REG - Learning Technol.Grp - Full Year Results 2023
16/04/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240416:nRSP7119Ka&default-theme=true
RNS Number : 7119K Learning Technologies Group PLC 16 April 2024
16 April 2024
Learning Technologies Group plc
FULL YEAR RESULTS 2023
Focus on execution with financial performance in line with consensus
expectations
Resilient revenue reflecting the strength of long-term contracts
Continued margin progression and record operating cash flow generation
Learning Technologies Group plc, a global market leader in digital learning
and talent management, announces results for the year ended 31 December 2023.
Focus on execution of our strategic agenda
● GP Strategies has more than doubled profit since joining LTG in 2021, driven
by margin progression, a successful transformation plan and operational
improvements to GPLX in H2 2023.
● Renewed all major client contracts >$10m and expanded revenue in LatAm and
Middle East.
● Actively managed our portfolio including the sale of Lorien Engineering
Solutions which completed in January 2024.
● Further streamlined and strengthened the commercial operation by integrating
Watershed into Rustici, LEO into GP Strategies and Reflektive into Bridge.
● Established Group wide AI task force launching several AI enhanced software
products in 2024 and leading on educating our Fortune 500 client base on a
"Human + AI" future.
● Achieved significant impact by providing learning to over 200 million people
during the year.
Resilient financial performance with record operating cash flow generation
● Revenue of £562.3 million and adjusted EBIT of £98.5 million in line with
consensus expectations, reflecting a slight decline (2)% in constant currency
revenue and (1)% adjusted EBIT.
● Statutory profit before tax increased 13% to £45.6 million.
● Resilient revenue performance in the context of the macroeconomic climate -
with 73% of revenue underpinned by durable SaaS and long-term contracts.
● Adjusted EBIT margin increased to 17.5% in FY23 from 17% in FY22.
● GP Strategies' EBIT margin c.15% in H2 and exit run-rate c. 17% in line with
previous guidance.
● Record net cashflow from operations during the year of £79.5m driving swift
deleveraging to 0.7x prior to incorporating proceeds from disposal of Lorien
received in 2024, with continued good cash generation in Q1 2024.
Dividend
● The Board is committed to a progressive dividend policy and is pleased to
propose a final dividend of 1.21 pence per share (2022: 1.15p), an increase of
5%, subject to shareholder approval at the AGM.
Current Trading and 2024 Outlook
The Board maintains a cautious stance for 2024 due to the macroeconomic
uncertainty. Consequently, we expect 2024 revenues will be in line with 2023
(after disposals), while continuing to drive growth in Adjusted EBIT. We
remain reassured by the strong foundations we have built, our effective
Go-to-Market strategy, ongoing product innovation, coupled with the active
management of our extensive portfolio. These efforts are geared towards
driving further efficiencies and supports our confidence in restoring
underlying revenue growth as the macroeconomic environment recovers.
Medium Term Targets Update
Given the temporary pause on bolt-on acquisitions in FY22 that continued into
FY23 as we focused on the transformation of GP Strategies, de-leveraging and
active portfolio management in a subdued macroeconomic environment, the Board
has concluded the 2025 goal to achieve run-rate revenues of £850 million and
£175 million run-rate adjusted EBIT is no longer appropriate.
Our continued strong cash generation and balance sheet strength give the Board
confidence in returning to value-accretive acquisitions in 2024 and beyond.
Furthermore, this is supported by an expectation that we will return to
organic growth as the economy improves.
Jonathan Satchell, Chief Executive Officer of Learning Technologies Group,
said:
"LTG has delivered a resilient performance in 2023 against the macroeconomic
backdrop. This demonstrates the benefit of our global client footprint and
diversification, the durable nature of our SaaS and long-term revenues and our
focus on efficiency and cash flow.
Looking ahead, we remain confident in the outlook over the medium term as the
structural drivers of the learning and development industry remain intact with
LTG offering one of the most comprehensive ranges of learning and talent
services and technologies within our sector. I am also excited about our AI
innovations which will enhance our productivity and create additional revenue
opportunities with our clients. Given the strength of our balance sheet, we
will return to acquisitions that align with our strategic objectives."
Financial summary:
£m unless otherwise stated 2023 2022* Change
Revenue* 562.3 588.6 (4%)
Constant currency (2)% 3%
Software & Platforms (4)% 5%
Content & Services (1)% (7%)
SaaS & long-term contracts 73% 71%
Adjusted EBIT* 98.5 99.9 (1%)
Adjusted EBIT margin* 17.5% 17% +50bps
Statutory PBT* 45.6 40.5 +13%
Adj. Diluted EPS (pence)* 7.803 7.996 (2)%
Basic EPS (pence) 3.724 3.857 (3)%
Net Debt 78.6 119.8 (34)%
Final Dividend (pence) 1.21 1.15 5%
Adjusted Operating Cash 86.3 83.2 4%
Net cashflow from operations 79.5 71.9 10%
* 2022 continuing operations.
Analyst and investor presentation:
LTG will host a hybrid presentation for analysts and institutional investors
at 09:00 today, 16th April 2024. To join the briefing virtually, please
register via the link below:
https://www.investormeetcompany.com/learning-technologies-group-plc/register-investor
(https://www.investormeetcompany.com/learning-technologies-group-plc/register-investor)
Enquiries:
Learning Technologies Group plc +44 (0)20 7832 3440
Jonathan Satchell, Chief Executive
Kath Kearney-Croft, Chief Financial Officer
Deutsche Numis (NOMAD and Corporate Broker) +44 (0)20 7260 1000
Nick Westlake, Ben Stoop, Tejas Padalkar
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
Jamie Ricketts, Emma Hall, Lucy Highland. Jemima Gurney
About LTG
Learning Technologies Group plc (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 software 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, South America and Asia-Pacific.
Annual Report - Chief Executive's Review
"Our resilience shows the benefit of our SaaS and long-term contracts -
representing 73% of revenues - and laser-focus on margin."
Market-leader in workplace learning and talent management
LTG is a leader in workplace learning and talent management, helping more than
6,000 organisations address a fast-evolving business landscape. The group is
a portfolio of profitable software and services businesses in talent
management and learning with a common go-to-market strategy.
Our comprehensive suite of products and services integrate with our customers,
bridging the skills gap between the present and the future workforce and
delivering tangible outcomes. When appropriate, we offer solutions and
services from more than one of our businesses, leveraging our combined
go-to-market strategy to reinforce our current global market presence and
drive growth.
As part of our ongoing active portfolio management, where businesses do not
fully align with our strategy we look to recycle the capital towards our core
focus on talent management and learning, as we have done with the disposals of
non-core Lorien Engineering Solutions and a carve-out of the external staffing
business of TTi Global in recent months.
Resilient performance with strong margin progression and cash generation
LTG delivered a resilient performance in 2023. Revenues and adjusted EBIT
from continuing operations were in line with consensus expectations, falling
marginally by 2% on a constant currency basis and 1% respectively. Revenues
were £562.3 million and adjusted EBIT from continuing operations was £98.5
million including the impact of a slight FX headwind. Margin progression to
17.5% (FY22: 17.0%) was driven by our focus on profitability and a significant
improvement within GPLX in H2.
Our performance in a challenging macro backdrop shows the strength of our SaaS
and long-term contracts - representing 73% of revenues - and a laser-focus on
margin. This meant we were able to absorb the impact of lower transactional
and project-based revenues linked to the challenging macroeconomic backdrop.
The restructuring programme we implemented cost £2.5 million with an ongoing
annual benefit of £9.5 million. With these proactive measures, we are
well-positioned to maintain our resilient performance in uncertain markets and
benefit from more favourable conditions as they arise.
We continued our strong track record of cash generation with adjusted
operating cash flow conversion of 88%. Because of our excellent cash
generation, we are able to make substantial investments in innovation -
including AI - to support our customers' learning and talent management needs.
GP Strategies commercial transformation complete and supporting our market
leadership
In the period following the transformational acquisition of GP Strategies in
2021 - which added significant strength and depth to our market leadership in
learning and talent development - GP Strategies has more than doubled in
profit. LEO Learning and PDT Global were integrated into GP Strategies in
January 2023, which caused some challenges which were successfully addressed
in H2. The combination has significantly bolstered our market offering as
one of the world's largest and most creative custom content and learning
experience design offering, alongside our leadership in talent
transformation. The continued commercial improvement in GP Strategies, with
exit margins at c17% in line with our previous guidance and margins of c.15%
in H2, reflects our focus on operational improvement. This underlines our
track record of improving the profitability and operating model of businesses
we acquire.
Active portfolio management
LTG accelerated the active management of its portfolio in 2023, making two
non-core disposals - Lorien Engineering Solutions for $21.4 million on a cash
and debt free basis (subject to customer adjustments and completed in 2024),
and the external staffing business of TTi Global for $0.8 million. These
businesses were part of GP Strategies when it was acquired by LTG in 2021 but
did not fit with our strategic focus on learning and talent management.
Proceeds from the disposals have further strengthened our balance sheet and
supported our swift deleveraging. Our balance sheet and excellent cash
generation underpin our intent to return to being acquisitive in 2024. As
previously indicated, our focus is on acquiring profitable software companies
that fit with our strategic focus on learning and talent management. Where
appropriate, we will continue to recycle capital from businesses that do not
fully align with that strategic focus.
Given the temporary pause on bolt-on acquisitions in FY22 and FY23 during the
transformation of GP Strategies, and focus on deleveraging and active
portfolio management in a lower organic growth environment, the Board has
concluded the 2025 goal to achieve run-rate revenues of £850 million and
£175 million run-rate adjusted EBIT is no longer appropriate.
Large addressable market opportunity
We are strategically positioned to capitalise on a substantial and expansive
global learning and talent market estimated to be worth approximately $396
billion in 2024(1). The products and services we offer cater to a diverse
array of industries and sectors, tapping into a broad and growing demand for
innovative solutions. This market comprises internal, external and tuition
markets, and with our go-to-market and integrated businesses, we have a
powerful combined offering that can address the >$100 billion external
corporate training segment of this market.
We are well placed to capitalise on the ongoing evolution of workforce
dynamics fuelled by demographic shifts, technological advances and the
ever-changing nature of skills required in the modern workplace. With change a
constant, the demand for sophisticated learning and talent solutions is
growing on a global scale. At LTG, we provide businesses with the tools to
align strategic objectives with workforce learning and development across all
facets of the employee lifecycle. Our suite of analytics tools also enables us
to monitor the performance of these solutions, providing customers with
transparent insights into the efficacy and return on investment of our
services and software.
Our approach not only enhances operational efficiency but also positions us at
the forefront of driving value to our customers through unified and effective
solutions rather than fragmented systems. Our teams are working hard to
strategically position ourselves to address the diverse needs of this
expansive market, staying ahead of the ever changing landscape of global
learning and talent management.
(1) Training Industry, Inc. Research Data 2023 estimated totals as of January
18, 2024
Investment case
Our demonstrated track record in value creation highlights our aptitude in
both organic growth over the medium term and margin enhancement. Additionally,
our strategic pursuit of acquisitions has not only expanded our capabilities
and market reach but has consistently contributed to accretive earnings. This
has resulted in robust cash flow generation, underpinning swift deleveraging
and a progressive dividend policy.
The main drivers that have enabled us to deliver a robust financial
performance over a sustained period are as follows:
● Our strategic positioning provides considerable access to the expanding
digital training markets, representing the future landscape of learning and
development. These markets are experiencing good growth, positioning us to
capitalise on profitable opportunities. In parallel, our commitment to
supporting learning is fortified by robust data analytics, empowering our
customers to quantifiably measure the effectiveness of their initiatives.
● Our portfolio of businesses has products that bring best-in-class specialist
expertise, including learning, performance, learning analytics, succession,
compensation, vendor management, recruitment and immersive virtual, augmented
and mixed reality experiences, complemented by expert advisory and consulting
through cross-selling. This makes us well-placed to help customers 'join up'
their learning and talent management activities. We are regarded as a thought
leader in a fast-paced and evolving market.
● Our highly skilled workforce comprises seasoned professionals adept at
providing LTG's diverse range of product offerings. This expertise enables us
to provide seamlessly integrated solutions incorporating our products and
services tailored to meet our customers' talent transformation requirements.
● Our expansive global presence with 5,000 employees in 36 countries enables us
to both attract new customers and enhance relationships with existing ones.
Through our local presence, we deliver training programmes finely tuned to
align with regional cultures and specific needs, ensuring optimal results.
This dual approach not only broadens our market reach but also demonstrates
our commitment to meeting our clients where they are in their learning and
talent transformation journey.
● Our longstanding partnerships and extensive expertise in industries marked by
rigorous regulations and high-stakes implications. These markets are
challenging to enter and the training needs within them are intricate,
mandatory and critical for success. These include automotive, financial and
insurance, defence, aerospace and technology markets.
● Our investments to drive innovation in learning through software solutions.
Our commitment to continuous improvement underscores our dedication to
optimising performance.
● Our proven ability to drive operational improvement - both in our pre-existing
businesses and those we acquire - and maintain close control of costs supports
margin progression over the long-term.
The demand for our services and software is intensifying as the imperative for
training and development becomes increasingly critical across various
industries. This is delivered through a high proportion of predictable and
recurring revenue streams, comprising SaaS subscriptions and long-term service
contracts.
Creating value through AI and investment in innovation
Harnessing AI to support customer needs
LTG has good capabilities in AI and is investing more to ensure we are in the
optimal position to work with clients as they train their own workforces.
We firmly believe the future workforce will be 'human + AI' to give our
customers innovative solutions, drive efficiency and enhance their overall
experience. Our AI innovations aim to optimise processes and create value,
ultimately contributing to increased client engagement and satisfaction.
In many areas across the business, we are trialling AI solutions in
collaboration with customers to ensure a more adaptive, targeted and
personalised approach to learning and talent management. Specifically, from
a services perspective, GP Strategies is investing in R&D innovation (eg
Content AIQ(1)) and educating customers. For example: 'Human+AI - Practical
Learning for Learning Leaders'(2), first run in 2023 and then Human+AI was the
subject of a Customer Forum hosted at the MetLife building in New York in
March 2024 with several Fortune 500 companies attending(3). Meanwhile our
Software & Platforms businesses are bringing AI enhanced products to
market throughout 2024 such as Rustici Software which provides AI innovation
to the 500+ learning applications and content publishers that it serves
worldwide.
Investment in Innovation
Dedicating resources to innovation is a top priority in our capital allocation
strategy, and our track record speaks to our ability to generate value in this
area. A key element of our investment strategy involves leveraging value from
complementary technologies obtained through strategic mergers and
acquisitions. Our approach allows us to deliver distinctive and comprehensive
capabilities to our customers. We adhere to a cautious, lower-risk strategy in
innovation by applying our existing technologies to markets whenever possible.
During 2023, we continued to make investments consistent with our strategy.
Examples include:
● Continued integration between Bridge, Gomo and Instilled to enhance and sell
Bridge Advanced Authoring and Bridge Advanced Video.
● Major investments in enterprise LMS functionality by way of GP iLearn.
● Reflektive market and adoption information drove enhancements, such as peer
feedback, new recognition features and the ability to sell as a standalone
module, to Bridge performance tool capabilities.
● Building out Bridge with Patheer technology to develop Skills+, leveraging 3rd
party data and AI to match employees to skills, job titles to skills, and
skills to content within the learning management system. The combined
technology of Bridge and Patheer supercharges the connections with features
that are in high demand in the market, taking advantage of recent advances in
scalable AI web services.
● Investment and focus on AI with a task force dedicated to understanding the
transformative capabilities that exist and how we can practically apply this
to our offerings to meet the needs of our clients. In 2024, we will:
○ Increase our upskilling efforts for our internal teams
○ Launch AI enablement and adoption tools for our customers including Content IQ
○ Build out our IP offerings on AI for customers focusing on upskilling the
L&D team as well as offerings for employees across the organisation
○ Expand our partnerships with leaders in the AI space to bring exciting new AI
services, tools and specialised teams
● There has been considerable effort in implementing our go-to-market strategy,
with new combined product and service offerings in:
○ Learning experience design
○ Enhanced managed learning services
○ A combined consulting and measurement approach
Our capacity to seamlessly blend our offerings allows us to provide
comprehensive solutions and cross-selling opportunities to our customers. We
remain committed to strategic investments in our products, aimed at enhancing
our offerings to meet the evolving needs of our customers.
(1) https://www.gpstrategies.com/solutions/consulting/artificial-intelligence-consulting-solutions/learning-content-aiq/
(https://www.gpstrategies.com/solutions/consulting/artificial-intelligence-consulting-solutions/learning-content-aiq/)
(2)https://www.gpstrategies.com/solutions/consulting/artificial-intelligence-consulting-solutions/human-plus-ai-training-program/
(https://www.gpstrategies.com/solutions/consulting/artificial-intelligence-consulting-solutions/human-plus-ai-training-program/)
(3)https://www.gpstrategies.com/2024-client-forum/
(https://www.gpstrategies.com/2024-client-forum/)
Non-core assets
In December 2022 we disclosed that a non-core asset had been identified for
disposal. We are pleased to report that we signed a definitive agreement on 5
December 2023 to sell our Lorien division, based within GP Strategies, to
NIRAS, a Danish engineering consultancy headquartered in Denmark. The sale of
this business subsequently closed on January 2, 2024.
We also confirmed in December 2023 we had completed a carve-out of the
external staffing business of TTi Global, part of GP Strategies, for a cash
consideration of approximately $0.8 million. A number of client staffing
contracts (for high quality engineering and technical roles) and people were
transferred to Premier Staffing Solution in October 2023.
People
Our people stand as our most valuable asset, and it is their unwavering
dedication that propels our success. In 2023, we implemented several HR
initiatives with the goal of enriching the employee experience, boosting
morale and achieving our organisational goals. We re-launched an
enterprise-wide engagement survey and implemented a comprehensive action
planning process, enabling us to seamlessly incorporate feedback received into
our priorities and planning during the second half of the year. This led to a
more enhanced onboarding programme for new employees, a new in-house designed
People Leader Essentials programme, an improved performance management
programme and a leader conversation series that provided our colleagues with
access to leadership from around the business on a variety of topics that they
expressed interest in hearing more about. We undertook a restructuring in
late 2023 as part of our ongoing commitment to drive operational improvement
and margin progression while retaining our breadth and depth of skills and IP.
Environmental, Social and Governance
ESG initiatives remain at the forefront of our business process and strategy,
enabling our customers to manage and develop their human capital and is
therefore fully aligned with ESG principles. As we continued to focus on our
own performance, we report on our scope 1, 2 and 3 Greenhouse Gas (GHG)
emissions and there was a 11% decrease in our total GHG emissions in 2023
driven primarily by rationalised office usage and a reduction in business and
commuting travel. We made further progress in our targets including
launching a Group-wide sustainable procurement policy, closed our largest
in-house physical data centre making further progress to reduce scope 3
emissions and continued to make progress in GHG emission assessments including
developing long-term net zero projections.
During 2024 the Board has approved participation in, and we have submitted a
signatory letter to, the UN Global Compact Group. We will continue to work
to further progress our sustainability journey and provide an update in our
2024 results.
Outlook
LTG delivered a resilient performance in 2023 despite a challenging
macroeconomic backdrop. This shows the benefit of our SaaS and long-term
contracts - representing 73% of revenues - and laser-focus on margin. We are
seeing the benefits of the full integration of our transformational
acquisition of GP Strategies, which has strengthened our market leadership in
learning and talent management.
Our subscription and long-term contracted revenue supports our expectation of
delivering a resilient performance again this year in a macroeconomic backdrop
which continues to be challenging. 2024 revenues are therefore expected to
be line with 2023 (after disposals) while continuing to drive growth in
Adjusted EBIT. Given the strength of our balance sheet, we are poised for a
return to earnings accretive acquisitions in 2024 that fit with our strategy,
as part of our active portfolio management. Longer term, our market
leadership in workplace learning and talent management supports our confidence
of igniting underlying revenue growth as the macroeconomic backdrop recovers.
Jonathan Satchell
Chief Executive
15 April 2024
Chief Financial Officer's Review:
Financial results
Revenue
Group revenue from continuing operations decreased by 2% on a constant
currency basis to £562.3 million (2022: £588.6 million), a resilient
performance in the face of a challenging macroeconomic backdrop affecting
transactional and project-based work. Discontinued operations reflect the
non-core UK Apprenticeship business following its closure as announced in
December 2022.
As of 2023 interim reporting, reporting divisions have been updated to reflect
internal reporting on a business unit basis, and the revised format is
consistent with that used by the Chief Operating Decision Maker. Following the
reorganisation and integration of LEO and PDT into GP Strategies, the Content
& Services division now includes all three businesses in addition to
Affirmity and PRELOADED. The Software & Platforms division reflects the
results for the Product companies. The categorisation of the companies under
the division heading is outlined below. Note 3 to the accounts includes a
restatement of the prior year's comparative results.
Our Content & Services division revenue (74% of Group revenue) marginally
declined by 1% on a constant currency basis with strong growth in PRELOADED
and Affirmity. The growth in these two brands was more than offset by GP
Strategies decline of 2% on a constant currency basis, due to the temporary H1
integration challenges in GPLX, and the macroeconomic climate slowing sales
cycles and project-based revenues.
There was 4% constant currency revenue decline in the Software & Platforms
division (26% of Group revenue). This comprised of expected lower revenue in
PeopleFluent, and Reflektive due to softness in technology sector customers
and the strategy to migrate customers to a version of Reflektive within
Bridge. In addition, there was a softening in revenues in VectorVMS, a
contingent workforce management business, and Breezy, a leading-edge talent
acquisition platform business. Rustici continued to deliver strong growth
and there was good growth in Bridge, a learning and performance management
solutions business.
As a proportion of Group revenue, SaaS-based subscription and long-term
contract revenue increased to 73% (2022: 71%).
Adjusted Earnings Before Interest and Tax (EBIT) and operating profit
Adjusted EBIT from continuing operations decreased marginally by 1% to £98.5
million (2022: £99.9 million) which included a small full year foreign
exchange headwind. The Group's Adjusted EBIT margin was higher at 17.5%
(2022: 17.0%) driven primarily by a combination of operational leverage in the
Software & Platforms division and supported by higher exit margins in GP
Strategies following a successful continuation of the commercial
transformation strategy despite the temporary H1 challenges in GPLX.
Included within adjusted EBIT was a share-based payment charge of £4.4
million (2022: £6.7 million, excluding £0.5 million acquisition related
charge), lower than the prior year due to lapsed options related to senior
leavers and performance criteria not being met.
Also included within adjusted EBIT was an amortisation charge for internally
generated development costs which increased to £8.8 million (2022: £7.5
million), as set out in Note 9. 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 as we innovate additional product features in the Product
Companies. The Group does not include £11.1 million (2022: £12.0 million)
of amortisation of acquired software and IP within adjusted EBIT due to an
expectation that the quantum exceeds that which would have been incurred if
internally developed, and therefore is not representative of a true ongoing
cost of the business.
The Group's statutory operating profit was £58.7 million (2022: £50.5
million), including the sale of our Brazil joint venture, the external
staffing business of TTi Global and other adjusting items of £39.8 million
(2022: £49.4 million), discussed in more detail in note 4.
Divisional Review
Content & Services
Content & Services comprises GP Strategies, PRELOADED and Affirmity. GP
Strategies is a global workforce transformation provider of organisational
and technical performance learning solutions. PRELOADED is a BAFTA-winning
immersive games studio. Affirmity provides a portfolio of software,
consulting services and blended learning solutions to help US-based enterprise
and mid-market companies measure diversity, build inclusive workforces and
operate effective DE&I and affirmative action programmes.
In January 2023, LEO and PDT Global were integrated with GP Strategies.
PRELOADED and Affirmity have not been integrated and will remain separate
brands within the Content & Services reporting segment.
Content & Services comprised 74% (2022: 74%) of 2023 Group revenue. In
2023, 65% (2022: 62%)) of the revenue in Content & Services was related to
long-term contracts, reported within SaaS & long-term contracts in segment
analysis (note 3).
Revenue decreased to £418.0 million (2022: £434.4 million) reflecting the
slowdown in spending in transaction and project-based work due to the
macroeconomic climate, and integration challenges in GPLX in the GP Strategies
business in the first half of the year. This was partially offset by strong
revenue growth in PRELOADED due to key relationships with major global
Technology and Entertainment brands unlocking more significant engagements in
2023, and Affirmity delivering a continued strong performance through the
year.
Adjusted EBIT also decreased to £56.5 million (2022: £59.9 million), driven
by the temporary challenges in GPLX in the first half of 2023. The adjusted
EBIT margin was 13.5% (2022: 13.8%).
Statutory profit before tax was £25.9 million (2022: £25.0 million) after
deducting adjusting items including amortisation of acquired intangibles,
transaction costs relating to asset held for sale, integration costs, earn-out
charges, loss on disposal of right-of-use assets, profit on sale of joint
venture, restructuring costs and finance expenses.
Software & Platforms
The Software & Platforms division comprises of SaaS and on-premise
solutions as well as hosting, support and maintenance
services. PeopleFluent provides cloud-based talent management solutions and
services to large-enterprise clients that require recruiting, performance,
succession, compensation, learning and organisation charting capabilities
beyond what is available within their current HR systems. Breezy provides a
largely self-service SaaS talent acquisition solution aimed at small and
medium-sized businesses. Bridge is an employee-focused learning and
performance platform operating in the higher growth, mid-market with proven
potential to move into sectors of the enterprise market. Rustici Software is
a global expert in e-learning interoperability software. Open LMS provides
the largest scale capability in the global open-source Moodle™ services
market. VectorVMS is a market-leading SaaS-based technology for the
contingent workforce.
Software & Platforms comprised 26% (2022: 26%) of 2023 Group revenue. In
2023, 96% (2022: 95%) of the revenue in Software & Platforms was related
to SaaS-based subscriptions and long-term contracts.
Revenue decreased to £144.3 million (2022: £154.2 million) with a constant
currency decline of 4% driven by the expected decline in PeopleFluent, a
reduction in Reflektive revenue due to a combination of softness in technology
sector customers and the strategy to migrate customers to a version of
Reflektive within Bridge, weaker demand in VectorVMS due to reduced contract
labour usage and lower healthcare rates, and softness in Breezy as
transactional business related to the SME US labour market remained subdued.
These challenges were partially offset by continued strong growth in Rustici
and good growth in Bridge.
The PeopleFluent product line, 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. In 2023,
opportunities to upsell and cross sell additional products in performance,
compensation and succession solutions, increased long-term contract revenue
made possible due to the expertise of the team, the relationships built with
customers, and our ability to support their goal of doing more with our
products.
Breezy provides a largely self-service SaaS talent acquisition solution aimed
at small and medium-sized businesses. As the business dealt with 44% lower
transactional demand than 2022, significant efforts were made to control costs
and avoid the effect of operational deleverage, resulting in similar EBIT
margins despite the lower revenue. The macro impact on Breezy's
transactional revenues masks 4% underlying growth in Platform hosting revenue
for the full year.
Open LMS performance was muted as educational establishments realigned their
requirements in a post-Covid environment. However, despite this, recurring
revenue by year end increased by c.1% with new sales and expansions expected
to benefit growth into 2024.
Rustici, the e-learning standards business, continued to enjoy strong growth.
On-premise renewals, new customers and continued demand for Content Controller
and Rustici Engine contributed to the strong performance.
Adjusted EBIT improved in the year to £42.1 million (2022: £40.0 million) as
operational leverage and reduced central costs, particularly reduced facility
costs, benefitted this reporting segment. Adjusted EBIT margin improved to
29.2% (2022: 25.9%).
Statutory profit before tax increased to £19.7 million (2022: £15.5 million)
after deducting adjusting items including amortisation of acquired
intangibles, integration costs, earn-out charges, loss on disposal of
right-of-use assets, restructuring costs and finance expenses.
Statutory operating profit
The Group's statutory operating profit was £58.7 million (2022: £50.5
million), including adjusting items of £39.8 million (2022: £49.4 million),
as set out in note 4, comprised of:
● An amortisation charge for acquired intangibles of £32.7 million (2022:
£35.7 million);
Amortisation of acquired intangible costs, including acquired software and IP,
are excluded from the adjusted results of the Group since the costs are
non-cash charges arising from investing activities. As such, they are not
considered reflective of the core trading performance of the Group.
● Impairment of goodwill and intangibles of nil (2022: £8.0 million);
Impairment of goodwill and intangibles are excluded from the adjusted results
of the Group since the costs are one-off, non-cash charges. The 2022
impairment related to closure of the non-core UK Apprenticeship business in
early 2023 announced on 19(th) December 2022.
● Integration costs of £2.4 million (2022: £3.5 million);
The costs of acquiring and integrating subsidiaries purchased in the year or
in prior periods, deemed to be incremental costs not part of the normal course
of business. In 2023, this includes £2.4 million of integration costs
related to the continued integration of GP Strategies. The integration costs
in 2022 included staff related costs such as retention bonuses, severance and
recruitment costs as well as consulting costs.
● Restructuring costs and provision of £2.5 million (2022: nil);
Restructuring provision of £2.5 million relating to severance incurred, or
the liability created by year end are excluded from the adjusted results as
they are restructuring in nature and not part of the normal operating costs of
the ongoing Group. £1.7 million was paid in 2023.
● Loss on disposal of right-of-use assets £2.2 million (2022: £0.2
million);
Impairment of right-of-use assets 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.
● Costs relating to asset held for sale £0.5 million (2022: nil);
On 2 January, the Group sold the Lorien business for $21.4 million (£16.8
million) on a cash and debt free basis (subject to customary adjustments) for
an estimated gain of $15.0 million (£11.8 million). The only impact in
these financial statements are costs in relation to the sale.
● Earn-out charges of £0.2 million (2022: £3.3 million);
The cost of earn-out charges are mechanisms included in the purchase
agreements of business combinations, primarily related to Learning Media
Services Ltd and Patheer in 2023, and Breezy and eCreators in 2022. 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.
● £0.6 million other income (2022: £1.5 million);
Other income includes amounts received in relation to the carve-out of the
external staffing business of TTi Global, part of GP Strategies, for a cash
consideration of approximately $0.8 million. A number of client staffing
contracts (for high quality engineering and technical roles) and people were
transferred to Premier Staffing Solutions in October 2023.
● £0.4 million profit on sale of joint venture (2022: £1.2 million);
On 5 September 2023, the Group sold its 17% investment in Leo Brasil
Tecnologia Educacional LTDA three million Brazilian Real, realising a gain on
sale of £0.4 million (see note 10). On 18(th) April 2022, the Group sold its
10% investment in National Aerospace Solutions LLC for proceeds of $3.0m
(£2.3 million), realising a gain on sale of £1.2 million.
● £0.3 million Cloud computing configuration and customisation costs (2022:
£0.7 million);
Cloud computing configuration and customisation costs reflects the impact of a
change in accounting policy following review of IFRIC guidance issued in March
2021 relating to capitalisation of cloud computer software implementation
costs. Where there is no underlying intangible asset over which we retain
control, the Group recognises configuration and customisation costs as an
expense.
Discontinued operations
Discontinued operations reflect the results of the UK Apprenticeship business
following the closure announced in December 2022. The £3.1m loss on
discontinued operations, net of tax, reflects closure costs incurred which
were not provided for in the 2022 financial statements and which were
partially expected to be covered by contracted revenue (see note 6).
Net Finance Charge and Profit Before Tax
The net finance charge was £13.1 million (2022: £10.0 million), with the
increase driven by the higher rates and partially offset by the lower average
debt in the year.
After the profit on sale of joint venture and net finance charge, adjusted
profit before tax for continuing operations was £85.7 million (2022: £89.9
million) and statutory profit before tax for continuing operations was £45.6
million (2022: £40.5 million).
Taxation Charge
The adjusted tax charge was £21.6 million (2022 £24.3 million), resulting in
an effective tax rate of 25% (2022: 27%). The statutory tax charge was
£13.0 million (2022: £10.1 million).
In 2022 the Group completed a tax study to confirm the availability of US
federal losses and recognised a deferred tax asset for losses of £5.5
million, of which £2.6 million was utilised in 2022 and £2.9 million
expected to be utilised over the subsequent three-year period in line with the
forecast period prepared for the Group. In 2023 the Group has continued to
apply this principle and has recognised deferred tax assets of £0.6 million
representing an additional year of availability in line with the forecast
period. In 2023, the Group similarly completed a tax study to confirm the
availability of US state losses in respect of these acquisitions and
recognised a deferred tax asset of £1.0 million for losses expected to be
utilised over the same subsequent three-year period. In subsequent years, the
Group will consider recognition of the further deferred tax assets on the
remaining losses on an annual basis.
The reduction in the effective tax rate to 25% in 2023 from 27% in 2022
reflects the recognition of a deferred tax asset related to the US state
losses noted above.
Foreign Exchange
The Group is exposed to a number of currencies resulting from its geographical
spread, with the majority of exposure to the US Dollar. The weakening of the
US Dollar since December 2022 has resulted in a FX headwind for the Group and
£20.2 million (2022: £31.0 million gain) exchange differences on translating
foreign operations within other comprehensive income largely due to
retranslation of foreign operations as well as £18.9 million of foreign
currency loss generated on goodwill and acquired intangibles (note 9). This
is largely due to a significant proportion of these items being designated in
USD.
Earnings per Share
Adjusted diluted EPS from continuing operations decreased marginally to 7.803
pence (2022: 7.996 pence for continuing operations) driven by a marginal
decrease in adjusted EBIT and higher net finance expenses partially offset by
a lower adjusted effective tax rate and a lower number of shares
outstanding. Adjusted diluted EPS for total operations is 7.427 pence (2022:
8.121 pence).
On a statutory basis, basic EPS decreased to 3.724 pence (2022: 3.857
pence).
Cash Generation
As per the Consolidated Statement of Cash Flows, cash generated from
operations finished strongly at £96.1 million (2022: £92.1 million) and net
cash flows from operating activities were £79.5 million (2022: £71.9
million).
There was a cash outflow from working capital of £9.6 million (2022: £18.4
million cash outflow) primarily driven by a c.£7 million reduction in the
short-term bonus accrual compared to 2022. Debtor days decreased to 79
days (2022: 81(2) days) and combined debtor work-in-progress and deferred
income days (combined days) increased to 45 days (2022: 41 days). The
combined days metric benefits from payments being received annually in advance
for recurring software licences.
Free cashflow(1) was £44.4 million (2022: £50.3 million), £5.9 million
lower than 2022. Cash conversion(1) was strong at 88% (2022: 82%(2)), as set
out below.
1 Alternative performance measures used by the Group are defined in the
Glossary
(2) As reported.
£m FY23 FY22(2) Variance
Statutory operating profit 58.7 50.5 8.2
Adjusting items 39.8 50.4 (10.6)
Adjusted EBIT(1) 98.5 100.9 (2.4)
Depreciation & Amortisation 14.1 13.9 0.2
Share based payment charges 4.4 6.7 (2.3)
Dec / (Inc) working capital (9.6) (18.4) 8.8
Capital expenditure (14.1) (11.6) (2.5)
Lease liabilities (5.7) (7.3) 1.6
Other (1.3) (1.0) (0.3)
Adjusted operating cash flow(1) 86.3 83.2 3.1
Cash Conversion 88% 82% 6%pts
Net Interest paid (15.7) (4.3) (11.4)
Tax paid (16.6) (20.2) 3.6
Restructuring cash costs (1.7) - (1.7)
Integration costs (2.4) (3.8) 1.4
Earnout & contingent consideration (4.6) (6.9) 2.3
Cash flow from discontinued operations (1.4) - (1.4)
Other income 0.6 - 0.6
Cash costs related to asset held for sale (0.5) - (0.5)
Proceeds from asset sale 0.4 2.3 (1.9)
Free cash flow(1) 44.4 50.3 (5.9)
( )
Net interest paid increased to £15.7 million (2022: £4.3 million) due to
higher interest rates on a lower average gross debt, and £4.5 million
interest from 2022 paid in 2023 due to actions taken in 2022 to benefit from a
fixed interest rate at a time of increasing rates. £1.6 million in interest
expense relating to 2023 is payable in 2024.
Net corporation tax payments decreased to £16.6 million (2022: £20.2
million) primarily due to the timing of tax payments. Restructuring cash
costs of £1.7 million related to resizing the organisation to a more
challenging macro environment, the reduction in transaction and project
related costs and structural decline in PeopleFluent. £2.4 million (2022:
£3.8 million) in integration costs related to the continued integration in
2023 of GP into the Group, including moving LEO and PDT into GP Strategies.
Payments of acquisition-related contingent consideration and earn-outs related
to Breezy and eCreators totalled £4.6 million in 2023, and £6.9 million
related to Breezy, Watershed, eCreators and eThink in 2022. Cash flow from
discontinued operations of £1.4 million related to the UK Apprenticeship
business, and cash costs related to asset held for sale of £0.5 million for
the Lorien business.
There were cash outflows from investment activities of £13.7 million (2022:
£9.3 million) comprising of £12.9 million (2022: £10.0 million) of outflows
relating to capitalised investment in internally generated IP, £1.2 million
(2022: £1.6 million) from investment in property, plant and equipment, and
£0.4 million (2022: £2.3 million) cash inflow from the sale of the
investment in Leo Brasil Tecnologia Educacional LTDA. The 2022 cash inflow of
£2.3 million relates to the sale of NAS joint venture in April 2022.
Net cash outflows from financing activities were £84.9 million (2022: 58.8
million). This includes £51.3 million repayment of bank loans, including
$25 million voluntary additional payment in September 2023. In addition, net
interest of £15.7m (2022: £4.3 million) was paid and there were £0.5
million (2022: £1.0 million) of proceeds from the issue of ordinary share
capital, net of share issue costs. There were also lease and lease interest
payments of £5.7 million (2022: £7.3 million), and dividend payments of
£12.7 million (2022: £9.1 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, selectively acquiring value
enhancing businesses and return of cash to shareholders, primarily through a
progressive dividend policy.
The Board's progressive dividend policy, while taking into account earnings
cover, also considers 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.
The Group considers these factors in the context of the Group's Principal
Risks and the overall risk profile of the Group.
Given the operational performance during a challenging year and strong cash
generation, the Board is recommending a final dividend of 1.21 pence per share
(2022: 1.15 pence). The total cash cost of the final dividend is approximately
£9.5 million.
Together with the interim dividend of 0.45 pence (2022: 0.45 pence), this
gives a total dividend for the year of 1.66 pence, an increase of 4% on the
prior year.
If approved the final dividend will be paid on 28(th) June 2024 to all
shareholders on the register on 7(th) June 2024.
Net Debt and Gearing
At 31 December 2023, the Group's net debt was £78.6 million (31 December
2022: £119.8 million), excluding £11.3 million (31 December 2022: £14.9
million) of lease liabilities. On a constant currency basis, net debt was
£82.7 million on 31 December 2023 at the 2022 rate.
The Group's net debt comprised £151.1 million of debt (31 December 2022:
£214.7 million) and £72.5 million of cash (31 December 2022: £94.8
million).
The Group's debt is made up of a term facility loan with an original
commitment of $265.0 million is available to the Group until October 2025.
The facility also includes a $50.0 million (£39.3 million at year end
exchange rates) Revolving Credit Facility and a $50 million (£39.3 million at
year end exchange rates) uncommitted accordion, both available to July 2025.
The Revolving Credit Facility remained undrawn in both 2022 and 2023. For
further details of the Group's debt facility see note 16.
The Group's covenant basis net debt / adjusted EBITDA ratio as at 31 December
2023 was 0.7 times (2022: 1.1 times).
Sale of Lorien Engineering Solutions
On 2 January 2024, LTG completed the disposal of non-core asset Lorien
Engineering Solutions for a cash consideration of $21.4 million on a cash
and debt free basis (subject to customary adjustments) which further supports
the Group's swift deleveraging.
There have been no other notifiable events between the 31 December 2023 and
the date of this Annual Report.
Balance Sheet
The Group has a strong balance sheet with total shareholder equity of £427.2
million at 31 December 2023 (31 December 2022: £426.3 million). This is
equivalent to 54.0 pence per share (2022: 54.0 pence per share). Key
movements on the balance sheet in 2023 include:
● Intangible assets - intangible fixed assets have decreased £52.2 million.
This is largely due to additions of £12.9 million offset by amortisation
charge on intangible assets of £41.6 million and net foreign exchange losses
of £23.5 million.
● The Group has a substantially reduced net debt position of c.£78.6 million
(31 December 2022: net debt £119.8 million), reflecting strong cash
generation which has contributed to the continued deleveraging of the balance
sheet.
Prior Year Adjustment
We have identified the need to make a correction to the presentation of the
2022 and 2021 balance sheets where goodwill and deferred tax of £15.8 million
at 31 December 2022 and £14.1 million at 31 December 2021 should not have
been recognised under IAS 12 as the book basis and tax basis of acquired
intangible assets were equal for certain US acquisition in 2016, 2020 and
2021. The adjustment reflects the tax efficient acquisition structure of the
relevant acquisitions and tax amortisation deductions were taken for tax years
2020-2022 based on acquired intangible assets recognised.
The Group has restated the presentation of the balance sheet to reflect this
correction. For details of the presentational changes made, refer to note
22. The presentational changes made have no impact on reported revenue or
profit, or cash generation in the years and no material impact on net assets.
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.
Cash flow is reviewed at a Group level, aided by rolling cash forecasts and
monitoring cash balances. 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
15th April 2024
Consolidated Statement of Comprehensive Income
Year ended 31 December 2023
Year ended 31 Dec Year ended 31 Dec
2023 2022
Note £'000 £'000
Revenue 3 562,305 588,587
Operating expenses (499,642) (532,743)
Share-based payment charge (4,381) (6,693)
Profit on sale of joint venture 10 425 1,242
Share of profit from equity accounted investment 4 - 155
Operating profit 58,707 50,548
Analysed as:
Adjusted EBIT 98,539 99,925
Adjusting items included in Operating profit 4 (39,832) (49,377)
Operating profit 58,707 50,548
Finance expenses (14,132) (10,475)
Finance income 1,032 429
Profit before taxation from continuing operations 45,607 40,502
Income tax charge 5 (13,015) (10,075)
Profit after taxation from continuing operations 32,592 30,427
Loss on discontinued operations, net of tax 6 (3,138) (21)
Profit for the year 29,454 30,406
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations (20,169) 30,961
Total comprehensive income for the year attributable to owners of the parent 61,367
Company
9,285
Earnings per share from continuing operations:
Basic (pence) 7 4.121 3.860
Diluted (pence) 7 3.985 3.712
Adjusted earnings per share from continuing operations:
Basic (pence) 7 8.069 8.314
Diluted (pence) 7 7.803 7.996
Earnings per share from continuing and discontinued operations:
Basic (pence) 7 3.724 3.857
Diluted (pence) 7 3.601 3.710
Adjusted earnings per share from continuing and discontinued operations:
Basic (pence) 7 7.680 8.443
Diluted (pence) 7 7.427 8.121
Consolidated Statement of Financial Position Restated
31 Dec 31 Dec
2023 2022
£'000 £'000
Note
Non-current assets
Property, plant and equipment 8 2,217 2,857
Right-of-use assets 8 6,812 11,808
Intangible assets 9 493,016 545,214
Deferred tax assets 13 6,147 4,077
Other receivables, deposits and prepayments 12 2,093 1,874
Investments accounted for under the equity method 10 - -
Amounts recoverable on contracts - 1,303
510,285 567,133
Current assets
Trade receivables 11 107,962 136,025
Other receivables, deposits and prepayments 12 14,374 16,765
Amounts recoverable on contracts 25,757 33,221
Inventory 1,260 2,432
Corporation tax receivable 5,155 -
Amount owing from related parties - 59
Cash and bank balances 72,522 94,847
Restricted cash balances 2,389 2,608
229,419 285,957
Assets in disposal groups classified as held for sale 20 8,007 8,369
Total assets 747,711 861,459
Current liabilities
Lease liabilities 17 4,423 5,082
Trade and other payables 14 133,950 180,634
Borrowings 16 30,091 36,714
Provisions 18 2,026 1,602
Corporation tax payable 8,237 602
ESPP scheme liability 995 500
179,722 225,134
Non-current liabilities
Lease liabilities 17 6,913 9,792
Deferred tax liabilities 13 5,744 11,500
Other long-term liabilities 15 405 3,517
Borrowings 16 120,984 177,944
Corporation tax payable 5 756 1,431
Provisions 18 621 1,857
135,423 206,041
Liabilities directly associated with assets in disposal groups classified as 20 5,335 3,984
held for sale
Total liabilities 320,480 435,159
Net assets 427,231 426,300
Equity
Share capital 2,967 2,962
Share premium account 318,698 318,183
Merger reserve 31,983 31,983
Reverse acquisition reserve (22,933) (22,933)
Share-based payment reserve 18,974 14,714
Foreign exchange translation reserve 5,560 25,729
Retained earnings 71,982 55,662
Total equity 427,231 426,300
Consolidated Statement of Changes in Equity
Year ended 31 December 2023
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 2022 3,034 317,114 31,983 (22,933) 11,148 (5,232) 36,224 371,338
Profit for the period - - - - - - 30,406 30,406
Exchange differences on translating foreign operations - - - - - 30,961 - 30,961
Total comprehensive profit for the period - - - - - 30,961 30,406 61,367
Issue of shares net of share issue costs 8 1,029 - - - - - 1,037
Reserve transfer (80) 40 - - - - 40 -
Credit to equity for equity settled share-based - - - - 6,693 - - 6,693
payments
Credit to equity treated as consideration for equity - - - - 542 - - 542
settled share-based payments
Tax charge on share options - - - - - - (1,946) (1,946)
Distributions in respect of cancelled options - - - - (3,669) - - (3,669)
Dividends paid - - - - - - (9,062) (9,062)
Transactions with owners (72) 1,069 - - 3,566 - (10,968) (6,405)
Balance at 31 December 2022 2,962 318,183 31,983 (22,933) 14,714 25,729 55,662 426,300
Profit for the period - - - - - - 29,454 29,454
Exchange differences on translating foreign operations - - - - - (20,169) - (20,169)
Total comprehensive profit for the period - - - - - (20,169) 29,454 9,285
Issue of shares net of share issue costs 5 515 - - - - - 520
Credit to equity for equity settled share-based - - - - 4,381 - - 4,381
payments
Tax charge on share options - - - - - - (520) (520)
Distributions in respect of cancelled options - - - - (121) - - (121)
Exercise of share options through trust - - - - - - 38 38
Dividends paid 19 - - - - - - (12,652) (12,652)
Transactions with owners 5 515 - - 4,260 - (13,134) (8,354)
Balance at 31 December 2023 2,967 318,698 31,983 (22,933) 18,974 5,560 71,982 427,231
Consolidated Statement of Cash Flows Year ended Year ended
31 Dec 31 Dec
2023 2022
Note £'000 £'000
Cash flows from operating activities
Profit before taxation from continuing operations 45,607 40,502
Loss before taxation from discontinued operations 6 (3,488) (26)
Adjustments for:
Loss on disposal of PPE and right-of-use assets 2,163 230
Share-based payment charge 4,381 7,235
Amortisation of intangible assets 9 41,551 43,183
Depreciation of plant and equipment 8 1,492 2,141
Depreciation of right-of-use assets 8 3,741 4,343
Impairment of goodwill and acquired intangibles 9 - 7,958
Finance expense (including IFRS 16 finance charge) 518 573
Interest on borrowings 13,614 9,102
Acquisition-related contingent consideration and earn-outs 4 224 3,273
Fair value movement on contingent consideration 4 - (21)
Payment of acquisition-related contingent consideration and earn-outs (4,636) (6,139)
Profit on sale of joint venture 10 (425) (1,242)
Share of profit in equity accounted investment 10 - (155)
Interest income (1,032) (429)
Other non-cash items 2,000 -
Operating cash flows before working capital changes 105,710 110,528
Decrease / (Increase) in trade and other receivables 21,692 (6,521)
Decrease / (Increase) in inventory 1,052 (1,210)
Decrease in amount recoverable on contracts 8,269 3,647
Decrease in payables (40,581) (14,317)
Cash generated from operations 96,142 92,127
Income tax paid (16,649) (20,180)
Net cash flows from operating activities 79,493 71,947
Cash flows used in investing activities
Purchase of property, plant and equipment 8 (1,192) (1,641)
Development of intangible assets 9 (12,883) (9,966)
Sale of Investment in associates and joint ventures 10 425 2,300
Net cash flows used in investing activities (13,650) (9,307)
Cash flows used in financing activities
Dividends paid 19 (12,652) (9,062)
Repayment of bank loans 16 (51,315) (38,458)
Interest paid (16,714) (4,609)
Interest received 1,032 352
Issue of ordinary share capital net of share issue costs 520 1,037
Contingent consideration payments in the period - (705)
Interest paid on lease liabilities 17 (546) (614)
Payments for lease liabilities 17 (5,192) (6,719)
Net cash flows used in financing activities (84,867) (58,778)
Net (decrease) / increase in cash and cash equivalents (19,024) 3,862
Cash and cash equivalents at beginning of the year 94,847 83,850
Exchange movements on cash (3,301) 7,135
Cash and cash equivalents at end of the year 72,522 94,847
1. General information
The financial information for the year ended 31 December 2023 and the year
ended 31 December 2022 does not constitute the company's statutory accounts
for those years.
Statutory accounts for the year ended 31 December 2022 have been delivered to
the Registrar of Companies. The statutory accounts for the year ended 31
December 2023 will be delivered to the Registrar of Companies in due course.
The auditors' reports on the accounts for 31 December 2023 and 31 December
2022 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 3 New
Street Square, London, England, EC4A 3BF. The registered number of the Company
is 07176993.
2. Summary of material accounting policies
The material 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.
Going concern
The Directors report that the going concern basis is appropriate for a period
of 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.
The Group has a debt facility dated 15 July 2021 with HSBC UK Bank PLC, HSBC
Innovation Bank Limited, Barclays Bank PLC, Fifth Third Bank NA and The
Governor and Company of the Bank of Ireland.
This facility comprises of a Term Facility A committed facility, with an
original commitment of $265.0 million available to the Group until October
2025, a $50.0 million committed Revolving Credit Facility (£39.3 million at
the year-end exchange rate) and a $50.0 million uncommitted accordion facility
(£39.3 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 1.5% and 2.75% 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.
In addition, a 12 month extension request is available to the Group for Term
Facility A and the RCF.
Term Facility A is repayable with quarterly instalments, starting December
2022, of $9.6 million (c £7.5 million at the year-end exchange rate) with the
balance repayable on the expiry of the loan in October 2025.
On 29 September 2023 the Group made a voluntary additional repayment of $25.0m
on the term loan.
The Group continues to hold a strong liquidity position overall at 31 December
2023, with gross cash and cash equivalents of £72.5 million and net debt of
£78.6 million (see note 16) (31 December 2022: gross cash was £94.8 million
and net debt of £119.8 million). Whilst there are a number of risks to the
Group's trading performance, 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 going concern period, which runs to 30 June 2025. In addition,
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. increasing customer payment days (DSO) by 15 days;
iii. combining 10% reduction in revenues and increasing DSO by 15 days;
iv. increasing costs by 8% from H1 2024; 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 the detailed forecasts for the going concern period 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
2023
New standards impacting the Group that have been adopted in the annual
financial statements for the year ended 31 December 2023 are:
Amendments to IAS 7 Demand deposits with restrictions on use arising from a contract with a third
party
Amendments to IAS 12 International tax reform - pillar two model rules
Amendments to IFRS15 Principal vs Agent: Software reseller
Amendments to IAS 37 Negative low emissions vehicle credits
Amendments to IAS 32 Special Purpose Acquisition Companies (SPAC): Classification of public shares
as financial liabilities or equity
Amendments to IFRS 17 Transfer of insurance coverage under a group of annuity contracts
Amendments to IFRS 17 and IAS 21 Multi-currency groups of insurance contracts
Amendments to IFRS 9 and IFRS 16 Lessor forgiveness of lease payments
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 UK). Management are currently
assessing the impact of these new standards on the group.
Amendments to IAS 1 Classification of non-current liabilities with covenants and information
provided relating to liabilities subject to these conditions.
Amendments to IAS 7 and IFRS 7 Disclosures to enhance the transparency of supplier finance arrangements and
their effect on the company's liabilities, cash flows and exposure to
liquidity risk.
Amendments to IAS 21 Lack of exchangeability relating to foreign currency transactions and
operations.
Amendments to IFRS 16 Leases in sale and leaseback
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, total equity
per share 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 4) 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, cloud computing configuration and
customisation costs, the share of profit in equity accounted investments,
profit on the sale of a joint venture 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 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. 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 two reportable segments,
being the Content & Services division and the Software & Platforms
division. A majority of sales were generated by the operations in North
America in the year ended 31 December 2023 and in the year ended 31 December
2022.
For income and expenses relating to the Group's administrative functions that
are not directly attributable to a reporting segment, these are apportioned
based on revenue.
SaaS, long-term contract and transactional revenue is defined 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 North America Asia Pacific Rest of the world Total
£'000 £'000 £'000 £'000 £'000 £'000
31 Dec 2023
Revenue from continuing operations 67,826 73,804 374,279 21,064 25,332 562,305
Revenue from discontinued operations 34 - - - - 34
Total Revenue 67,860 73,804 374,279 21,064 25,332 562,339
Non-current assets 36,132 709 450,479 16,472 346 504,138
31 Dec 2022
Revenue from continuing operations 58,679 71,637 407,343 21,824 29,104 588,587
Revenue from discontinued operations 8,315 - - - - 8,315
Total Revenue 66,994 71,637 407,343 21,824 29,104 596,902
Non-current assets (restated) 31,017 569 511,876 19,177 417 563,056
The total non-current assets figure is exclusive of deferred tax assets in
each of the periods above, with the 2022 balances being restated as described
in note 22.
Information about reported segment revenue, profit or loss from continuing
operations and total assets
31 December 2023 Content & Services Software & Platforms Total
Global Services Regional Services Other Technical Total On-premise Software Licences Hosting & SaaS Platforms Professional Services & Other Support & Maintenance Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
SaaS and long-term contracts 87,220 179,783 2,825 269,828 30,684 100,212 3,925 3,429 138,250 408,078
Transactional 21,529 98,520 28,131 148,180 - 58 5,989 - 6,047 154,227
Total Revenue 108,749 278,303 30,956 418,008 30,684 100,270 9,914 3,429 144,297 562,305
Depreciation & amortisation (5,516) (8,562) (14,078)
Adjusted EBIT 56,416 42,123 98,539
Amortisation of acquired intangibles (15,065) (17,641) (32,706)
Acquisition related adjusting items (2,395) (239) (2,634)
Other adjusting items (3,330) (1,162) (4,492)
Finance expenses (9,736) (3,364) (13,100)
Profit before tax 25,890 19,717 45,607
Additions to intangible assets - 12,883 12,883
Total Assets 555,836 191,875 747,711
31 December 2022 Content & Services Software & Platforms Total
Global Services Regional Services Other Technical Total On-premise Software Licences Hosting & SaaS Platforms Professional Services & Other Support & Maintenance Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
SaaS and long-term contracts 89,405 175,359 5,395 270,159 29,925 108,909 4,106 3,952 146,892 417,051
Transactional 29,530 99,105 35,557 164,192 - 85 7,259 - 7,344 171,536
Total Revenue 118,935 274,464 40,952 434,351 29,925 108,994 11,365 3,952 154,236 588,587
Depreciation & amortisation (6,544) (7,400) (13,944)
Adjusted EBIT 59,902 40,023 99,925
Amortisation of acquired intangibles (15,833) (19,890) (35,723)
Acquisition related adjusting items (4,619) (2,991) (7,610)
Other adjusting items (7,023) 979 (6,044)
Finance expenses (7,414) (2,632) (10,046)
Profit before tax 25,013 15,489 40,502
Additions to intangible assets 445 9,521 9,966
Total Assets (restated) 635,718 225,741 861,459
Effective within this report, there are changes to the grouping of businesses
within the reportable segments, as well as a consolidation of the reporting
segments themselves. This was performed following internal reorganisation
and is consistent with the format of the internal reporting used by the Chief
Operating Decision Maker. The prior year's comparative results have been
represented to align under this updated presentation.
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, with the 2022 balances being restated as described in note 22.
Information about major customers
In the year ended 31 December 2023 and the year ended 31 December 2022, no
customer accounted for more than 10 per cent of reported revenues.
4. 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
2023 2022
Note £'000 £'000
Adjusting items included in Operating profit:
Acquisition related costs:
Amortisation of acquired intangibles 32,706 35,723
Acquisition-related contingent consideration and earn-outs 224 3,273
Acquisition-related share-based payment charge - 542
Fair value movement on contingent consideration - (21)
Transaction costs - 304
Integration costs 2,410 3,512
Total acquisition related costs 35,340 43,333
Other adjusting items:
Impairment of goodwill and intangibles - 7,958
Loss on disposal of fixed assets 124 5
Loss on disposal of right-of-use assets 2,039 228
Share of profit of equity accounted investments - (155)
Profit on sale of joint venture 10 (425) (1,242)
Cloud computing configuration and customisation costs 292 719
Restructuring costs 2,537 -
Costs relating to asset held for sale 20 529 -
Other income (604) (1,469)
Total other adjusting items 4,492 6,044
Total adjusting items 39,832 49,377
As outlined above, the material adjustments are made in respect of:
- Amortisation of acquired intangibles - the cost of £32.7 million
(2022: £35.7 million) is 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 goodwill and intangibles- these costs were excluded
from the adjusted results of the Group in 2022 as the costs were one-off
charges related to closure of the non-core UK apprenticeship business in early
2023, as announced in 2022.
- Restructuring costs relate to the resizing of the organisation
aligning to a more challenging macro environment.
- 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.
- Transaction and integration costs - the costs of acquiring and
integrating subsidiaries purchased. 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. Included within the £2.4 million integration costs
is £1.2 million incremental labour cost and £1.2 million relating to various
system integrations, insurances and legal and professional fees.
- Other income in 2023 relates a carve-out of the external staffing
business of TTi Global, part of GP Strategies, for a cash consideration of
approximately $800k. In 2022 the income related to amounts received in
relation to a contract. In both cases, these are considered adjusting items
due to the quantum and non-recurring nature.
- Cloud computing configuration and customisation costs reflects the
impact of a change in accounting policy following review of IFRIC guidance
issued in March 2021 relating to capitalisation of cloud computing software
implementation costs. Where there is no underlying intangible asset over which
we retain control, the Group recognises configuration and customisation costs
as an expense.
5. Income tax
Of the total income tax expense as set out in the table below, £13,015,000
relates to taxation on continuing operations (2022: expense £10,075,000) and
£350,000 relates to tax credit on discontinuing operations (2022: credit
£5,000).
31 Dec 31 Dec
2023 2022
£'000 £'000
Current tax expense:
- UK current tax on profits for the year 5,502 (282)
- Adjustments in respect to prior years (1,029) 2,522
- Foreign current tax on profits for the year 16,441 19,193
Total current tax 20,914 21,433
Deferred tax (note 13):
- Origination and reversal of temporary differences (12,158) (7,459)
- Adjustments in respect to prior years 2,129 (3,597)
- Change in deferred tax rate 1,780 (307)
Total deferred tax (8,249) (11,363)
Income tax expense 12,665 10,070
The increases in UK current tax primarily relate to the increase in
intercompany interest income between the UK and US arising from changes in
interest rates which were on average 6.7%, increased from the prior year
average of 3.4%
The 'changes in tax rate' reflect the remeasuring of temporary differences.
This primarily arises as a result of adjustments to the deferred tax rate
applied to the amortisation of acquired intangibles deferred tax liabilities
recognised at the consolidated level of £2.1 million and favourable impact
from US of £0.3 million due to the change in the blended tax rate derived
from state income apportionment as well as fluctuations in state tax rates.
In 2022 the Group completed a tax study to confirm the availability of US
federal losses acquired with the PeopleFluent and Reflektive acquisitions and
determined that tax effected losses amounting to £24.7 million were available
for recognition, consisting of £12.9 million for the period 2022-2038 and
£11.8 million to be carried forward indefinitely. The Group considered both
positive and negative evidence available and recognised a deferred tax asset
for losses of £5.5 million, of which £2.6 million was utilised in 2022 and
£2.9 million expected to be utilised over the subsequent three-year period in
line with the forecast period prepared for the Group. In 2023 the Group has
continued to apply this principle and has recognised deferred tax assets of
£0.6 million representing an additional year of availability in line with the
forecast period. In 2023, the Group similarly completed a tax study to confirm
the availability of US state losses in respect of these acquisitions and
recognised a deferred tax asset of £1.0m for losses expected to be utilised
over the same subsequent three-year period.
The Group has identified and reflected adjustments in respect to prior years
deferred tax expense amounting to £2.1 million, primarily arising in the US
in respect of recognition of deferred tax liabilities of amount £1.9 million
related to goodwill and intangibles, and other prior year adjustments of net
amount £0.2 million.
The current year deferred tax credit of £12.2 million, arising from the
origination and reversal of temporary differences, primarily relates to the
deferred tax liability release associated with acquired intangible
amortisation and impairments amounting to £8.8 million, net deferred tax
assets arising in the US of amount £3.0 million and other net timing
differences of £0.4 million. The temporary
differences arising in the US consist of deferred tax assets in respect of
provisions amounting to £4.3 million, the deferred tax asset in respect
of capitalised R&D of amount £2.5 million, offset by utilisation of
deferred tax losses of £1.6 million, accelerated tax depreciation of amount
£2.2 million, deferred revenue £1.1 million and other net timing differences
of £0.1 million.
The £0.8 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 2017 US tax reform, decreased from the prior year
amount payable of £1.4 million. This will be fully settled by 2025.
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
2023 2022
£'000 £'000
Profit before taxation from continuing and discontinued operations 42,119 40,476
Tax calculated at the domestic tax rate of 23.50% (2022: 19.00%): 9,898 7,690
Tax effects of: -
Expenses not deductible for tax purposes 1,896 2,147
Adjustments to corporation tax in respect to prior years (1,029) 2,522
Adjustments to deferred tax in respect to prior years 2,129 (3,597)
Recognition of previously unrecognised losses (1,000) -
Effect of differences in tax rates 771 1,308
12,665 10,070
The aggregate current and deferred tax directly charged to equity amounted to
£520,000 (2022: charge £1,946,000).
6. Loss on discontinued operations, net of tax
The table below show the results of the discontinued operations which are
included in the Group Income Statement and Group Statement of Cash Flows
respectively.
The discontinued operations relate to the closure of non-core operations.
Prior to 31 December 2022, management announced that it planned to exit the UK
apprenticeship business which then ceased trading on 31 March 2023.
31 Dec 31 Dec
2023 2022
£'000 £'000
Revenue 34 8,315
Operating expenses (3,522) (8,341)
Operating loss (3,488) (26)
Adjusted EBIT (3,425) 1,018
Adjusting items included in Operating loss
(Loss) / profit on disposal of fixed assets (3) 3
Closure costs (60) (1,047)
Operating loss (3,488) (26)
Loss before taxation (3,488) (26)
Taxation 350 5
Loss after taxation (3,138) (21)
31 Dec 31 Dec
2023 2022
£'000 £'000
Cash flow from operating activities
Loss before taxation (3,488) (26)
Adjustments for:
Loss / (profit) on disposal of PPE, right-of-use assets and lease liabilities 3 (3)
Other non-cash items 2,000 -
Net cash used in operating activities (1,485) (29)
Net cash (used in) / from investing activities (3) 3
Net cash used in discontinued operations (1,488) (26)
7. Earnings per share
31 December 2023 31 December 2022
Continuing operations Total operations Continuing operations Total operations
Pence Pence Pence Pence
Basic earnings per share 4.121 3.724 3.860 3.857
Diluted earnings per share 3.985 3.601 3.712 3.710
Adjusted basic earnings per share 8.069 7.680 8.314 8.443
Adjusted diluted earnings per share 7.803 7.427 7.996 8.121
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 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 4. The adjusted measures 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.
The calculation of earnings per share from continuing and discontinued
operations is based on the following earnings and number of shares.
2023 2022
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 29,454 790,920 3.724 30,406 788,295 3.857
Effect of adjustments:
Total adjusting items (see note 4) 39,895 50,421
Income tax expense 12,665 10,070
Effect of adjustments 52,560 6.645 60,491 7.674
Adjusted profit before tax 82,014 90,897
Tax impact after adjustments (21,272) (2.690) (24,338) (3.087)
Adjusted basic earnings per ordinary share 60,742 790,920 7.680 66,559 788,295 8.443
Effect of dilutive potential ordinary shares:
Share options 26,947 (0.253) 31,310 (0.322)
Adjusted diluted earnings per ordinary share 60,742 817,867 7.427 66,559 819,605 8.121
Diluted earnings per ordinary share attributable to the owners of the parent 29,454 817,867 3.601 30,406 819,605 3.710
The calculation of earnings per share from continuing operations is based on
the following earnings and number of shares.
2023 2022
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 32,592 790,920 4.121 30,427 788,295 3.860
Effect of adjustments:
Total adjusting items (see note 4) 39,832 49,377
Income tax expense / (credit) 13,015 10,075
Effect of adjustments 52,847 6.682 59,452 7.542
Adjusted profit before tax 85,439 88,879
Tax impact after adjustments (21,622) (2.734) (24,343) (3.088)
Adjusted basic earnings per ordinary share 63,817 790,920 8.069 65,536 788,295 8.314
Effect of dilutive potential ordinary shares:
Share options 26,947 (0.266) 31,310 (0.320)
Adjusted diluted earnings per ordinary share 63,817 817,867 7.803 65,536 819,605 7.996
Diluted earnings per ordinary share attributable to the owners of the parent 32,592 817,867 3.985 30,427 819,605 3.712
8. Property, plant, equipment and right-of-use assets
Right-of-use assets
Computer equipment Fixtures Leasehold Total Computer equipment Total
and Improvements Property Motor vehicles
fittings
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 1,804 438 1,617 3,859 559 23,347 134 24,040
Reclassification 1,134 140 (1,274) - - - - -
Additions 1,515 103 23 1,641 - 2,062 - 2,062
Foreign exchange differences 2,042 (26) 229 2,245 12 199 - 211
Reclassified as assets held for sale (236) (48) (43) (327) - (278) - (278)
Disposals (591) (233) (159) (983) (101) (4,065) (57) (4,223)
At 31 December 2022 5,668 374 393 6,435 470 21,265 77 21,812
Additions 1,111 12 69 1,192 102 3,044 - 3,146
Foreign exchange differences (314) 262 (180) (232) (1) 204 - 203
Reclassified as assets held for sale - - - - - 74 - 74
Disposals (1,799) (28) (139) (1,966) - (7,109) - (7,109)
At 31 December 2023 4,666 620 143 5,429 571 17,478 77 18,126
Accumulated Depreciation
At 1 January 2022 281 124 222 627 186 6,596 13 6,795
Charge for the year 1,619 270 252 2,141 161 4,129 53 4,343
Reclassification 129 - (129) - - - - -
Reclassified as assets held for sale (178) (47) (43) (268) - (105) - (105)
Disposals (480) (221) (148) (849) (20) (987) (22) (1,029)
Foreign exchange differences 1,765 (10) 172 1,927 - - - -
At 31 December 2022 3,136 116 326 3,578 327 9,633 44 10,004
Charge for the year 1,189 137 166 1,492 131 3,584 26 3,741
Reclassified as assets held for sale - - - - - 1 - 1
Disposals (1,711) (27) (103) (1,841) - (2,432) - (2,432)
Foreign exchange differences (25) 254 (246) (17) - - - -
At 31 December 2023 2,589 480 143 3,212 458 10,786 70 11,314
Net book value
At 31 December 2022 2,532 258 67 2,857 143 11,632 33 11,808
At 31 December 2023 2,077 140 - 2,217 113 6,692 7 6,812
The above property, plant and equipment and right-of-use assets includes items
held as security as part of the fixed and floating charge over the assets of
the Group, refer to note 16 for further details of the Group's borrowings.
The reclassifications in the prior year relate to misclassification of assets
acquired as part of a business combination in 2021.
9. Intangible assets
Customer contracts and relationships Acquired software and Intellectual Property Internal Software Development
Goodwill Total
Branding
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 (restated) 323,624 188,860 15,277 90,314 26,199 644,274
Additions - - - - 9,966 9,966
Adjustment related to cloud computing costs - - - - (640) (640)
Reclassified as assets held for sale (501) (1,095) (450) (28) - (2,074)
Impairment (5,401) (2,581) (497) (59) - (8,538)
Foreign exchange differences 33,789 13,937 2,448 9,345 2,291 61,810
At 31 December 2022 (restated) 351,511 199,121 16,778 99,572 37,816 704,798
Additions - - - - 12,883 12,883
Disposals - - - - (124) (124)
Foreign exchange differences (16,019) (4,999) (794) (4,606) (1,825) (28,243)
At 31 December 2023 335,492 194,122 15,984 94,966 48,750 689,314
Accumulated amortisation
At 1 January 2022 - 70,947 2,068 23,179 14,838 111,032
Amortisation charged in year - 20,651 3,056 12,016 7,460 43,183
Reclassified as assets held for sale - (182) (105) (7) - (294)
Impairment - (446) (120) (14) - (580)
Foreign exchange differences - 2,703 981 1,944 615 6,243
At 31 December 2022 - 93,673 5,880 37,118 22,913 159,584
Amortisation charged in year - 18,736 2,822 11,148 8,845 41,551
Disposals - - - - (115) (115)
Foreign exchange differences - (1,766) (289) (1,763) (904) (4,722)
At 31 December 2023 - 110,643 8,413 46,503 30,739 196,298
Carrying amount
At 31 December 2022 (restated) 351,511 105,448 10,898 62,454 14,903 545,214
335,492 83,479 7,571 48,463 18,011 493,016
At 31 December 2023
The Goodwill balances have been restated as at 1 January and 31 December 2022
relating to a prior period adjustment as described in note 22.
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 16 for further
details of the Group's borrowings.
Goodwill and acquisition-related intangible assets recognised have arisen from
acquisitions. Internal software development reflects the recognition of
development work undertaken in-house.
The amortisation charge for the year of £41.6 million (2022: £43.2 million)
includes £32.7 million (2022: £35.7 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 except where arising in the US as an acquisition
of a single member limited liability company, this is treated as an asset
purchase for tax purposes and hence tax deductible.
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 eight (2022: nine)
CGUs. The carrying amount of goodwill has been allocated as follows:
CGU Goodwill Growth rate for years 2 to 5 Post-tax discount rate
2023 2022 (restated) 2023 2022 2023 2022
£'000 £'000 % % % %
Content & learning services 2,180 12,712 7% 2% 10.8% 10.7%
Diversity & inclusion 19,434 28,020 5% 6% 10.3% 10.6%
Software solutions 143,568 150,612 2% 4% 10.8% 10.6%
GP Strategies - Global Services 66,586 35,839 4% 5% 10.3% 10.2%
GP Strategies - Americas 87,175 106,894 4% 5% 10.3% 10.1%
GP Strategies - Europe 1,839 2,933 4% 4% 12.0% 10.2%
GP Strategies - AMEA 3,443 2,623 5% 5% 11.2% 10.2%
GP Strategies - Effective People 11,768 12,379 6% 8% 12.0% 10.2%
GP Strategies - SFA - - -% -% - 16.8%
335,993 352,012
During the year GP Strategies reorganised its BPO business from Americas CGU
to Global Services CGU and comparatives for 2022 have been restated
accordingly, in order to align to how the business is managed and monitored,
but also due to product and service offerings becoming increasingly
interrelated.
The Content & Services and Diversity & Inclusion CGUs have been
amended in 2023 to reflect the transfer of trade and assets relating to Leo
Learning and PDT to GP Strategies with effect from January 2023.
The difference between the net book value of the Goodwill generated on
acquisitions as at 31 December 2023 of £335,492,000 and the £335,993,000
stated above relates to £501,000 of Goodwill relating to assets classified as
held for sale (see note 20).
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 calculations. 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 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 2024 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 2% and 7% for the first five
years. The terminal rate used for the value in use calculation thereafter is
2.0%.
All CGUs have substantial headroom between the calculated value-in-use and the
net book value except for the GP Strategies - SFA CGU which has been fully
impaired following the Board's announcement in December 2022 regarding closure
of the UK apprenticeship business in early 2023. Approximately 80% of
operations within the GP Strategies - SFA CGU are being discontinued. The
remaining contracts within the CGU are of uncertain longevity and management
are not targeting further investment in this area. The resultant impairment
charge for 2022 was £8.0 million.
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 2024 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 2024 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 not result in an impairment
to any CGU. Our sensitivity analysis has concluded that 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.
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, 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, increasing the
discount rate by 1% and reducing the long-term growth rates to 0%. 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.
Acquired software and Intellectual Property is amortised over the estimated
useful life of between two and ten years.
10. 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 investments is listed
below.
Percentage of ordinary shares held by Group
Name of entity Country of Registration or Incorporation Principal activity 31 December 2023 31 December 2022
LEO Brasil Tecnologia Educacional Ltda (formerly Epic Brasil Brazil Bespoke e-learning - 17%
TecnologiaEducacional Ltda)
LEO Brasil Tecnologia Educacional Ltda
Since 31 December 2021 the Group's proportional ownership in LEO Brasil
Tecnologia Educacional Ltda (formerly Epic Brasil Tecnologia Educacional Ltda)
has been 17%.
On 5 September 2023, the Group sold its 17% investment for proceeds of R$3
million (£0.4 million), realising a gain on sale of £0.4 million.
There is no other impact on these financial statements as the investment held
had been fully impaired.
National Aerospace Solutions, LLC
Share of joint venture's net assets Share of joint venture's net assets
2023 2022
£'000 £'000
Cost
At 1 January - 1,018
Additions from acquisitions - -
Share of profit after tax - 155
Disposals - (1,173)
Disbursements - -
Foreign exchange differences - -
At 31 December - -
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.
On 18th April 2022, the Group sold its 10% investment in National Aerospace
Solutions LLC for proceeds of $3.0m (£2.3 million), realising a gain on sale
of £1.2 million.
11. Trade receivables
31 Dec 31 Dec
2023 2022
£'000 £'000
Trade receivables 113,080 140,951
Allowance for impairment losses (5,118) (4,926)
107,962 136,025
The Group's normal trade credit term is 30-60 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.
2023 2022
£'000 £'000
Contract liabilities offset within trade receivables above 13,099 6,639
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables. To measure expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics and aging. The amounts
receivables on contacts have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group's historical credit losses
experienced in the previous period and then adjusted for current and
forward-looking information on macroeconomic factors affecting the Group's
customers.
The expected credit loss rate and the aged gross trade receivables and aged
loss allowance as at 31 December are as follows:
31 December 2023 Expected Loss rate Gross Trade receivable Allowance for impairment losses
£'000 £'000
Not past due -% 97,988 297
Past due:
- Less than three months 8% 5,512 422
- Three to six months 31% 1,713 524
- Past six months 49% 7,867 3,875
Gross amount 113,080 5,118
31 December 2022 Expected Loss rate Gross Trade receivable Allowance for impairment losses
£'000 £'000
Not past due 1% 117,464 1,608
Past due:
- Less than three months 5% 12,143 619
- Three to six months 7% 2,637 184
- Past six months 29% 8,707 2,515
Gross amount 140,951 4,926
The movement in the allowance for expected credit loss is as below:
2023 2022
£'000 £'000
At 1 January 4,926 2,543
Reclassified as assets held for sale - 11
Additions 763 1,949
Release (401) -
Foreign exchange (170) 423
At 31 December 5,118 4,926
As at 31 December 2023 trade receivables of £1,192,000 (2022: £1,091,000)
had lifetime expected credit losses of the full value of the receivables.
The receivables due at the end of the financial year relate to 59 customers
(2022: 51 customers) and have been fully provided based on the aged profile of
the debt or public information available to management indicating the
customers may be unable to settle the debt.
12. Other receivables and prepayments
Current assets
31 Dec 31 Dec
2023 2022
£'000 £'000
Sundry receivables 5,179 6,767
Prepayments 9,195 9,998
14,374 16,765
Non-current assets
31 Dec 31 Dec
2023 2022
£'000 £'000
Sundry receivables 2,093 1,874
2,093 1,874
Sundry receivables include rent deposits and other sundry receivables.
13. 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.
The balances as at 1 January and 31 December 2022 have been restated as per
note 22.
The movements in deferred tax assets and liabilities prior to offsetting are
shown below:
Share options Tax losses Short-term timing differences Intangibles Total
Deferred tax assets £'000 £'000 £'000 £'000 £'000
At 1 January 2022 (restated) 5,660 1,781 9,880 10,268 27,589
Deferred tax (charge)/credit directly to the income statement (566) 3,469 1,868 (663) 4,108
Deferred tax charged directly to equity (1,946) - - - (1,946)
Exchange rate differences, charged directly to OCI 188 144 962 1,242 2,536
Changes in tax rate, credited to the income statement 286 (146) 104 10 254
At 31 December 2022 (restated) 3,622 5,248 12,814 10,857 32,541
Deferred tax (charge)/credit directly to the income statement (281) (226) 7,141 (17) 6,617
Deferred tax charged directly to equity (520) - - - (520)
Exchange rate differences, charged directly to OCI 2 (151) 308 (531) (372)
Changes in tax rate, credited to the income statement 4 - 307 (414) (103)
At 31 December 2023 2,827 4,871 20,570 9,895 38,163
Accelerated tax Short-term timing
Intangibles depreciation differences Total
Deferred tax liabilities £'000 £'000 £'000 £'000
At 1 January 2022 (restated) 41,474 788 472 42,734
Deferred tax credit/(charge) directly to the income statement (7,762) (1,292) 2,106 (6,948)
Exchange rate differences, charged directly to OCI 4,097 125 9 4,231
Changes in tax rate, charged to the income statement (70) (44) 61 (53)
At 31 December 2022 (restated) 37,739 (423) 2,648 39,964
Deferred tax credit/(charge) directly to the income statement (3,958) 587 (41) (3,412)
Exchange rate differences, charged directly to OCI (1,362) 17 876 (469)
Changes in tax rate, charged to the income statement 1,667 (1) 11 1,677
At 31 December 2023 34,086 180 3,494 37,760
The total deferred tax assets and liabilities subject to offsetting are
presented below:
Total Deferred tax assets Total Deferred tax liabilities
Restated Restated
31 Dec 31 Dec 31 Dec 31 Dec
2023 2022 2023 2022
£'000 £'000 £'000 £'000
At 31 December prior to offsetting 38,163 32,541 37,760 39,964
Offset of tax (32,016) (28,464) (32,016) (28,464)
At 31 December after offsetting 6,147 4,077 5,744 11,500
The Group has recognised £4.9 million (2022: £5.2 million) of deferred tax
assets relating to carried forward tax losses, including those arising in the
US of amount £3.1 million. 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 ability
to recognise deferred tax assets on an annual basis to estimate whether
sufficient future taxable income will be generated to permit their use.
Deferred tax assets of £24.6 million, relating primarily to trading losses
carried forward arising in the US totalling £86.2 million (2022: £91.9
million), consisting of £31.7 million available for utilisation for the
period 2027-38 and £54.5 million to be carried forward indefinitely, continue
to be unrecognised. The Group has completed a US federal tax study in 2022 and
US state tax study in 2023 that confirms the availability of these losses.
The Group has utilised approximately £7.5 million of trading losses (2022:
£12.3 million) and recognised deferred tax assets of amount £3.1 million
relating to trading losses of £20.9 million that are expected to be utilised
in the period 2024-2026.
14. Trade and other payables
31 Dec 31 Dec
2023 2022
£'000 £'000
Trade payables 24,979 31,813
Contract liabilities 63,398 99,303
Tax and social security 15,158 22,300
Contingent consideration 20 21
Acquisition-related contingent consideration and earn-outs 145 4,876
Accruals 30,250 22,321
133,950 180,634
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 2022 was recognised as revenue in 2023 and the current contract
liabilities balance at 31 December 2023 is expected to be recognised as
revenue in 2024.
The acquisition-related contingent consideration and earn-outs balance in 2023
relates to the acquisition of Learning Media Services and Patheer. The 2022
balance relates to the acquisition of PDT Global, eCreators, eThink and
BreezyHR Inc ('Breezy') and were financial instruments held at fair value
within the scope of IFRS 9 and were repaid during 2023. The 2023 and 2022
contingent consideration balance relates to Moodle News.
The Group has netted off £13.1 million (2022: £6.6 million) of contract
liabilities against its trade receivables balances as outlined in note 11.
15. Other long-term liabilities
31 Dec 31 Dec
2023 2022
£'000 £'000
Contract liabilities 405 3,517
405 3,517
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 2023 is expected to be recognised during 2025.
16. Borrowings
The Group has a debt facility dated 15 July 2021 with HSBC UK Bank PLC, HSBC
Innovation Bank Limited, Barclays Bank PLC, Fifth Third Bank NA and The
Governor and Company of the Bank of Ireland.
In March 2023, HSBC UK bank plc ("HSBC") acquired Silicon Valley Bank UK
Limited ("SVB UK"). SVB UK, now known as HSBC Innovation Bank Limited, a
direct wholly-owned subsidiary of HSBC, and which remains as the facility
agent and security agent for the debt facility.
The facility comprises of a Term Facility A committed facility, with an
original commitment of $265.0 million available to the Group until October
2025, a $50.0 million committed Revolving Credit Facility (£39.3 million at
the year-end exchange rate) and a $50.0 million uncommitted accordion facility
(£39.3 million at the year-end exchange rate), both available until July
2025. In addition, a 12 month extension request is available to the Group
for Term Facility A and the RCF.
The term facility attracts variable interest based on LIBOR plus a margin of
between 1.50% and 2.75% 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.
Term Facility A is repayable with quarterly instalments, starting December
2022, of $9.6 million (c £7.5 million at the year-end exchange rate) with the
balance repayable on the expiry of the loan in October 2025. During the year
the Group also made a voluntary additional repayment of $25 million (c £20.5
million). There were no utilisations of the Revolving Credit Facility or
uncommitted accordion facility in either of the years ended 2023 or 2022.
The bank loan is secured by a fixed and floating charge over the assets of the
Group and is subject to 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 interest cover ratio is the ratio of adjusted EBITDA, as defined in the
agreement, to Finance Charges. The leverage ratio is total net debt on the
last day of the relevant period to adjusted EBITDA for that relevant period.
Both numerator and denominator in each calculation comprise several
adjustments as defined in the debt facility agreement and as such are not
directly calculable from the financial statements.
The Group was compliant with all financial covenants throughout the year and
as at 31 December 2023, the Group's interest cover was 8.34 (2022: 12.90) and
its leverage ratio was 0.71 (2022: 1.08).
The lease liabilities have arisen on adoption of IFRS 16 and are secured by
the related underlying assets.
31 Dec 31 Dec
2023 2022
£'000 £'000
Current interest-bearing loans and borrowings 30,091 36,714
Non-current interest-bearing loans and borrowings 120,984 177,944
Current lease liabilities 4,423 5,082
Non-current lease liabilities 6,913 9,792
162,411 229,532
Net debt reconciliation
Net debt, which excludes lease liabilities, can be analysed as follows:
31 Dec 31 Dec
2023 2022
£'000 £'000
Cash and cash equivalents 72,522 94,847
Borrowings:
- Revolving credit facility - -
- Term loan (151,075) (214,658)
Net debt (78,553) (119,811)
17. Lease liabilities
This note provides information for leases where the group is a lessee.
2023 2022
£'000 £'000
At 1 January 14,874 21,845
Additions 4,346 1,948
Interest expense 546 614
Lease payments (principal and interest) (5,738) (7,333)
Disposals (3,204) (2,367)
Liabilities in disposal group held for sale (76) (175)
Foreign exchange movements 588 342
At 31 December 11,336 14,874
The split of the lease liabilities due in less than and greater than one year
is presented in note 16.
Additional profits or losses and cash flow information
31 Dec 31 Dec
2023 2022
£'000 £'000
Income from subleasing office premises 3 256
Total cash outflow in respect of leases in the year (5,738) (7,333)
Expense related to short term leases not accounted for under IFRS 16 (217) (594)
Additions to right-of-use assets 3,147 2,062
18. Provisions
Property provisions(1) Litigation and regulation provisions(2) Onerous contract provisions(3) Closure and restructuring provisions(4) Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 1,075 6,489 1,024 - 8,588
Released to the income statement (34) (3,769) (643) - (4,446)
Paid in the year (143) (2,260) - - (2,403)
Additions 204 - - 1,047 1,251
Foreign exchange movements (99) 461 107 - 469
At 31 December 2022 1,003 921 488 1,047 3,459
Released to the income statement (87) (320) (475) - (882)
Paid in the year (37) - - (1,733) (1,770)
Additions 6 208 - 1,792 2,006
Foreign exchange movements (65) (43) (13) (45) (166)
At 31 December 2023 820 766 - 1,061 2,647
Current 199 766 - 1,061 2,026
Non-current 621 - - - 621
Total provisions 820 766 - 1,061 2,647
1. The Group is party to a number of leasehold property contracts. Provision
has been made for 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 than the provisions made
as there is a range of potential outcomes.
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.
4. Closure and restructuring provisions relate to redundancy costs and
facility obligations in relation to the closure of the UK apprenticeship
business, announced prior to 31 December 2022, given the nature of the
customer relationships and quality of the offering in the business do not
match the high standards elsewhere in the Group. The UK apprenticeship
business ceased trading on 31 March 2023.
In 2023, the redundancy provisions relate to resizing the organisation due to
a more challenging macro economic environment.
19. Dividends paid
31 Dec 31 Dec
2023 2022
£'000 £'000
Final dividend paid 9,094 5,515
Interim dividend paid 3,558 3,547
12,652 9,062
On 27 October 2023 the Company paid an interim dividend of 0.45 pence per
share (2022: 0.45 pence per share) amounting to a total dividend payment of
£3.6 million. The Directors propose to pay a final dividend of 1.21 pence
per share for the year ended 31 December 2023, equating to a total payment in
respect of the year of 1.66 pence per share (2022: 1.60 pence per share).
The proposed final dividend of 1.21 pence per share, amounting to a final
dividend of c. £9.5m, is not included as a liability in these financial
statements and, subject to shareholder approval, will be paid on 28 June 2024
to shareholders on the register at the close of business on 7 June 2024. The
final dividend will be paid gross.
20. Assets and liabilities classified as held for sale
In December 2022, the Group decided to dispose the non-core Lorien Engineering
business as soon as practicable and communicated this decision internally and
to investors on 19 December 2022. This business was acquired as part of the
GP Strategies acquisition in October 2021.
Following its classification as held for sale the asset group is held at the
lower of fair value less costs to sell and net book value.
Effect of the assets and associated liabilities on financial position of the
Group
31 Dec 31 Dec
2023 2022
£'000 £'000
Non-current assets
Goodwill 501 501
Intangible assets 1,279 1,279
Property, plant and equipment 66 58
Right-of-use assets 97 173
1,943 2,011
Current assets
Trade receivables 5,079 5,299
Other receivables, deposits and prepayments 136 82
Amounts recoverable on contracts 849 977
6,064 6,358
Assets in disposal groups classified as held for sale 8,007 8,369
Current liabilities
Lease liabilities - 77
Trade and other payables 5,238 3,809
5,238 3,886
Non-current liabilities
Lease liabilities 97 98
Liabilities directly associated with assets in disposal groups classified as 5,335 3,984
held for sale
The net assets of the Lorien Engineering business held for sale as at 31
December 2023 exclude deferred tax assets of £25,000 (2022: £39,000) and
current tax liabilities of £659,000 (2022: £412,000) which remain within the
Group tax position.
The Group recovered greater than the net book value from the eventual sale
which occurred on 2 January (note 21).
21. Events since the reporting date
Sale of Lorien
On 2 January 2024, the Group sold the Lorien business for a cash consideration
of $21.4 million (£16.8 million) on a cash and debt free basis. The net
proceeds after customary adjustments are expected to be $19.7 million (£15.5
million) resulting in an estimated gain of $15.0 million (£11.8 million).
The only impact in these financial statements are costs in relation to the
sale of £529,000 (note 4). These balances are subject to finalisation of
the completion accounts.
There have been no other notifiable events between the 31 December 2023 and
the date of this Annual Report.
22. Prior period adjustment
The Company has identified the need to make a correction to the 2022 and 2021
balance sheets where deferred tax liabilities and goodwill amounting to £15.8
million as at 31 December 2022 and £14.1 million as at 31 December 2021
should not have been recognised under IAS 12 as the book basis and tax basis
of acquired intangible assets were equal for certain US acquisitions in 2016,
2020 and 2021. The adjustment reflects the tax efficient structure of the
relevant acquisitions and tax amortisation deductions were taken for tax years
2020-2022 based on acquired intangible assets recognised.
The Group has restated the balance sheet and associated note disclosures as at
31 December 2022 and as outlined below. There is no material impact on
the cash flow statements or net assets.
Statement of financial position adjustments Restated
31 December 2022 Adjustments 31 December 2022
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 2,857 - 2,857
Right-of-use assets 11,808 - 11,808
Intangible assets 560,972 (15,758) 545,214
Deferred tax assets 4,084 (7) 4,077
Other receivables, deposits and prepayments 1,874 - 1,874
Investments accounted for under the equity method - - -
Amounts recoverable on contracts 1,303 - 1,303
582,898 (15,765) 567,133
Non-current liabilities
Lease liabilities 9,792 - 9,792
Deferred tax liabilities 27,265 (15,765) 11,500
Other long-term liabilities 3,517 - 3,517
Borrowings 177,944 - 177,944
Corporation tax payable 1,431 - 1,431
Provisions 1,857 - 1,857
221,806 (15,765) 206,041
Changes to associated note disclosures
Note 9 - Intangible assets Restated
31 December 2022 Adjustments 31 December 2022
£'000 £'000 £'000
Goodwill - cost
At 1 January 2022 337,754 (14,130) 323,624
Reclassified as assets held for sale (501) - (501)
Impairment (5,401) - (5,401)
Foreign exchange differences 35,417 (1,628) 33,789
At 31 December 2022 367,269 (15,758) 351,511
Note 13 - Deferred tax assets Share options Tax losses Short-term timing differences Intangibles Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 5,660 1,781 9,880 5,237 22,558
Deferred tax (charge)/credit directly to the income statement (566) 3,469 1,868 (923) 3,848
Deferred tax charged directly to equity (1,946) - - - (1,946)
Exchange rate differences, charged directly to OCI 188 144 962 650 1,944
Changes in tax rate, credited to the income statement 286 (146) 104 (25) 219
At 31 December 2022 3,622 5,248 12,814 4,939 26,623
Adjustments to deferred tax assets Share options Tax losses Short-term timing differences Intangibles Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 - - - 5,031 5,031
Deferred tax (charge)/credit directly to the income statement - - - 260 260
Deferred tax charged directly to equity - - - - -
Exchange rate differences, charged directly to OCI - - - 592 592
Changes in tax rate, credited to the income statement - - - 35 35
At 31 December 2022 - - - 5,918 5,918
Restated Deferred Tax Assets Share options Tax losses Short-term timing differences Intangibles Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 (restated) 5,660 1,781 9,880 10,268 27,589
Deferred tax (charge)/credit directly to the income statement (566) 3,469 1,868 (663) 4,108
Deferred tax charged directly to equity (1,946) - - - (1,946)
Exercise of share options - - - - -
Exchange rate differences, charged directly to OCI 188 144 962 1,242 2,536
Changes in tax rate, credited to the income statement 286 (146) 104 10 254
At 31 December 2022 (restated) 3,622 5,248 12,814 10,857 32,541
Note 13 - Deferred tax liabilities Accelerated tax Short-term timing
Intangibles depreciation differences Total
£'000 £'000 £'000 £'000
At 1 January 2022 51,235 127 472 51,834
Deferred tax credit/(charge) directly to the income statement (9,900) 585 2,106 (7,209)
Exchange rate differences, charged directly to OCI 5,206 51 9 5,266
Changes in tax rate, charged to the income statement - (148) 61 (87)
At 31 December 2022 46,541 615 2,648 49,804
Adjustments to deferred tax liabilities Accelerated tax Short-term timing
Intangibles depreciation differences Total
£'000 £'000 £'000 £'000
At 1 January 2022 (9,761) 661 - (9,100)
Deferred tax credit/(charge) directly to the income statement 2,138 (1,877) - 261
Exchange rate differences, charged directly to OCI (1,109) 74 - (1,035)
Changes in tax rate, charged to the income statement (70) 104 - 34
At 31 December 2022 (8,802) (1,038) - (9,840)
Restated Deferred Tax Liabilities Accelerated tax Short-term timing
Intangibles depreciation differences Total
£'000 £'000 £'000 £'000
At 1 January 2022 (restated) 41,474 788 472 42,734
Deferred tax credit/(charge) directly to the income statement (7,762) (1,292) 2,106 (6,948)
Exchange rate differences, charged directly to OCI 4,097 125 9 4,231
Changes in tax rate, charged to the income statement (70) (44) 61 (53)
At 31 December 2022 (restated) 37,739 (423) 2,648 39,964
The impact on the 31 December 2021 balance sheet is to reduce Goodwill by
£14.1 million (note 9), reduce deferred tax liabilities prior to offsetting
£9.1 million and increase deferred tax asset of £5.0 million prior to
offsetting (note 13). After offsetting, the increase in deferred tax assets
was £14.1m with no corresponding change in the deferred tax liability.
There is no material impact on net assets, cash flow or reserves in 2021.
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.
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 4 to the financial statements.
SaaS and long-term contracts Revenue Refer to note 3 Recurring 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 to note 3 Non-recurring 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 Refer to note 16 Net cash / debt is defined as Cash and cash equivalents and short-term
deposits, less Bank overdrafts and other current and non-current borrowings.
Lease liabilities are excluded from net debt. A reconciliation is provided in
note 16 to the financial statements.
Total Equity per share 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
December 2022 were 789,824,841 and 791,160,022 at 31 December 2023.
Cash Flow Measures
Adjusted operating cash flow None Refer to definition Cash flow in the period after accounting for operating activities and capital
expenditure.
Cash conversion None Refer to definition Adjusted operating cash flow as a percentage of Adjusted EBIT.
Free cash flow None Refer to definition Cash flow in the period after accounting for operating activities, investing
activities, lease payments, interest and tax.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR QKPBQDBKBNQDRecent news on Learning Technologies
See all newsREG - Learning Technol.Grp - Posting of Annual Report and Notice of AGM
AnnouncementREG - Learning Technol.Grp - Holding(s) in Company
AnnouncementREG - Learning Technol.Grp - Holding(s) in Company
AnnouncementREG - Learning Technol.Grp - Holding(s) in Company
AnnouncementREG - Learning Technol.Grp - Holding(s) in Company
Announcement