REG - Learning Technol.Grp - Half Year Results 2023
26/09/2023 07:00
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RNS Number : 5978N Learning Technologies Group PLC 26 September 2023
26 September 2023
Learning Technologies Group plc
HALF YEAR RESULTS 2023
Resilient performance with high levels of visibility from recurring revenues
FY23 performance expected to be in line with analyst estimates
Learning Technologies Group plc, a global market leader in digital learning
and talent management, announces half year results for the six months ended 30
June 2023. All figures relate to that period unless otherwise stated.
Strategic and operational highlights
· Resilient, diversified business model reflected in long-term contract wins for
Software & Platforms and wins for major customers in Content &
Services
· Solid performance from SaaS and long-term contracts which account for 72% of
H1 2023 revenue (H1 2022: 71%)
· As indicated previously, challenging macroeconomic backdrop continues to
impact transactional and project-based work
· One-off issues relating to LEO integration within GP Strategies resolved in
July, as previously indicated, with significant improvement in major KPIs in
GPLX since Q2
Financial highlights
· Reported revenues up 2% to £284.6 million (H1 2022: £277.8 million
continuing operations)
· Flat revenues on an organic constant currency basis: Content & Services up
2% and Software & Platforms down 5%
· Adjusted EBIT slightly down 1% to £43.1 million (H1 2022: £43.6 million
continuing operations)
· Good cash performance with conversion of 65% (last year 60%)
· Ongoing deleveraging supporting a planned voluntary debt repayment of $25
million on 29 September 2023, for an expected $0.4 million interest benefit in
Q4 2023
· Robust balance sheet with net debt of £108.4 million at 30 June 2023 (31
December 2022: £119.8 million) and net debt: EBITDA ratio of 0.9x (FY 2022:
1.1x), allowing for select accretive acquisitions
Dividend
· The Board is pleased to declare an interim dividend of 0.45 pence per share
(H1 2022: 0.45 pence).
Current trading and outlook
· We continue to see resilience in our SaaS and long-term contracts, offset by
lower transactional volumes in line with the broader macroeconomic environment
as well as lower demand in GP Strategies, notably in China
· GP Strategies is expected to deliver a significantly improved exit run-rate
EBIT margin of c.17%, driven by improvements to GPLX and a commercial
transformation programme
· FY23 performance expected to be in line with analyst estimates, including
updated expectations for FX and share-based payments(1)
(1) Median company-compiled analyst estimates, as at 14 September 2023, are
£560.2m revenues and £98.0m Adjusted EBIT for FY23
( )
(
)
Jonathan Satchell, Chief Executive Officer of Learning Technologies Group,
said:
"LTG has delivered a resilient performance in a challenging macro backdrop,
underpinned by our SaaS and long-term contracts, which represent 72% of H1
2023 revenues. Revenues, on an organic constant currency basis, were flat as a
result of lower transactional volumes, as indicated in July.
LTG remains uniquely placed to capture growth opportunities in a >$100
billion addressable market as a result of our scale and breadth of offering in
digital learning and talent management. Our balance sheet supports investment
and accretive acquisitions that fit with our business model, whilst also
allowing us to make a voluntary debt repayment. Demand from organisations to
recruit, motivate and retain the best talent, allied with improvements from
our commercial transformation programme in GP Strategies, support our
confidence of meeting analyst estimates for FY23."
Financial summary:
Continuing Reported
£m unless otherwise stated H1 2023 H1 2022 Change H1 2022
Revenue 284.6 277.8 2% 281.8
Organic growth* 0.1% 5.2%
Software & Platforms organic growth (4.7)% 6.5%
Content & Services organic growth 1.8% 1.6%
SaaS & long-term contracts 72% 71%
Adjusted EBIT 43.1 43.6 (1)% 44.1
Adjusted EBIT margin 15.1% 15.7% 15.6%
Statutory PBT 16.5 18.0 (8)% 18.5
Adj. Diluted EPS (pence) 3.293 3.666 (10)% 3.715
Basic EPS (pence) - continuing & discontinued 1.376 1.848
Net Debt / (Cash) 108.4 145.3
Dividend (pence) 0.45 0.45
* Organic growth on a constant currency basis
Analyst and investor presentation:
LTG will host an analyst and investor webcast at 09:00 today, 26 September
2023. The registration link can be found below:
https://attendee.gotowebinar.com/register/6277184884607235423
(https://attendee.gotowebinar.com/register/6277184884607235423)
Telephone dial-in details: +44 330 221 9922 (+1 (951) 384-3421 for
international dial-in).
Access Code: 838-970-977
Enquiries:
Learning Technologies Group plc +44 (0)20 7832 3440
Jonathan Satchell, Chief Executive
Kath Kearney-Croft, Chief Financial Officer
Numis Securities Limited (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 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.
Chief Executive Review
Introduction
LTG is a global provider of integrated talent management and learning software
and services.
Our purpose is shared by all of our companies: we help organisations keep up
with ever-changing workforce development needs. Organisations need to recruit,
motivate and retain the best talent.
To meet this demand, we have built a broad offering to capture a >$100
billion addressable market for digital learning and talent management. The
size of the opportunity reflects long-term, structural drivers.
Our businesses are a cohesive federation of like-minded, highly profitable
leaders in talent management and learning software and services with a common
go-to-market strategy. Where it is advantageous to our strategy, performance
and client needs, we collaborate on bilateral cross-selling and we integrate
our businesses' systems.
LTG continues to evolve by building out our offering through a combination of
organic growth and strategic acquisitions that complement the current
business. Our strong cash generation and prudent balance sheet give us a
platform to pursue select accretive acquisitions.
The Group remains well placed to benefit from AI and continues to make
progress with its AI strategy. A number of projects, trials and policies are
underway across the Group. For example, GP Strategies is helping some of its
largest clients to train their own AI models across learning and talent and
recently launched its AI Consulting framework in May 2023. GP Strategies
expects to launch its AI learning programme in October for Learning and
Development leaders. Where relevant, our businesses are collaborating on AI
initiatives. Character-based AI initiated by the PRELOADED team is being
introduced to the largest GP Strategies client for character-based learning
assistant exploration. As part of our long-term strategy, we will consider
acquisitions of AI technology businesses who have good products but need
access to the market.
Resilient performance with high levels of visibility from recurring revenues
Revenues from continuing operations for the six months to June 2023 grew by 2%
to £284.6 million (H1 2022: £277.8 million). Our recurring revenues were
offset by lower transactional volumes in the first half of 2023, as indicated
in our July update, resulting in flat revenues on an organic constant currency
basis. This performance in a challenging macro backdrop underlines the
resilience of our model, with SaaS and long-term contracts representing 72% of
H1 2023 revenue (H1 2022: 71%).
As expected, the operational focus in H1 2023 remained the large-scale
commercial transformation of GP Strategies, acquired in 2021. The addition of
GP Strategies has been a step-change for our scale, tripling revenues and
doubling profits. One-off issues in the first half of the year relating to the
integration of LEO into GP Strategies' content division to form GPLX, impacted
its first half performance. These have now been resolved and we have seen an
improvement in GPLX margins in July and August compared to H1 with further
improvement expected in the remainder of the second half of the year. As
expected, overall margins in GP Strategies are improving and we expect the
exit run-rate adjusted EBIT margin for the entire GP Strategies business will
be in line with expectations at c.17%.
Adjusted EBIT was slightly lower at £43.1 million (H1 2022: £43.6 million).
Statutory operating profit from continuing operations improved 5% to £23.2
million (H1 2022: £22.2 million), including adjusting items of £19.9 million
(H1 2022: £21.4 million).
LTG is a cash generative business, which enables us to make a voluntary debt
repayment of $25 million on 29 September 2023, giving an expected $1.7 million
benefit per annum on interest payments at current interest rates.
As announced in December 2022, a non-core asset within GP Strategies had been
identified for disposal in 2023. The sale of this business is progressing well
and we expect to provide a further update before the end of the year.
Corporate Governance
ESG initiatives remain at the forefront of our business process and strategy
as we continue to advance towards our 2023 targets, including making progress
during the first half of the year around sustainable procurement, scope 3
data, colleague engagement and training.
We implemented a group-wide sustainable procurement policy and will continue
to refine our data and supplier review process, including cascading our
recently updated supplier code of conduct policy. These steps help us to
ensure that our supply chain is aligned to our goals in the ESG space. In
addition, we are focusing heavily on our scope 3 data, looking more in-depth
at our upstream purchased goods and service category and evaluating our supply
chain. Our Ecovadis scores from our February 2023 submission improved
substantially and we have reduced our Scope 1 and Scope 2 emissions by more
than 60% over our 2019 baseline year.
From the colleague perspective, we reactivated our engagement survey to
measure satisfaction and had a response rate of 75%. Whilst there is no room
for complacency, we were heartened by most of results and qualitative
feedback. We have implemented disciplined processes for action planning and
follow-up and we have several other colleague initiatives underway in parallel
to include delivering our in-house designed core leadership programme, and
strengthening our performance enablement process to proactively address
development planning and well-being. I am also excited to share that our
largest subsidiary, GP Strategies, had numerous internal promotions further
diversifying their senior leadership team.
We remain focused and committed to meeting the ESG goals that we set forth in
the 2022 annual report.
Operational Review
With effect from this interim report, 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 and 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 result.
Content & Services (74% of H1 2023 Group revenue)
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.
Revenue increased by 4.5% to £211.5 million (H1 2022: £202.3 million)
reflecting the benefit of the strength of the US dollar and 1.8% organic
constant currency growth with particularly strong growth in Affirmity and
PRELOADED. There was moderate growth in GP Strategies despite lengthening
sales cycles and the challenging macro environment impacting on transactional
and project-based work. As outlined previously, the integration challenges
within GPLX that impacted performance in the first half of the year have been
resolved.
Long-term contracts continued to perform as organisations maintained their
investment in delivering effective workforce transformation solutions in a
digital, flexible and fast-paced corporate environment.
Effective 1 January 2023, LEO Learning, a digital learning specialist was
integrated with GP Strategies' global content design team to create the
world's largest and most creative custom content and learning experience
design offering, called GPLX. Simultaneously, PDT Global joined GP Strategies'
Leadership Training division to create a combined force in Diversity, Equity
and Inclusion (DE&I). These additions to GP Strategies' portfolio
enhance its capabilities as a world-leading learning and talent transformation
company.
GP Strategies' solutions improve the effectiveness of organisations by
delivering innovative and superior consulting, training, and business
improvement solutions. Clients include Global 500 companies, automotive,
financial services, technology, aerospace and defence industries, and other
commercial and government customers. The business has experienced good
growth in managed learning services with the ramp up of new accounts, and in
the Americas division with the expansion and growth in existing accounts and
non-US automotive accounts. AMEA had strong growth in H1 2023 following a
slower Covid recovery in H1 2022. This was partially offset by the temporary
GPLX H1 integration challenges and lower transactional revenue due to a
slowdown in spending in large Human Capital Management implementation
projects.
PRELOADED has seen a strong start to the year and continues to win highly
innovative contracts with significant clients including a global entertainment
company and a global international social media company.
During the first half of 2023, Affirmity delivered strong revenue growth
driven by an improvement to the client renewal rate, cross-selling at renewal
and adding new clients.
Software & Platforms (26% of H1 2023 Group revenue)
The Software & Platforms division comprises SaaS and on-premise licenced
product 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 revenue of £72.9 million (H1 2022: £75.5 million)
declined 3% due to a combination of mixed business performance and FX
tailwinds. On an organic constant currency basis Software & Platforms
declined 4.7% driven by a 10.8% decline in PeopleFluent as expected, lower
revenue in Breezy due to softer transactional revenue from the US SME
recruitment market and lower year-on-year performance in Reflektive due to
softness in technology sector customers and the commencement of a strategy to
migrate customers to a version of Reflektive within Bridge. This was partially
offset by continued strong growth in Rustici and Bridge, and moderate growth
in OpenLMS.
The macroeconomic picture has suppressed Breezy's performance in H1 2023, as a
49% reduction in transactional revenue related to job postings, now
representing c15% of Breezy revenues, masks a 3% growth in platform hosting
revenues.
Rustici has continued to deliver strong organic revenue growth in the first
half of the year driven by its Content Controller product which represents 60%
of the growth (as it is the youngest and fastest growing) and SCORM Cloud
products.
Open LMS had moderate organic constant currency revenue growth as customers
rebased their requirements following strong performance in the Covid years.
VectorVMS reported a slight softening in revenues compared to the first half
of 2022 as a result of customers reducing their utilisation of contingent
labour and healthcare labour rates moderating after strong demand in Covid
years.
Dividend
On 14 July 2023, the Company paid a final dividend of 1.15 pence per share,
giving a total dividend for 2022 of 1.60 pence per share. Given its confidence
in the continuing success of the Group, the Board is pleased to declare an
interim dividend of 0.45 pence per share (2022: 0.45 pence per share). This
dividend will be paid on 27 October 2023 to all shareholders on the register
as at 6 October 2023.
Current trading and outlook
In line with the pattern established in the first half of 2023, LTG continues
to see resilient trading in our SaaS and long-term contracts, offset by lower
transactional volumes, consistent with current macroeconomic trends. While GP
Strategies has seen lower demand in certain regions such as China, it is
expected to deliver a significantly improved exit run-rate EBIT margin of
c.17%, driven by improvements to GPLX and a commercial transformation
programme.
The Board expects FY23 performance to be in line with analyst estimates,
including updated expectations for FX and share-based payments. The Group
remains well-placed to capitalise on greater project activity as macro
conditions improve.
LTG remains uniquely placed to capture growth opportunities in a >$100
billion addressable market as a result of our scale and breadth of offering in
digital learning and talent management. Our balance sheet supports accretive
acquisitions that fit with our culture. Demand from organisations to recruit,
motivate and retain the best talent, allied with improvements from our
commercial transformation programme in GP Strategies, support our confidence
of further progress in the second half of the year.
Jonathan Satchell
Chief Executive
26 September 2023
Chief Financial Officer's Review
In the six months ended 30 June 2023, despite the challenging economic
climate, revenues for continuing operations increased by 2% to £284.6 million
(H1 2022: £277.8 million). The Group has experienced growth and resilience in
SaaS and long-term contracts in contrast to transactional revenue with the
proportion of this category of revenue increasing to 72% from 71% in H1
2022.
Revenue in Content & Services increased 5% to £211.5 million (H1 2022:
£202.3 million) with the division now accounting for 74% of Group revenue (H1
2022: 73%). Organic constant currency revenue growth was 1.8% (H1 2022:
1.6%), due to a combination of moderate growth in GP Strategies and strong
growth in Affirmity and PRELOADED. Long-term contracts accounted for 65% of
the division's revenue, an increase from 62% in H1 2022, a testament to the
resilience of recurring revenue. GP Strategies saw strong growth in managed
learning services contracts, and AMEA following a slower Covid recovery in
2022, and the Americas division. Offsetting this good growth were the
temporary H1 integration challenges in GPLX, slowdown in spending in large
implementation projects and the macroeconomic climate affecting transactional
revenues. PRELOADED revenue growth was fuelled by an increased US presence
alongside developing stronger long-term client relationships resulting in
increased work from existing clients. Affirmity also delivered strong growth
driven by an improvement to the client renewal rate, cross-selling at renewal
and acquiring new clients.
Revenue in Software & Platforms decreased 3% to £72.9 million (H1 2022:
£75.5 million) with the division now representing 26% of Group revenue (H1
2022: 27%). On an organic constant currency basis Software & Platforms
declined 4.7% (H1 2022: 6.5% growth) driven by an expected 10.8% decline in
PeopleFluent, continued challenges in Breezy as the transaction business
related to the SME US labour market remained subdued despite resilient SaaS
revenues, and Reflektive due to softness in technology sector customers and
the strategy to migrate customers to a version of Reflektive within Bridge.
These challenges were partially offset by continued growth in Rustici driven
by its Content Controller product and moderate growth in OpenLMS as customers
rebalance their requirements following the Covid years, including some
organisations losing their government sponsored funding and a move back to
face-to-face learning.
Adjusted EBIT from continuing operations decreased slightly to £43.1 million
(H1 2022: £43.6 million continuing operations). The resulting adjusted EBIT
margin of 15.1% was down from 15.7% in H1 2022, driven primarily by lower
revenue in the Software & Platforms division resulting in operational
deleverage and the temporary H1 challenges in GPLX which are now resolved.
Adjusted EBIT margin in the Content & Services division at 11.8% (H1 2022:
12.0%) was broadly in line with the prior year. Software & Platforms
adjusted EBIT margin reduced from 25.5% in H1 2022 to 24.8% due to a decline
in revenues resulting in slight operational deleverage.
The Group reported an increase in operating profit of 5% to £23.2 million (H1
2022: £22.2 million continuing operations, £21.4 million reported) which is
stated after amortisation of acquired intangibles, various acquisition
earn-out charges, loss on disposal of fixed assets, transaction and
integration costs. Amortisation of acquired intangibles decreased to £16.6
million (H1 2022: £18.0 million). Acquisition earn-out charges decreased to
£1.1 million (H1 2022: £2.3 million). Contingent consideration arrangements
are in place for eThink, eCreators, and PDT and are all dependent on
challenging incremental revenue growth targets. Loss on disposal of fixed
assets were £0.9 million (H1 2022: £0.2 million). Integration costs
decreased to £1.2 million (H1 2022: £2.3 million) related to the integration
of GP Strategies, with further costs expected in H2. We remain on track to
complete the integration in line with our initial estimate of $13 million. For
further details of the items excluded from statutory operating profit, see
note 6.
Net finance expenses of £6.7 million (H1 2022: £4.2 million) include
interest on borrowings of £7.0 million (H1 2022: £3.1 million), £0.3
million (H1 2022: £0.3 million) relating to the Group's leases under IFRS 16,
and £0.5 million interest receivable (H1 2022: £0.2 million).
The Group reported a profit before tax of £16.5 million for the six months
ended 30 June 2023 (H1 2022: £18.0 million). The tax charge of £4.5 million
(H1 2022: tax charge of £3.8 million) is primarily driven by applying UK and
international tax rates to associated results offset by the net favourable
impact of tax rate changes on deferred assets and liabilities and net
non-deductible foreign exchange adjustments.
Discontinued operations, reflecting the closure of the UK Apprenticeship
business, generated a loss after taxation of £1.1 million for the period (H1
2022: £0.4 million profit).
Basic earnings per share for continuing and discontinued operations in H1 2023
was 1.376 pence (H1 2022: 1.848 pence). Adjusted diluted earnings per share
for continuing operations as set out in Note 9 was 10% down on the prior year
at 3.293 pence (H1 2022: 3.666 pence) reflecting marginally lower adjusted
operating profit, a significant increase in interest costs and a higher number
of shares including the potential dilutive impact of share options.
Gross cash of £78.1 million and net debt of £108.4 million, excluding £12.6
million of lease liabilities, at 30 June 2023 compares with gross cash of
£94.8 million and net debt of £119.8 million, excluding £14.9 million of
lease liabilities, at 31 December 2022. The covenant net debt / adjusted
EBITDA ratio was 0.9x in June 2023 (1.1x in December 2022).
Share-based payments are lower year-on-year due to a release of prior year
costs resulting from leavers and performance criteria not being met.
Cash generated from operations was strong at £32.6 million (H1 2022: £26.8
million) as we tightly manage our working capital, and net cash flow from
operating activities was £26.7 million (H1 2022: £18.6 million).
Free cash flow(2) was £5.6 million (H1 2022: £8.2 million) as set out below,
and we expect free cash flow to continue to be H2 weighted.
£m H1 2023 H1 2022(3) Variance
Statutory operating profit 23.2 21.4 1.8
Adjusting items 19.9 22.7 (2.8)
Adjusted EBIT 43.1 44.1 (1.0)
Depreciation & Amortisation 7.1 7.8 (0.7)
Share based payment charges 3.1 4.1 (1.0)
Dec / (Inc) in working capital(4) (12.1) (17.7) 5.6
Capital expenditure (7.2) (5.0) (2.2)
Lease liabilities (3.2) (4.0) 0.8
Other (2.8) (3.0) 0.2
Adjusted operating cash flow(2) 28.0 26.3 1.7
Cash Conversion(2) 65% 60% 5% pts
Net Interest paid (10.6) (3.7) (6.9)
Tax paid (5.9) (8.2) 2.3
Integration & transaction costs (1.2) (2.3) 1.1
Earnout & contingent consideration (4.7) (6.2) 1.5
Proceeds from asset sale - 2.3 (2.3)
Free cash flow(2) 5.6 8.2 (2.6)
Adjusted operating cash flow was £1.7 million higher than H1 2022 primarily
reflecting a lower working capital investment offset by higher capital
expenditure in the period and lower share-based payment charges. Cash
conversion was 65%, an improvement from 60% in H1 2022.
Net interest payments increased to £10.6 million from £3.7 million,
including £4.5m related to interest costs from 2022 payable in January 2023
as the loan was rolled for 6 months to mitigate interest rate rises in H2
2022. Tax payments decreased to £5.9 million (H1 2022: £8.2 million) due to
a combination of the reorganisation and prior year payments. Integration and
transaction costs primarily relate to the GP Strategies acquisition in late
2021. Earnout payments relate to Breezy and eCreators. Proceeds from asset
sale were £nil in H1 2023, with the 2022 net cash inflow due to the sale of
an investment of £2.3 million related to the sale of the NAS JV completed in
April 2022.
The Group plans to voluntarily repay $25 million of its term loan in addition
to the normal quarterly payment of $9.6 million on 29 September 2023. The
expected benefit of the voluntary repayment in 2023, at current interest
rates, is c.$1.7 million per annum.
Net assets decreased to £419.6 million at 30 June 2023 (31 December 2022:
£426.3 million) and total equity per share(2) decreased from 54.0 pence per
share to 53.0 pence per share.
(2) Alternative Performance Measure (APM) term defined and explained in the
Glossary
(3) As reported in H1 2022
(4) Excludes integration & transaction costs
Kath Kearney-Croft
CFO
26 September 2023
Consolidated statement of comprehensive income Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
Note £'000 £'000 £'000
Revenue 3 284,582 277,836 588,587
Operating expenses (258,320) (252,991) (532,743)
Share-based payment charge (3,081) (4,061) (6,693)
Profit on sale of joint venture - 1,242 1,242
Share of profit from equity accounted investment - 155 155
Operating profit 23,181 22,181 50,548
Adjusted EBIT 43,115 43,585 99,925
Adjusting items included in Operating profit 6 (19,934) (21,404) (49,377)
Operating profit 23,181 22,181 50,548
Finance expenses 7 (7,243) (4,361) (10,475)
Finance income 7 539 184 429
Profit before taxation from continuing operations 16,477 18,004 40,502
Income tax charge 4 (4,472) (3,841) (9,784)
Profit after taxation from continuing operations 12,005 14,163 30,718
(Loss) / Profit on discontinued operations, net of tax 5 (1,125) 394 (312)
Profit for the period/year 10,880 14,557 30,406
Profit for the period/year attributable to the owners of the parent 10,880 14,557 30,406
Other comprehensive income:
Exchange differences on translating foreign operations (11,920) 34,483 30,961
Total comprehensive (loss)/profit for the period/year (1,040) 49,040 61,367
Earnings per share from continuing operations
Basic (pence) 9 1.518 1.798 3.897
Diluted (pence) 9 1.476 1.749 3.748
Adjusted earnings per share
Basic (pence) 9 3.387 3.768 8.351
Diluted (pence) 9 3.293 3.666 8.032
Earnings per share from continuing and discontinued operations
Basic (pence) 9 1.376 1.848 3.857
Diluted (pence) 9 1.338 1.798 3.710
Adjusted earnings per share
Basic (pence) 9 3.253 3.818 8.443
Diluted (pence) 9 3.163 3.715 8.121
Consolidated statement of financial position Note 30 June 2023 30 June 2022 £'000 31 Dec 2022
£'000 £'000
NON-CURRENT ASSETS
Property, plant and equipment 11 2,433 3,233 2,857
Right-of-use assets 11 10,449 14,235 11,808
Intangible assets 10 527,173 585,623 560,972
Deferred tax assets 15 7,331 4,584 4,084
Other receivables, deposits and prepayments 2,146 324 1,874
Amounts recoverable on contracts - 1,362 1,303
549,532 609,361 582,898
CURRENT ASSETS
Trade receivables 12 105,768 122,872 136,025
Other receivables, deposits and prepayments 13 14,620 17,876 16,765
Amounts recoverable on contracts 39,349 41,800 33,221
Inventory 2,403 4,823 2,432
Amounts due from related parties - 96 59
Cash and cash equivalents 14 78,132 71,933 94,847
Restricted cash balances 14 2,303 3,158 2,608
242,575 262,558 285,957
Assets in disposal groups classified as held for sale 19 6,695 - 8,369
TOTAL ASSETS 798,802 871,919 877,224
CURRENT LIABILITIES
Lease liabilities 17 4,162 8,194 5,082
Trade and other payables 16 141,581 174,470 180,634
Amounts due to related parties - 6 -
Borrowings 17 31,220 23,845 36,714
Provisions 18 1,621 7,185 1,602
Corporation tax 5,468 4,395 602
ESPP scheme liability 881 703 500
184,933 218,798 225,134
NON-CURRENT LIABILITIES
Lease liabilities 17 8,486 13,196 9,792
Deferred tax liabilities 15 23,547 26,101 27,265
Other long-term liabilities 1,466 806 3,517
Borrowings 17 155,289 193,367 177,944
Corporation tax payable 763 1,428 1,431
Provisions 18 534 949 1,857
190,085 235,847 221,806
Liabilities directly associated with assets in disposal groups classified as 4,137 - 3,984
held for sale
19
TOTAL LIABILITIES 379,155 454,645 450,924
NET ASSETS 419,647 417,274 426,300
EQUITY
Share capital 2,967 3,037 2,962
Share premium account 318,699 317,406 318,183
Merger relief reserve 31,983 31,983 31,983
Reverse acquisition reserve (22,933) (22,933) (22,933)
Share based payment reserve 17,674 13,322 14,714
Foreign exchange translation reserve 13,809 29,251 25,729
Accumulated retained earnings 57,448 45,208 55,662
TOTAL EQUITY 419,647 417,274 426,300
Consolidated statement of changes in equity
Share Share Merger relief reserve Reverse acquisition reserve Share based Foreign Retained earnings Total equity
capital Premium payments exchange
reserve reserve
£'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 period - - - - - - 14,557 14,557
Exchange differences on translating foreign operations - - - - - 34,483 - 34,483
Total comprehensive income for the period - - - - - 34,483 14,557 49,040
Issue of shares net of share issue costs 3 292 - - - - - 295
Share based payment charge / credited to equity - - - - 4,061 - - 4,061
Distributions in respect of cancelled share options - - - - (1,887) - - (1,887)
Tax credit on share options - - - - - - (58) (58)
Transfer on exercise and lapse of options - - - - - - - -
Dividends paid - - - - - - (5,515) (5,515)
Balance at 30 June 2022 3,037 317,406 31,983 (22,933) 13,322 29,251 45,208 417,274
Profit for period - - - - - - 15,849 15,849
Exchange differences on translating foreign operations - - - - - (3,522) - (3,522)
Total comprehensive income for the period - - - - - (3,522) 15,849 12,327
Issue of shares net of share issue costs 5 737 - - - - - 742
Reserves transfer (80) 40 - - - - 40 -
Share based payment charge / credited to equity - - - - 2,632 - - 2,632
Share-based payment charge treated as consideration, credited to equity - - - - 542 - - 542
Distributions in respect of cancelled share options - - - - (1,782) - - (1,782)
Tax credit on share options - - - - - - (1,888) (1,888)
Transfer on exercise and lapse of options - - - - - - - -
Dividends paid - - - - - - (3,547) (3,547)
2,962 318,183 31,983 (22,933) 14,714 25,729 55,662 426,300
Balance at 31 December 2022
Profit for period - - - - - - 10,880 10,880
Exchange differences on translating foreign operations - - - - - (11,920) - (11,920)
Total comprehensive (expense) / income for - - - - - (11,920) 10,880 (1,040)
the period
Issue of shares net of share issue costs 5 516 - - - - - 521
Reserves transfer - -
Share based payment charge / credited to equity - - - - 3,081 - - 3,081
Share based payment consideration debited to equity - - - - (121) - - (121)
Tax credit on share options - - - - - - - -
Transfer on exercise and lapse of options - - - - - - - -
Dividends paid - - - - - - (9,094) (9,094)
Transactions with owners 5 516 - - 2,960 - (9,094) (5,613)
Balance at 30 June 2023 2,967 318,699 31,983 (22,933) 17,674 13,809 57,448 419,647
Consolidated statement of cash flows
Note Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Cash flow from operating activities
Profit before taxation 16,477 18,004 40,502
(Loss)/profit before taxation from discontinued operations 5 (1,452) 486 (26)
Adjustments for:-
Loss on disposal of PPE and right-of-use assets 893 232 230
Share based payment charge 3,081 4,061 7,235
Amortisation of intangible assets 20,880 21,359 43,183
Depreciation of plant and equipment 11 745 2,334 2,141
Depreciation of right-of-use assets 11 2,128 2,140 4,343
Impairment of Goodwill and acquired intangibles - - 7,958
Finance expense 7 257 306 573
Interest on borrowings 7 6,986 3,297 9,102
Acquisition-related contingent consideration and earn-outs 6 1,088 2,254 3,273
Fair value movement on contingent consideration - - (21)
Payment of acquisition-related contingent consideration and earn-outs (4,726) (6,163) (6,139)
Profit on sale of joint venture - (1,242) (1,242)
Share of profit in equity accounted investment - (155) (155)
Interest income 7 (539) (108) (429)
Operating cash flow before working capital changes 45,818 46,805 110,528
Decrease/(increase) in trade and other receivables 24,189 8,113 (6,521)
Increase in inventory (70) (3,727) (1,210)
(Increase)/decrease in amount recoverable on contracts (6,187) (10,222) 3,647
Decrease in payables (31,190) (14,213) (14,317)
Cash generated from operations 32,560 26,756 92,127
Income tax paid (5,904) (8,151) (20,180)
Net cash flow from operating activities 26,656 18,605 71,947
Cash flow used in investing activities
Purchase of property, plant and equipment (490) (289) (1,641)
Development of intangible assets (6,707) (4,700) (9,966)
Sale of Investment in associates or joint ventures - 2,300 2,300
(7,197) (2,689) (9,307)
Net cash flow used in investing activities
Cash flow (used in)/from financing activities
Dividends paid 8 - - (9,062)
Cash generated from issue of shares, net of share issue costs 521 293 1,037
Repayment of bank loans (15,409) (30,496) (38,458)
Interest paid1 (11,147) (3,851) (4,609)
Interest received 539 108 352
Contingent consideration payments in the period - - (705)
Interest paid on lease liabilities (261) (334) (614)
Cash payments for the principal portion of lease liabilities (2,977) (3,707) (6,719)
Net cash flow (used in)/from financing
activities (28,734) (37,987) (58,778)
Net (decrease) / increase in cash and cash equivalents (9,275) (22,071) 3,862
Cash and cash equivalents at beginning of the period/year 94,847 83,850 83,850
Effects of foreign exchange rate changes (7,440) 10,154 7,135
Cash and cash equivalents at end of the period/year 14 78,132 71,933 94,847
1 Interest paid for six months ending 30 June 2023 (£11.1 million) is higher
than interest charged for the same period (£6.9 million), mainly as the last
six months interest of 2022 were paid in January 2023 as per the lending
agreement.
Notes to the consolidated financial statements for the six months to 30 June 2023
1. General information
Learning Technologies Group plc ("the Company'') and its subsidiaries
(together, "the Group'') provide a range of learning and talent software and
services to corporate customers. The principal activity of the Company is that
of a holding company for the Group, as well as performing all administrative,
corporate finance, strategic and governance functions of the Group.
The Company is a public limited company, which is listed on the AIM Market of
the London Stock Exchange and domiciled in England and incorporated and
registered in England and Wales. The address of its registered office is 15
Fetter Lane, London, England, EC4A 1BW. The registered number of the Company
is 07176993.
2. Basis of preparation
The unaudited condensed consolidated interim financial information has been
prepared in accordance with IAS 34 Interim Financial Reporting. They do not
include all disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the 2022 annual
report.
The interim results for the six months to 30 June 2023 are unaudited and do
not therefore constitute statutory accounts in accordance with Section 434 of
the Companies Act 2006.
Statutory accounts for the year ended 31 December 2022 have been filed with
the Registrar of Companies and the auditor's report was unqualified, did not
contain any statement under Section 498(2) or 498(3) of the Companies Act 2006
and did not contain any matters to which the auditors drew attention without
qualifying their report.
The accounting policies used in preparing the interim results are the same as
those applied to the latest audited annual financial statements.
Going concern
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 may be supplemented, if required, by additional drawings
under the Group's committed $50.0 million revolving credit facility (RCF)
which is available until October 2025; refer to Note 17 for further details.
The Group continues to hold a strong liquidity position as at 30 June 2023,
with gross cash and cash equivalents of £78.1 million (Note 14). Net debt of
£108.4 million includes a fully drawn $265.0 million term loan which is
repayable in quarterly instalments of $9.6 million commencing in December 2022
(Note 17) (31 December 2022: gross cash was £94.8 million and net debt was
£119.8 million). Whilst there are a number of risks to the Group's trading
performance, as summarised in the 'Principal risks and uncertainties' section
on pages 27 - 28 within the 2022 Annual Report, 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, and borrowing facilities. The Group's forecasts
demonstrate it will generate profits and cash in the year ending 31 December
2023 and beyond and that the Group has 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 Directors have concluded that it is appropriate to adopt the going concern
basis of accounting in preparing the interim financial information, having
undertaken a review of a reforecast for 2023 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.
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, SaaS and
long-term contracts, transactional revenue, 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.
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 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 payment charges, contingent consideration and
earn-outs, cloud computing configuration and customisation costs, joint
venture profits, profit on sale of a joint venture and fixed asset and
right-of-use asset disposal gains or losses.
3. Segment analysis
Geographical information
The Group's revenue from external customers and non-current assets by
geographical location are detailed below.
UK Europe North America(1) Asia Pacific Rest of world Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months to 30 June 2023
Revenue from continuing operations 33,023 26,916 194,875 17,637 12,131 284,582
Total Revenue 33,023 26,916 194,875 17,637 12,131 284,582
Non-current assets 29,653 900 493,927 17,270 451 542,201
Six months to 30 June 2022
Revenue from continuing operations 30,357 26,463 189,383 18,859 12,774 277,836
Revenue from discontinued operations 3,973 - - - - 3,973
Total Revenue 34,330 26,463 189,383 18,859 12,774 281,809
Non-current assets 44,246 912 537,933 21,056 630 604,777
Year to 31 December 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 31,017 569 527,634 19,177 417 578,814
(1) The values as presented for Canada and the United States for the six
months to 30 June 2022 have been combined into 'North America' to align with
the geographical segmentation as reported to the Chief Operating Decision
Maker internally.
The total non-current assets figure is exclusive of deferred tax assets in
each of the periods above.
The non-current assets as at 30 June 2022 have been represented following the
prior year acquisition measurement adjustments as detailed in the Annual
Report for the year ended 31 December 2022.
3. Segment analysis (continued)
Information about reported segment revenue, profit or loss from continuing
operations and assets
Software & Platforms Content & Services Other Total
On-Premise Software Licences Hosting & SaaS Platforms Professional Services & Other Support and Maintenance Total Global Services Regional Services Other Technical Services Total Rental Income
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Six months to 30 June 2023
Saas and long-term contracts 15,191 50,249 2,057 1,958 69,455 44,142 90,311 2,183 136,636 189 206,280
Transactional - 31 3,386 - 3,417 9,724 50,991 14,170 74,885 - 78,302
Revenue 15,191 50,280 5,443 1,958 72,872 53,866 141,302 16,353 211,521 189 284,582
Depreciation and amortisation (3,978) (2,391) (6,369)
Adjusted EBIT 18,050 24,876 189 43,115
Amortisation of acquired intangibles (8,995) (7,581) - (16,576)
Acquisition related adjusting items (1,046) (1,192) - (2,238)
Other adjusting items (287) (833) - (1,120)
Finance (expenses)/income (1,717) (4,987) - (6,704)
Profit before tax 6,005 10,283 189 16,477
Additions to intangible Assets 1,717 4,990 6,707
Total assets 204,547 594,255 798,802
Six months to 30 June 2022
Saas and long-term contracts 15,104 52,395 1,983 2,020 71,502 40,106 82,097 3,214 125,417 70 196,989
Transactional - 42 3,931 - 3,973 3,698 56,128 17,048 76,874 - 80,847
Revenue 15,104 52,437 5,914 2,020 75,475 43,804 138,225 20,262 202,291 70 277,836
Depreciation and amortisation (3,673) (2,865) (6,538)
Adjusted EBIT 19,217 24,298 70 43,585
Amortisation of acquired intangibles (9,249) (8,741) - (17,990)
Acquisition-related adjusting items (787) (3,792) - (4,579)
Other adjusting items 317 848 - 1,165
Finance expenses (1,134) (3,043) - (4,177)
Profit before tax 8,364 9,570 70 18,004
Additions to intangible Assets 4,433 267 4,700
Total assets 236,858 635,061 871,919
3. Segment analysis (continued)
Effective with this interim report, there are changes to the grouping of
businesses within the reportable segments, including restating the prior
year's comparative result.
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.
Information about major customers
In the six months to 30 June 2023 no customer accounted for more than 10 per
cent of reported revenues (Six months to 30 June 2022: no customer accounted
for more than 10 per cent of reported revenues).
4. Taxation
Current and deferred tax for the six months to 30 June 2023 has been
calculated by applying the jurisdictional statutory rates on an
entity-by-entity basis to derive the Group's total income tax expense. This is
allocated to current and deferred tax as outlined below:
Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Current tax:
Tax on profits for the period/year - 1,860 (282)
Adjustments in respect of prior periods / years 1,449 134 2,522
Foreign current tax on profits for the period / year 9,034 11,091 19,193
Total current tax 10,483 13,085 21,433
Deferred tax:
Origination and reversal of temporary differences (5,836) (5,830) (7,459)
Adjustments in respect of prior periods / years (359) (87) (3,597)
Change in deferred tax rate (143) (3,235) (307)
Total deferred tax (6,338) (9,152) (11,363)
Income tax expense 4,145 3,933 10,070
Of the total income tax expense, £4,472,000 relates to taxation on continuing
operations (six months to June 2022 expense £3,841,000 and year to 31
December 2022 expense £9,784,000).
5. (Loss) / Profit 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.
Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Revenue - 3,973 8,315
Operating expenses (1,452) (3,487) (8,341)
Operating (loss) / profit (1,452) 486 (26)
Adjusted EBIT (1,389) 486 1,018
Adjusting items included in Operating (loss) / profit
(Loss) / profit on disposal of fixed assets (1) - 3
Closure costs (62) - (1,047)
Operating (loss) / profit (1,452) 486 (26)
(Loss) / Profit before taxation (1,452) 486 (26)
Taxation 327 (92) (286)
(Loss) / Profit after taxation (1,125) 394 (312)
Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Net cash (used in) / from operating activities (1,452) 486 (29)
Net cash from investing activities - - 3
Net cash from discontinued operations (1,452) 486 (26)
6. Adjusting items
These items are included in the 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 below.
Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Adjusting items included in Operating profit:
Acquisition related costs:
Amortisation of acquired intangibles 16,576 17,990 35,723
Acquisition-related contingent consideration and earn-outs 1,088 2,254 3,273
Acquisition-related share based payment charge - - 542
Fair value movement on contingent consideration - - (21)
Acquisition costs - 43 304
Integration costs 1,150 2,282 3,512
Total acquisition related costs 18,814 22,569 43,333
Other adjusting items:
Impairment of goodwill and intangibles - - 7,958
Loss on disposal of fixed assets 41 - 5
Loss on disposal of right-of-use assets 852 232 228
Share of profit of joint venture - (155) (155)
Profit on sale of joint venture - (1,242) (1,242)
Cloud computing configuration and customisation costs 122 - 719
Disposal costs 105 - -
Other income - - (1,469)
Total other adjusting items 1,120 (1,165) 6,044
Total adjusting items 19,934 21,404 49,377
As outlined above, the material adjustments during the period are made in
respect of:
- Amortisation of acquired intangibles - the cost of £16.6 million (2022:
£18.0 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 and closure provisions - these costs
are excluded from the adjusted results of the Group since the costs are
one-off charges related to closure of the non-core UK apprenticeship business
in early 2023 as announced in 2022.
- 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.
6. Adjusting items (continued)
- 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.
- Disposal costs relate to the fees incurred for the sale of a non-core asset
(see note 19).
- Costs of acquisition and integration - 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 £1.2 million integration costs are legal
and professional fees of £0.2 million, an allocation of internal labour for
employees who have worked on integration activities during the year of £0.9
million and costs relating to facilities of £0.1 million.
- Other income includes amounts received in relation to a contract and is an
adjusting item due to its 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.
7. Finance expenses
Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Interest on borrowings 6,986 3,148 9,102
Net foreign exchange differences - 908 800
IFRS 16 finance expense 257 305 573
Finance expense 7,243 4,361 10,475
Credit on contingent consideration - - (77)
Interest receivable (539) (184) (352)
Finance income (539) (184) (429)
Net finance expense 6,704 4,177 10,046
8. Dividends paid
Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Final dividends paid 9,094 5,515 5,515
Interim dividend paid - - 3,547
9,094 5,515 9,062
The declared interim dividend of 0.45 pence per share, amounting to a total
dividend payment of £3.6 million, is not included as a liability in these
financial statements and will be paid on 27 October 2023 to shareholders on
the register at the close of business on 6 October 2023.
9. Earnings per share
Six months to Six months to Year to
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Basic earnings per share (pence) 1.376 1.848 3.857
Diluted earnings per share (pence) 1.338 1.798 3.710
Adjusted basic earnings per share (pence) 3.253 3.818 8.443
Adjusted diluted earnings per share (pence) 3.163 3.715 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 period.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has share options that are dilutive
potential ordinary shares.
In order to give a better understanding of the underlying operating
performance of the Group, an adjusted earnings per share comparative has been
included. Adjusted earnings per share is stated after adjusting the profit
after tax attributable to equity holders of the Group for certain charges as
set out in the table below.
Adjusted earnings per share is stated after the impact of the adjusting items
disclosed in note 6.
In the six month period ended 30 June 2022, management had excluded the profit
or losses on disposal of fixed assets and right-of-use assets and included the
impact of financing items (note 7) in their calculation of adjusted earnings
per share.
When including the profit or losses on disposal of fixed assets and excluding
interest receivable, finance expense on contingent consideration and finance
expense on lease liabilities to present earnings per share on a like for like
basis, the adjusted basic earnings per share for the period ended 30 June 2022
would have been 3.717p and adjusted diluted earnings per share 3.617p, a
difference of 0.101p and 0.098p, respectively. On a like for like basis for
the period ended 30 June 2022 in relation to continuing operations, the
adjusted basic earnings per share would have been 3.667p and the adjusted
diluted earnings per share 3.568p, a difference of 0.101p and 0.098p,
respectively.
The calculation of earnings per share from continuing and discontinued
operations is based on the following earnings and number of shares.
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
Profit after tax Weighted average number of shares Pence per share 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 £'000 '000
Basic earnings per ordinary share 10,880 790,677 1.376 14,557 787,765 1.848 30,406 788,295 3.857
Effect of adjustments:
Total adjusting items (see note 6) 19,997 22,646 50,421
Adjusting items excluded from earnings per share adjustments:
Loss on disposal of fixed assets - (232) -
Profit on disposal of joint venture - (1,242) -
Interest receivable - (184) -
Net foreign exchange gain on borrowings - 907 -
Finance expense on lease liabilities (IFRS 16) - 305 -
Income tax (credit)/expense 4,145 3,933 10,070
Effect of adjustments 24,142 - 3.053 26,133 - 3.317 60,491 7.674
Adjusted profit before tax 35,022 - - 40,690 - - 90,897
Tax impact after adjustments (9,305) - (1.177) (10,613) - (1.347) (24,338) (3.087)
Adjusted basic earnings per ordinary share 25,717 790,677 3.253 30,077 787,765 3.818 66,559 788,295 8.443
Effect of dilutive potential ordinary shares:
Share options - 22,509 (0.090) - 21,807 (0.103) 31,310 (0.322)
Adjusted diluted earnings per ordinary share 25,717 813,186 3.163 30,077 809,572 3.715 66,559 819,605 8.121
Diluted earnings per ordinary share attributable to the owners of the parent 10,880 813,186 1.338 14,557 809,572 1.798 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.
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
Profit after tax Weighted average number of shares Pence per share 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 £'000 '000
Basic earnings per ordinary share 12,005 790,677 1.518 14,163 787,765 1.798 30,718 788,295 3.897
Effect of adjustments:
Total adjusting items (see note 6) 19,934 22,646 49,377
Adjusting items excluded from earnings per share adjustments:
Loss on disposal of fixed assets - (232) -
Profit on disposal of joint venture - (1,242) -
Interest receivable - (184) -
Net foreign exchange gain on borrowings - 907 -
Finance expense on lease liabilities (IFRS 16) - 305 -
Income tax (credit)/expense 4,472 3,841 9,784
Effect of adjustments 24,406 3.087 26,041 3.306 59,161 7.505
Adjusted profit before tax 36,411 40,204 89,879
Tax impact after adjustments (9,632) (1.218) (10,521) (1.336) (24,052) (3.051)
Adjusted basic earnings per ordinary share 26,779 790,677 3.387 29,683 787,765 3.768 65,827 788,295 8.351
Effect of dilutive potential ordinary shares:
Share options - 22,509 (0.094) - 21,807 (0.101) - 31,310 (0.319)
Adjusted diluted earnings per ordinary share 26,779 813,186 3.293 29,683 809,572 3.666 65,827 819,605 8.032
Diluted earnings per ordinary share attributable to the owners of the parent 12,005 813,186 1.476 14,163 809,572 1.749 30,718 819,605 3.748
.
10. Intangible assets
Goodwill Customer contracts and relationships Branding Acquired IP Internal software develop-ment Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 337,754 188,860 15,277 90,314 26,199 658,404
Additions - - - - 4,700 4,700
Foreign exchange differences 34,404 10,808 10,808 1,396 7,100 1,202 - 54,910
At 30 June 2022 372,158 199,668 199,668 16,673 97,414 32,101 28,844 718,014
Additions - - - - 5,266 5,266
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 1,013 3,129 1,052 2,245 1,089 8,528
At 31 December 2022 367,269 199,121 16,778 99,572 37,816 720,556
Additions - - - - 6,707 6,707
Foreign exchange differences (14,025) (4,354) (595) (3,883) (1,101) (23,958)
At 30 June 2023 353,244 194,767 16,183 95,689 43,422 703,305
Accumulated amortisation
At 1 January 2022 - 70,947 2,068 23,179 14,838 111,032
Amortisation charged in period - 10,760 1,466 5,764 3,369 21,359
At 30 June 2022 - 81,707 3,534 28,943 18,207 132,391
Amortisation charged in period - 9,891 1,590 6,252 4,091 21,824
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 period - 9,367 1,424 5,785 4,304 20,880
Foreign exchange differences - (2,080) (196) (1,474) (582) (4,332)
At 30 June 2023 - 100,960 7,108 41,429 26,635 176,132
Carrying amount
At 30 June 2022 372,158 117,961 13,139 68,471 13,894 585,623
At 31 December 2022 367,269 105,448 10,898 62,454 14,903 560,972
At 30 June 2023 353,244 93,807 9,075 54,260 16,787 527,173
11. Property, Plant, equipment and right-of-use assets
Right of Use Assets
Computer equipment Property Total Computer equipment Property Total
Motor vehicles Motor vehicles
£'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
Additions 631 9 7 647 - 587 - 587
Foreign exchange differences 151 31 138 320 21 475 (13) 483
Transfer between cost and depreciation (11) - - (11)
Disposals (53) (1) - (54) (67) (3,331) - (3,398)
At 30 June 2022 2,522 477 1,762 4,761 513 21,078 121 21,712
Reclassifications 1,134 140 (1,274) -
Additions 884 94 16 994 - 1,475 - 1,475
Foreign exchange differences 1,902 (57) 91 1,936 (9) (276) 13 (272)
Reclassified as assets held for sale (236) (48) (43) (327) - (278) - (278)
Disposals (538) (232) (159) (929) (34) (2,097) (57) (2,188)
At 31 December 2022 5,668 374 393 6,435 470 19,902 77 20,449
Additions 415 12 63 490 - 1,316 - 1,316
Foreign exchange differences (154) 262 (121) (13) (2) (232) - (234)
Disposals (1,706) (23) (142) (1,871) - (313) - (313)
At 30 June 2023 4,223 625 193 5,041 468 20,673 77 21,218
Accumulated Depreciation
At 1 January 2022 281 124 222 627 186 6,596 13 6,795
Charge for the period 675 103 123 901 86 2,366 34 2,486
Disposals (14) (1,790) - (1,804)
At 30 June 2022 956 227 345 1,528 258 7,172 47 7,477
Charge for the period 944 167 129 1,240 75 1,763 19 1,857
Reclassifications 129 - (129) -
Disposals (480) (221) (148) (849) (6) (560) (22) (588)
Reclassified as assets held for sale (178) (47) (43) (268) - (105) - (105)
Foreign exchange differences 1,765 (10) 172 1,927 - - - -
At 31 December 2022 3,136 116 326 3,578 327 8,270 44 8,641
Charge for the period 558 97 90 745 58 2,055 15 2,128
Disposals (1,704) (23) (105) (1,832) - - - -
Foreign exchange differences (18) 253 (118) 117 - - - -
At 30 June 2023 1,972 443 193 2,608 385 10,325 59 10,769
Net book value
At 30 June 2022 1,566 250 1,417 3,233 255 13,906 74 14,235
At 31 December 2022 2,532 258 67 2,857 143 11,632 33 11,808
At 30 June 2023 2,251 182 - 2,433 83 10,348 18 10,449
(
)
( )
12. Trade receivables
30 Jun 30 Jun 31 Dec
2023 2022 2022
£'000 £'000 £'000
Trade receivables 109,890 128,384 140,951
Allowance for impairment losses (4,122) (5,512) (4,926)
105,768 122,872 136,025
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 recognized or the date that the services are
delivered and an associated contract asset is recognized.
30 Jun 30 Jun 31 Dec
2023 2022 2022
£'000 £'000 £'000
Contract liabilities offset within trade receivables above 3,981 7,085 6,639
13. Other receivables, deposits and prepayments
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Sundry receivables 6,742 4,258 6,767
Prepayments 7,878 13,618 9,998
14,620 17,876 16,765
Sundry receivables as at 30 June 2022 have been adjusted relating to the
impact of prior year acquisition measurement period adjustment (see the Annual
Report for the year ended 31 December 2022).
14. Cash and cash equivalents, restricted cash and short-term deposits
For the purpose of the statement of cash flows, cash and cash equivalents
comprise cash held by the Group and short-term bank deposits with an original
maturity of three months or less:
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Cash and cash equivalents 78,132 71,933 94,847
Restricted cash balances comprise amounts held on behalf of third parties and
employees as part of the Employee Stock Purchase Plan ('ESPP'):
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Restricted cash 2,303 3,158 2,608
15. Deferred tax assets / liabilities
The movement in deferred tax assets and liabilities prior to offsetting are
shown below:
Deferred Tax Assets Share options Tax losses Short-term timing differences Intangibles Total
£'000 £'000 £'000 £'000 £'000
At 31 December 2022 3,622 5,248 12,814 4,939 26,623
Deferred tax charged directly to the income statement - 1,920 1,058 - 2,978
Exchange rate differences (48) (166) (507) (198) (919)
Changes in tax rate - 124 36 - 160
At 30 June 2023 3,574 7,126 13,401 4,741 28,842
Deferred Tax Liability Intangibles Accelerated tax depreciation Short-term timing differences Total
£'000 £'000 £'000 £'000
At 31 December 2022 46,541 615 2,648 49,804
Deferred tax charge directly to the income statement (4,284) (9) 1,075 (3,218)
Deferred tax charged directly to equity (1,402) - - (1,402)
Exchange rate differences - (26) (118) (144)
Changes in tax rate - - 18 18
At 30 June 2023 40,855 580 3,623 45,058
15. Deferred tax assets / liabilities (continued)
The total deferred tax assets and liabilities subject to offsetting are
presented below:
Total Deferred tax assets Total Deferred tax liabilities
30 June 30 June 2022 31 Dec 30 June 30 June 2022 31 Dec
2023 £'000 2022 2023 £'000 2022
£'000 £'000 £'000 £'000
Prior to offsetting 28,842 19,682 26,623 45,058 41,199 49,804
Offset of tax (21,511) (15,098) (22,539) (21,511) (15,098) (22,539)
After offsetting 7,331 4,584 4,084 23,547 26,101 27,265
The deferred tax assets and liabilities have been represented in the balance
sheet as at 30 June 2022 to reflect the requirements of IAS12 to offset
deferred tax assets and liabilities when there is a legally enforceable right
to set off current tax assets against current tax liabilities, when they
relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
This has resulted in a reduction of deferred tax assets and liabilities
included in non-current assets and non-current liabilities respectively of
£15.1 million. There is no impact on net assets, cash flow or reserves.
16. Trade and other payables
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Trade payables 15,056 27,919 31,813
Contract liabilities 74,292 80,431 99,303
Tax and social security 11,574 23,188 22,300
Contingent consideration - - 21
Acquisition-related contingent consideration and earn-outs 1,610 4,776 4,876
Accruals and other payables 39,049 38,156 22,321
141,581 174,470 180,634
Trade payables as at 30 June 2022 have been adjusted relating to the impact of
prior year acquisition measurement period adjustment (see the Annual Report
for the year ended 31 December 2022).
17. 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.
At the outset this comprised two committed term loans, Term Facility A, with
an original commitment of $265.0 million available to the Group until October
2025 and Term Facility B for $40.0 million, subsequently fully repaid in March
2022.
The facilities available also include a $50.0 million committed Revolving
Credit Facility (£39.6 million at the period-end exchange rate) and a $50.0
million uncommitted accordion facility (£39.6 million at the period-end
exchange rate), both available until July 2025. The term facility attracts
variable interest based on LIBOR plus a margin of between 1.25% and 2.75% per
annum, based on the Group's leverage to December 2023, 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 £7.6 million at the period-end exchange rate) with
the balance repayable on the expiry of the loan in October 2025. Term Facility
B was repayable in full in April 2022 but was fully repaid early in March
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 EBITDA to Finance Charges and 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 period and
as at 30 June 2023, the Group's interest cover was 8.96 and its leverage ratio
was 0.94.
The lease liabilities have arisen on adoption of IFRS 16 and are secured by
the related underlying assets.
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Current interest-bearing loans and borrowings 31,220 23,845 36,714
Non-current interest-bearing loans and borrowings 155,289 193,367 177,944
Current lease liabilities 4,162 8,194 5,082
Non-current lease liabilities 8,486 13,196 9,792
199,157 238,602 229,532
Net debt reconciliation
Net debt can be analysed as follows:
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Cash and cash equivalents 78,132 71,933 94,847
Borrowings:
- Term loan (186,509) (217,212) (214,658)
Net debt (108,377) (145,279) (119,811)
18. Provisions
Property provisions Litigation and regulation provisions Onerous contract provisions Closure provisions Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 1,075 6,489 1,024 - 8,588
Released to the income statement -
(242) - (212) (454)
Foreign exchange movement - - - - -
At 30 June 2022 833 6,489 812 - 8,134
Charged / (released) to the income statement 208 (3,769) (431) - (3,992)
Paid in the period (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 - - (319) (62) (381)
Paid in the period (86) (11) - (718) (815)
Additions 6 - - - 6
Foreign exchange movements (64) (37) (13) - (114)
At 30 June 2023 859 873 156 267 2,155
Current 325 873 156 267 1,621
Non-current 534 - - - 534
At 30 June 2023 859 873 156 267 2,155
The provisions as at 1 January 2022 have been restated to include the impact
of measurement period adjustments as described in the Annual Report for the
year ended 31 December 2022.
19. Assets and liabilities classified as held for sale
In December 2022, the Group decided to dispose a non-core 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.
19. Assets and liabilities classified as held for sale (continued)
Effect of the assets and associated liabilities on financial position of the
Group
30 Jun 31 Dec
2023 2022
£'000 £'000
Non-current assets
Goodwill 501 501
Intangible assets 1,279 1,279
Property, plant and equipment 53 58
Right of use assets 143 173
1,976 2,011
Current assets
Trade receivables 3,629 5,299
Other receivables, deposits and prepayments 180 82
Amounts recoverable on contracts 910 977
4,719 6,358
Assets in disposal groups classified as held for sale 6,695 8,369
Current liabilities
Lease liabilities 16 77
Trade and other payables 3,984 3,809
4,000 3,886
Non-current liabilities
Lease liabilities 137 98
Liabilities directly associated with assets in disposal groups classified as 4,137 3,984
held for sale
The net assets held for sale as at 30 June 2023 exclude deferred tax assets of
£39,000 (31 December 2022: £39,000) and current tax liabilities of £635,000
(31 December 2022: £412,000) which remain within the Group tax position.
The Group expects to recover greater than the net book value from the eventual
sale which is progressing well and we expect to provide a further update
before the end of the year.
20. Events after the balance sheet date
On 5 September 2023, the Group sold its 17% investment in LEO Brasil
Tecnologia Educacional Ltda (formerly Epic Brasil Tecnologia Educacional Ltda)
for proceeds of R$3 million (£0.5 million), realising a gain on sale of £0.4
million.
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 6 to the financial statements.
Saas and long-term contracts Revenue Refer to Note 3 Saas and long-term contracts are 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 Transactional revenue is defined as the revenue streams of the Group that
arise from one-off fees or services that may or may not happen again.
Balance Sheet Measures
Net cash or debt None Refer to Note 17 Net cash / debt is defined as Cash and cash equivalents and short-term
deposits, less Bank overdrafts and other current and non-current borrowings. A
reconciliation is provided in Note 17 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 in issue at the end of the period/year, The shares in issue at 31
December 2022 were 789,824,841 (based on Note 26 of the 2022 Annual report)
and 791,160,022 at 30 June 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.
Company information
Directors Registrar
Andrew Brode, Non-Executive Chairman Computershare Investor Services plc
Jonathan Satchell, Chief Executive Officer The Pavilions
Kath Kearney-Croft, Chief Financial Officer Bridgewater Road
Piers Lea, Chief Strategy Officer Bristol
Simon Boddie, Non-executive Director BS13 8AE
Aimie Chapple, Non-Executive Director
Leslie-Ann Reed, Non-Executive Director Principal Bankers
HSBC UK Bank plc
Company Secretary 71 Queen Victoria Street,
Claire Walsh London, EC4V 4AL, UK
Company number HSBC Innovation Bank Limited
07176993 Alphabeta, 14-18 Finsbury Square,
London, EC2A 1BR, UK
Registered address
15 Fetter Lane Fifth Third Bank NA
Ground Floor 142 W 57(th) Street,
London Suite 1600,
England New York, NY 10019, USA
EC4A 1BW
Barclays Bank plc
1 Churchill Place,
Independent auditors London, E14 5HP, UK
BDO LLP
Chartered Accountants and Statutory Auditors The Governor and Company of the Bank of Ireland
55 Baker Street 4(th) Floor, Bow Bells House,
London 1 Bread Street,
W1U 7EU London, EC4M 9BE, UK
Nominated adviser and joint broker
Numis Securities Limited Communications consultancy
10 Paternoster Square FTI Consulting LLP
London 200 Aldersgate
EC4M 7LT Aldersgate Street
London
Joint broker EC1A 4HD
Goldman Sachs
Plumtree Court
25 Shoe Lane
London
EC4A 4AU
Legal advisers
DLA Piper U.K LLP
160 Aldersgate Street
London
EC1A 4HT
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