
net of the associated contract liabilities, as outlined below. These
balances will be shown net until the earlier of either the date the payment
becomes due and a receivable is recognised or the date that the services are
delivered and an associated contract asset is recognised.
2021 2020
£'000 £'000
Contract liabilities offset within trade receivables above 6,257 6,179
Disclosure of the expected credit losses tables are not included as they are
not material.
13. Other receivables and prepayments
Current assets
31 Dec 31 Dec
2021 2020
£'000 £'000
Sundry receivables 4,287 371
Prepayments 10,955 3,848
15,242 4,219
Non-current assets
31 Dec 31 Dec
2021 2020
£'000 £'000
Sundry receivables 3,541 76
3,541 76
Sundry receivables includes rent deposits and other sundry receivables.
14. Deferred tax assets/(liabilities)
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.
Share options Tax losses Short-term timing differences Intangibles Total
Deferred tax assets £'000 £'000 £'000 £'000 £'000
At 1 January 2020 2,340 1,635 240 - 4,215
Deferred tax (charge)/credit directly to the income statement 870 557 1,171 - 2,598
Deferred tax charged directly to equity 646 - - - 646
Exercise of share options, charged directly to the income statement (66) - - - (66)
Exchange rate differences, charged directly to OCI (36) (19) (32) - (87)
Changes in tax rate, credited to the income statement 240 66 2 - 308
At 31 December 2020 3,994 2,239 1,381 - 7,614
Share options Tax losses Short-term timing differences Intangibles Total
At 1 January 2021 3,994 2,239 1,381 - 7,614
Deferred tax recognised on acquisition 23 396 6,155 5,414 11,988
Deferred tax (charge)/credit directly to the income statement 1,127 (887) 2,447 (177) 2,510
Deferred tax charged directly to equity 689 - - - 689
Exercise of share options (411) - - - (411)
Exchange rate differences, charged directly to OCI - 1 164 - 165
Changes in tax rate, credited to the income statement 238 32 (267) - 3
At 31 December 2021 5,660 1,781 9,880 5,237 22,558
Accelerated tax Short-term timing
Intangibles depreciation differences Total
Deferred tax liabilities £'000 £'000 £'000 £'000
At 1 January 2020 (20,983) (2,028) (2,246) (25,257)
Deferred tax on acquired intangibles and via acquisition (7,864) - - (7,864)
Deferred tax (credit)/charge directly to the income statement 4,533 (195) 1,857 6,195
Exchange rate differences, charged directly to OCI 1,142 92 86 1,320
Changes in tax rate, charged to the income statement - (11) - (11)
At 31 December 2020 (23,172) (2,142) (303) (25,617)
Deferred tax on acquired intangibles and via acquisition (33,850) (598) (1,331) (35,779)
Deferred tax credit/(charge) directly to the income statement 6,063 1,744 1,419 9,226
Exchange rate differences, charged directly to OCI (285) (3) 18 (270)
Changes in tax rate, charged to the income statement - 110 (6) 104
At 31 December 2021 (51,244) (889) (203) (52,336)
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April
2023) was substantively enacted on 24 May 2021. As a result, the relevant
deferred tax balances have been re-measured except for the acquired entities
within GP Strategies, where 19% has been applied. If 25% instead of 19% has
been applied, the impact would have been to increase the deferred tax asset by
£145,000. The US corporate tax rate is unchanged at 21% plus state and
local taxes at 4-5% which varies by jurisdiction.
The Group has recognised £1.8 million (2020: £2.2 million) of deferred tax
assets relating to carried forward tax losses. These losses have been
recognised as it is probable that future taxable profits will allow these
deferred tax assets to be recovered. The Group has performed a continuing
evaluation of its deferred tax asset valuation allowance on an annual basis to
estimate whether sufficient future taxable income will be generated to permit
use of the existing deferred tax assets.
Deferred tax assets, relating primarily to trading losses carried forward
arising in the US, totalling £25.4 million (2020: £34.0 million) continue to
be matched by a valuation allowance. The Group has utilised approximately
£20.6 million of the trading losses, £10.2 million in 2020 and £10.4
million in 2021, and is adopting a prudent approach regarding the balance of
losses carried forward of £25.4 million (equivalent $34.3 million), pending
completion of a further tax study which should confirm their availability.
15. Trade and other payables
31 Dec 31 Dec
2021 2020
£'000 £'000
(Restated)
Trade payables 43,216 2,335
Contract liabilities 70,154 45,500
Tax and social security 21,931 1,687
Contingent consideration 749 493
Acquisition-related contingent consideration and earn-outs 6,427 1,205
Accruals 30,505 10,616
172,982 61,836
The acquisition-related contingent consideration and earn-outs balance in 2021
relates to the acquisition of PDT Global, eCreators, eThink, BreezyHR Inc
('BreezyHR') and Watershed Systems Inc ('Watershed'), the balance in 2020
relates partly to the acquisition of Watershed and partly to the acquisition
of BreezyHR. This is treated as post-combination remuneration and is accrued
over the service period. The contingent consideration balance in 2020 relates
wholly to the acquisition of Watershed. In 2021, the contingent consideration
balances relates to the acquisition of Watershed and Moodle News and is a
financial instrument held at fair value within the scope of IFRS 9 repayable
during 2022.
The contract liabilities balance relates mainly to the Group's right to access
licences, support and maintenance and hosting contracts which are recognised
over the contract term as the customer receives and consumes the benefits of
the service. All of the current liability contract liabilities balance at 31
December 2020 was recognised as revenue in 2021 and the current contract
liabilities balance at 31 December 2021 is expected to be recognised as
revenue in 2022.
The Group acquired £20.0 million of contract liabilities balances as part of
the business acquisitions discussed in Note 9. These balances were partly
recognised as revenue in 2021 with the remaining balance being expected to be
recognised as revenue in 2022.
The Group has netted off £6.3 million (2020: £6.2 million) of contract
liabilities against its trade receivables balances as outlined in Note 12
above.
16. Other long-term liabilities
31 Dec 31 Dec
2021 2020
£'000 £'000
Acquisition-related contingent consideration and earn-outs 1,090 1,597
Contingent consideration 19 662
Contract liabilities 1,831 4,778
Other long-term liabilities - 598
2,940 7,635
The acquisition-related contingent consideration and earn-outs balance in 2021
relates to the acquisitions of PDT Global, BreezyHR, eCreators, and eThink.
The contingent consideration balances relates to the acquisition of Moodle
News, repayable in 2023.
The non-current contract liabilities balance relates mainly to the Group's
right to access licences, support and maintenance and hosting contracts which
are recognised over the contract term as the customer receives and consumes
the benefits of the service. The non-current contract liabilities balance at
31 December 2021 is expected to be recognised during 2022 and 2023.
17. Borrowings
On the acquisition of GP Strategies in October 2021 the existing debt facility
with Silicon Valley Bank ('SVB') was repaid in full for £18.1 million and
extinguished. A new debt facility with SVB, Barclays Bank, Fifth Third Bank,
HSBC UK Bank and the Bank of Ireland was entered into for a total of $405.0
million.
This is made up of two committed term loans, Term Facility A of $265.0 million
(£196.3 million at the year-end exchange rate) available to the Group until
October 2025 and Term Facility B of $40.0 million (£29.6 million at the
year-end exchange rate) available to the Group until April 2022. These two
facilities were fully drawn down in October 2021. The facilities available
also include a $50.0 million committed (£37.0 million at the year-end
exchange rate) RCF and a $50.0 million uncommitted accordion facility (£37.0
million at the year-end exchange rate), both available until July 2025. The
term facility attracts variable interest based on LIBOR plus a margin of
between 1.25% and 2.00% per annum, based on the Group's leverage to December
2022, following this it attracts SOFR plus the margin discussed above and an
adjusted credit spread until repaid.
The Term Facility A is repayable with quarterly instalments of $9.6 million (c
£7.1 million) with the balance repayable on the expiry of the loan in October
2025. The Term Facility B is repayable in full in April 2022 and was fully
repaid in March 2022.
The bank loan is secured by a fixed and floating charge over the assets of the
Group and is subject to various financial covenants that are tested quarterly
based on a calendar year.
The financial covenants are that the Group must ensure that its interest cover
ratio is at least 4.0 times and its leverage ratio does not exceed 3.0 times.
The interest cover and leverage ratio is not a statutory measure and so its
basis and composition may differ from other leverage measures published by
other companies.
The Group was compliant with all financial covenants throughout the year and
as at 31 December 2021, the Group's interest cover was 31.76 and its leverage
ratio was 1.77.
The lease liabilities have arisen on adoption of IFRS 16 and are secured by
the related underlying assets.
31 Dec 31 Dec
2021 2020
£'000 £'000
Current interest-bearing loans and borrowings 37,503 7,339
Non-current interest-bearing loans and borrowings 187,759 11,073
Current lease liabilities 6,755 2,536
Non-current lease liabilities 15,090 7,722
247,107 28,670
Net debt / cash reconciliation
Net debt / cash, which excludes lease liabilities, can be analysed as follows:
31 Dec 31 Dec
2021 2020
£'000 £'000
Cash and cash equivalents 83,850 88,614
Borrowings:
- Revolving credit facility - -
- Term loan (225,262) (18,412)
Net (debt) / cash (141,412) 70,202
18. Lease liabilities
This note provides information for leases where the group is a lessee.
2021 2020
£'000 £'000
At 1 January 10,258 11,957
Additions 1,210 2,219
Additions on acquisitions 14,586 21
Interest expense 434 418
Lease payments (principal and interest) (4,854) (3,317)
Disposals - (889)
Foreign exchange movements 211 (151)
At 31 December 21,845 10,258
Additional profit or loss and cash flow information
31 Dec 31 Dec
2021 2020
£'000 £'000
Income from subleasing office premises 245 230
Total cash outflow in respect of leases in the year (4,854) (3,317)
Expense related to short term leases not accounted for under IFRS 16 (487) (81)
Additions to right of use assets 14,041 2,255
The Group's accounting policy for leases is set out in Note 2. The
right-of-use asset categories on which depreciation is incurred are presented
in Note 8.
19. Provisions
Property provisions(1) Litigation and regulation provisions(2) Onerous contract provisions(3) Total
£'000 £'000 £'000 £'000
At 1 January 2020 273 580 - 853
Released to the income statement (152) - - (152)
Paid in the year - - - -
Addition - - - -
At 31 December 2020 121 580 - 701
Additions arising from acquisitions 1,139 4,225 1,134 6,498
Released to the income statement - (580) (121) (701)
Paid in the year (284) - - (284)
Additions 90 - - 90
Foreign exchange movements 9 42 11 62
At 31 December 2021 1,075 4,267 1,024 6,366
Current - 4,267 588 4,855
Non-current 1,075 - 436 1,511
Total provisions 1,075 4,267 1,024 6,366
1. The Group is party to a number of leasehold property contracts. Provision
has been made against the unavoidable non-rent costs on those leases where the
property is now vacant. As a result of the implementation of IFRS 16 the
rental elements of certain property provisions are now included within lease
liabilities. In addition, the Group has provided for dilapidation costs
expected to be incurred at the end of property leases.
2. Litigation and regulation provisions relate to estimates for potential
liabilities which may arise in the Group as a result of client claims and past
practices. Whilst the nature of legal claims means that the timing of
settlement can be uncertain, we expect all claims to be settled in the next 1
to 2 years Whilst the provisions are based on management's best estimate of
the likely liability for obligations that exist at the year end date, the
maximum potential exposure could be materially higher or lower than the
provisions made as there is a range of potential outcomes. The acquired
balance of £4.2 million includes a £3.5 million provision for potential
penalties for health and safety claims arising in a subsidiary of GP
Strategies prior to acquisition, as well as associated legal costs. The
range of possible outcomes are £Nil to £6.0 million (excluding legal costs)
and are dependent on the harm category and level of culpability assessed.
3. Onerous contract provisions relate to provisions made for certain software
contracts where the unavoidable costs of meeting the obligation under the
contract, exceed the economic benefits expected to be received under the
contract.
20. Dividends paid
31 Dec 31 Dec
2021 2020
£'000 £'000
Final dividend paid 3,705 -
Interim dividend paid 2,360 5,537
6,065 5,537
On 29 October 2021 the Company paid an interim dividend of 0.30 pence per
share (2020: 0.25 pence per share) amounting to a total dividend payment of
£2.4 million. Given the robust performance of the Group during the past
year the Directors propose to pay a final dividend of 0.70 pence per share for
the year ended 31 December 2021, equating to a total payment in respect of the
year of 1.00 pence per share (2020: 0.75 pence per share).
The proposed final dividend of 0.70 pence per share, amounting to a final
dividend of c. £5.5m, is not included as a liability in these financial
statements and, subject to shareholder approval, will be paid on 21 July 2022
to shareholders on the register at the close of business on 1 July 2022. The
final dividend will be paid gross.
21. Events since the reporting date
Repayment of Term Facility B
On 14(th) March 2022, the Group repaid the outstanding balance of Term
Facility B of $40.0 million. The total repayment including interest was
$40.5 million (£31.1 million).
Sale of investment in Joint Venture
On 18th April 2022, the Group sold its 10% investment in National Aerospace
Solutions LLC for proceeds of $3.0 million (£2.3 million).
There have been no other notifiable events between the 31 December 2021
and the date of this Annual Report.
Glossary
Alternative Performance Measures
In reporting financial information, the Group presents alternative performance
measures, "APMs", which are not defined or specified under the requirements of
IFRS. The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional useful information on the underlying trends, performance and
position of the Group and are consistent with how business performance is
measured internally. The alternative performance measures are not defined by
IFRS and therefore may not be directly comparable with other companies'
alternative performance measures. The key APMs that the Group uses are
outlined below.
APM Closest equivalent IFRS measure Reconciling items to IFRS measure Definition and purpose
Income Statement Measures
Adjusted EBIT Operating profit Adjusting items Adjusted EBIT excludes adjusting items. A reconciliation from Adjusted EBIT
to Operating profit is provided in the Consolidated statement of comprehensive
income.
Adjusting items None Refer to definition Items which are not considered part of the normal operating costs of the
business, are separately disclosed because of their size, nature or incidence
are treated as adjusting. The Group believes the separate disclosure of these
items provides additional useful information to users of the financial
statements to enable a better understanding of the Group's underlying
financial performance. An explanation of the nature of the items identified as
adjusting is provided in Note 5 to the financial statements.
SaaS and long term contracts Revenue Refer Note 4 SaaS and long term contract revenue is defined as the revenue streams of the
Group that are predictable and expected to continue into the future upon
customer renewal.
Transactional Revenue Refer Note 4 Transactional revenue is defined as the revenue streams of the Group that
arise from one-off fees or services that may or may not happen again.
Balance Sheet Measures
Net cash or debt None Net cash / debt is defined as Cash and cash equivalents and short-term
deposits, less Bank overdrafts and other current and non-current borrowings.
Shareholders' funds None Refer to definition Calculated as Total Equity at the end of the period/year divided by the number
of shares on issue at the end of the period/year, The shares on issue at
31(st) December 2020 were 739,297,410 and 787,642,975 at 31(st) December 2021.
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