LTG Plc - Digital Learning in the Pandemic Era
27 January 2021
Last Friday LTG Plc issued an upbeat trading update despite the ongoing Covid-19 pandemic. It has been some time since we last checked in with LTG, the company’s share price at the time was hovering around 40p per share (this morning it opened at 176.8p). In the intervening time LTG has continued in the vein it had begun by achieving self-declared revenue and EBITD targets as well as adding new businesses to the group. I take this opportunity to look at how the company has managed to provide a positive trading update in a pandemic-ravaged global economy.
Acquisitions
At its flotation in 2013, the LTG’s aim was to create a “best-of-breed” technologies focused learning enterprise. Since then company has expanded its focus to include recruitment and performance monitoring software. The first step towards this focus was the acquisition of US talent management company PeopleFluent in June 2018. The software provided by the PeopleFluent offers digital solutions for talent acquisition, performance, compensation, succession and learning. In LTG’s bid to create a “market leading end-to-end product suite for talent transformation”, the company’s existing NetDimensions division was merged into PeopleFluent within three months of the acquisition. In April 2019 LTG completed the acquisition of Florida-based Breezy HR. Earlier this month the company also completed the acquisition of California-based Reflektive. These acquisitions have spawned several new divisions within LTG including:
The LTG Portfolio
Affirmity: software designed to optimise affirmative action, diversity and inclusion programmes
VectorVMS: platform which automates the process of procuring and managing staff allowing organisations to control costs, maintain compliance and drive efficiency in the workforce
Breezy HR: cloud-based recruitment platform and applicant tracking system. The software’s client base is mid-market non-corporate Small Medium Enterprises (SMEs)
Reflektive: is a performance management software provider, it remains to be seen whether Reflektive will be merged into PeopleFluent or become a division of its own under PeopleFluent
LTG acquisitions in the last year have seen the company return to Learning Management Systems (LMS) targets. The company completed the acquisition of Moodle-based learning provider Open LMS in April 2020. LTG also acquired eCreators (September 2020) and eThink (December 2020) which are Moodle market leaders for Australia and the US respectively.
Moodle
Moodle is a free, open-source and collaborative learning management system. According to Moodle, the platform is used by over 60% of world’s higher education institutions including The Open University, Oxford Brookes University, Trinity College Dublin and Louisiana State University. The name “Moodle” is an acronym of “modular object orientated dynamic learning environment”.
Some of LTG’s recent LMS acquisitions have now shown the Board’s hand. In acquiring Open LMS, eCreators and eThink, it seems the company is eyeing customers on the opensource Moodle platform. The LTG Board have obviously seen an opportunity to grow into and montetise a market which is well populated but fragmented. LTG’s 2020 Interim Report states “we look forward to further building LTG’s position in the corporate Moodle market … with the acquisition of eCreators”. Commenting on the Open LMS acquisition, Chief Innovation and Product Officer at LTG, Tim Martin stated “We believe that consolidating some of the Moodle providers from around the world will allow us to operate more efficiently and more effectively leverage every bit of energy we put into Moodle itself and the products and services we arrange around it”.
Moodle HQ have certainly noticed the moves made by LTG and are not taking this potential threat to the Moodle ecosystem lying down – days after the eThink acquisition in December completed, Moodle revoked the developer’s “Certified Partner” status. The change in status does not, however, mean that eThink content has been removed from the Moodle platform nor does it prevent eThink from continuing to use the Moodle platform. Moodle HQ accuses LTG of a “closed” approach to its “open” learning model, specifically stating that “it is harder for organisations to move to a different provider or to their own servers”.
No doubt decision makers at Totara - an open-source learning management system for corporate learning - are watching LTG’s moves on Moodle with bated breath.
The LTG-Moodle dispute may, for readers of a certain vintage, remind of the Browser War between “Netscape Navigator” and “Internet Explorer” which was ultimately won by the latter because the browser was packaged into Mircosoft’s operating system bundle. With that story in mind, I am sure there will be more salvos to come in the LTG-Moodle story.
Royal Navy Contract
LTG was part of the “iMast Alliance” consortium bidding to partner with the Royal Navy as part of the program to transform and modernise naval training. Unfortunately for LTG, on 18th December 2020 the Royal Navy awarded the training contract to the “Fisher Training” consortium led by Capita. LTG investors who may be disappointed the company did not win the Royal Navy contract can take consolation in the knowledge that Capita’s share price in fact fell on the day of the award announcement and is currently trading 20% lower than it was on that day (not suggesting the share price fall is due to the Royal Navy contract, more that the contract award was unable to prop up an already faltering share price).
Trading Update
As the pandemic started to take hold in Europe and the US in March 2020, LTG took actions to protect the health of its employees and business as the company braced itself for a turbulent period. Shareholder dividends and director bonuses were postponed, marketing budgets were tightened and Breezy HR’s $4 million acquisition was funded through LTG shares instead of cash. It is worth noting that company staff bonuses were still paid.
The trading update for full financial year of 2020 show revenues of not less than £131 million (2019: £130.1m) and EBIT of not be less than £40 million (2019: £41m). It seems LTG has thus far weathered the storm with minimal damage. A year on from the start of the Covid-19 pandemic, CEO Jonathan Satchell is touting LTG’s financial performance in 2020 as robust and resilient – a way of telling the market the company was prepared for worst-case scenario but were able to avert it. Given the upheaval caused by the pandemic, it is the author’s considered opinion that maintaining sales figures for 2020 at the same level as 2019 is a significant achievement.
LTG is currently sat on cash reserves of £70.2 million and (as of June 2020) also had access to roughly $49 million of its $63 million debt facility with Silicon Valley Bank and Barclays Bank. These funds are anticipated to be deployed for use in further mergers and acquisitions.
What’s to come in 2021?
Leaving aside the non-financial drama of Moodle and the seemingly not-too-disappointing loss of the Royal Navy contract, LTG’s business appears to be growing. Having asked investors for more than £80 million in May, the Board have gone on to use that cash to fund growth in the form of numerous strategic acquisitions with further acquisitions expected in 2021. Despite Covid-19 complicating business in 2020, revenues, profits and cash reserves remain strong. Thus far in its corporate life, LTG has consistently delivered on its promises to shareholders. There should be no surprise that long term shareholders are willing to heed the CEO’s statement he is “more confident than ever” LTG will achieve its targets of £230 million run-rate revenue and £66 million run-rate EBIT by December 2022.
The Covid-19 pandemic has enforced potentially permanent lifestyle changes across industries the world over. Digital transformation products such as video conferencing, cloud systems and digital learning have seen an exponential growth. Some investors may posit LTG as an opportunity to invest in that growth. The test tube for that theory will be the company’s performance in 2021. I will leave the reader with a recent quote to ponder.
“customers are moving towards a much more structured, blended learning approach … we are long standing experts of designing those … We see that [trend] continuing in 2021 very strongly. Platforms that deliver, monitor, track and sustain this content – they are even more important now we are moving towards a more disparate and remote workforce”
LTG CEO Jonathan Satchell, 25 Jan 2021
A previous in depth report on LTG Plc can be found here:
