Shares in digital learning services provider Learning Technologies (LTG:AIM) gained more than 8% to 175p as it guided for annual revenue and earnings to be ahead of market expectations following a pandemic-led rise in demand for digital learning and talent management.

In a full year trading update, Learning Technologies said revenue would total not not less than £131 million, up from £130.1 million year-on-year and ahead of market estimates of £127 million, while recurring revenue growth increased to about 80% from 74%.

The uptick in recurring revenue was driven by the ongoing performance in the software & platforms division and the expansion of the firm’s business in open-source learning management systems through the acquisitions of Open LMS, eCreators and eThink Education.

Adjusted earnings before interest and taxes (EBIT) is expected to be ahead of consensus of £38.1 million and not less than £40 million, while the group’s net cash position at 31 December 2020 of £70.2 million was significantly ahead of consensus of £59.6 million, which it said was driven by ‘strong operating cash conversion and additional net cash balances of £1.6 million from the acquisitions of eCreators and eThink.’


Megabuyte analyst Cameron Naylor believes that while Learning Technologies has managed to beat full year expectations despite Covid-19 headwinds, particularly in the first half, ‘these expectations were slightly conservative given such positive second half momentum’.

He added: ‘Nonetheless, this latest update not only demonstrates the resilience of LTG’s Software & Platforms division (particularly through mid-market and enterprise customers) but the demand for digital learning and talent management (which the pandemic has only accelerated).

‘This will contribute to LTG’s organic growth, which continues to be supplemented by complementary M&A, both helping achieve its goal for 2022 exit run-rate adjusted operating profit of £66 million on run-rate revenues of £230 million.’

Berenberg analyst Benjamin May sees the firm’s update today as the ‘first of many upgrades to come’ and believes the firm can also deliver strong organic sales growth, a lack of which has previously put off some investors.

He also praised the company’s recent acquisition of performance management platform Reflektive, and regarding M&A added: ‘Assuming the company simply spends £60 million in the next two years, using existing cash reserves and modest debt we calculate £66 million of EBIT in FY22, in line with the company’s targets. On this figure, LTG would trade on 24.5x P/E, representing precisely a 50% discount versus UK software peers… this is just too cheap.’


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Issue Date: 22 Jan 2021