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

 

Enquiries:
Learning Technologies Group plc Jonathan Satchell, Chief Executive Kath Kearney-Croft, Chief Financial Officer	+44 (0)20 7832 3440
Deutsche Numis (NOMAD and Corporate Broker) Nick Westlake, Ben Stoop, Tejas Padalkar	+44 (0)20 7260 1000
Goldman Sachs International (Joint Corporate Broker) Bertie Whitehead, Adam Laikin	+44 (0)20 7774 1000
FTI Consulting (Public Relations Adviser) Jamie Ricketts, Emma Hall, Lucy Highland. Jemima Gurney	+44 (0)20 3727 1000

 

 

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 2024¹. 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 AIQ¹) 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 attending³. 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/

²https://www.gpstrategies.com/solutions/consulting/artificial-intelligence-consulting-solutions/human-plus-ai-training-program/

³https://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: 81² 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 cashflow¹ was £44.4 million (2022: £50.3 million), £5.9 million lower than 2022.  Cash conversion¹ 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	FY222	Variance
Statutory operating profit	58.7	50.5	8.2
Adjusting items	39.8	50.4	(10.6)
Adjusted EBIT1	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 flow1	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 flow1	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 Company			9,285	61,367
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