Learning Technologies Group PLC (LON: LTG)

Learning Technologies Group PLC (LON: LTG) is an FTSE AIM UK 50 Index listed Company, which is engaged in the business of digital learning and talent management. The broader set of business segments include Software & Platforms, Content & Services and Other Segment. Moreover, LTG has a strong partnership network facilitating the Company to deliver expertise beyond capability.  

On 26 April 2022, the Company will release full-year FY21 results.

Recent trend of dividend payments

The Company has a progressive dividend policy to pay out to shareholders, and it had paid an interim dividend of 0.30 pence per share on 29 October 2021, while the ex-dividend date was 08 October 2021. In comparison, LTG had paid an interim dividend of 0.25 pence per share for an equivalent period of the prior year.

(Source: LSE, chart created by Kalkine Group)

Growth Prospects

• Innovative Products: LTG provides large organisations with a new learning approach driven by digital transformation. Furthermore, it provides an innovative set of products and services that focus on partnering with clients to achieve desired results and bridge the gap between current and future workforce tendencies.
• Acquisition Benefits: Several acquisitions, such as Reflektive, PDT Global and Bridge, which were completed during H1 FY21, got fully integrated and made a significant contribution to FY21 total revenue. Meanwhile, the acquisition of GP Strategies completed on 15 October 2021, led to an improvement in operational performance.

Key Risks

• Contractual Risk: The client contractual risk may impact the growth trajectory of the Company.
• Record UK Inflation: British inflation hit a 30-year high of around 6.2% in February 2022, which may cause a further interest rate hike.
• Ukraine Tension: The mounting concern over the Russian invasion of Ukraine can continue to weigh on the equity market.

Key Fundamental and Shareholders Statistics of Learning Technologies Group PLC.

Brode (Andrew Stephen) is the most significant shareholder as it holds nearly 117.10 million shares as of 31 March 2022.       

Trading Update (for the 12 months ended 31 December 2021, as of 25 January 2022)

• Top-Line Business: The Company had anticipated a solid increase of at least 92% in the total revenue to £254 million during FY21. In comparison, it generated around £132.3 million of total revenue in the prior year.
• Profitability: On the profitability front, the continued focus on operational excellence led to a growth in adjusted EBIT from £40.3 million during FY20 to £53.7 million during FY21.
• Balance Sheet: Net debt of £141.5 million remained better than expected (consensus: £169.2 million) as of 31 December 2021.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 01 April 2022 at 08:04 AM GMT+1, LTG’s shares were trading at GBX 163.60, up by around 0.43% against the previous day’s closing price. Stock’s 52-week High and Low were GBX 239.00 and GBX 135.40, respectively.

On a daily chart, the 14-days RSI of ~48.21 indicates a neutral price momentum.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

LTG had ended FY21 on a good note with a significant increase in top-line revenue led by several acquisitions completed during the year. The acquisition strategy of LTG is focused on two key aspects to expanding the addressable market and focusing more on cross-selling opportunities for the largest 50 customers. Moreover, both business divisions gained solid momentum during the year and drove continued growth on a like-for-like basis. Meanwhile, the Company aims to serve a much larger proportion of the £100 billion addressable markets. Overall, the Company would aim to accelerate recurring revenue growth driven by the robust business model and increasing acquisition opportunities.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the decent fundamentals, strong industry dynamics, a significant proportion of the addressable market, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Learning Technologies Group PLC at the current price of GBX 163.60 (as of 01 April 2022 at 08:04 AM GMT+1), with lower-double digit upside potential based on 25.49x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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