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.  

Recent Trend of Dividend Payments

LTG has a progressive dividend policy and will pay a final dividend of 0.70 pence per share on 21 July 2022 with an ex-dividend date of 30 June 2022. The total dividend for FY21 remained 1.00 pence per share, an increase of around 33% from FY20 levels.

(Data Source: LSE Website, Research done by Kalkine Group)

Growth Prospects

• Strategic Initiatives: The Company has adopted a new go-to-market strategy to support greater breadth and depth of offering & geographical reach, and faster-growing markets.
• 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 

• Weak Financial Position: LTG has witnessed an unfavourable turnaround from delivering net cash in FY20 to reporting a net debt during FY21.
• Record UK Inflation: The rise in regulated household energy bills led to UK inflation leaping to 9% in April 2022, the highest level since 1982. It may adversely impact UK equities.
• European Central Banking Meeting: The recent ECB meeting has hinted of 25 basis interest rate hikes in July and September 2022. Thus, it will put pressure on European Equities.
• Bank of England Warning: The Bank of England had trimmed its economic growth forecast for 2023 and is expected to show a contraction of 0.25% from a previously estimated growth of 1.25%. Moreover, it had also warned of UK inflation reaching around 10% very soon.

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.

Financial Highlights (for the 12 months ended 31 December 2021, as of 3 May 2022)

(Source: Company Website)

• Top-Line Business: The Company reported a solid increase of 95% in the total revenue to £258.2 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 £54.8 million during FY21.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 10 June 2022 at 08:46 AM GMT+1, LTG’s shares were trading at GBX 120.72, down by around 1.77% against the previous day closing price. Stock 52-week High and Low were GBX 239.00 and GBX 112.70, respectively.

On a daily chart, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Also, the 14-days RSI of ~36.23 approaches oversold territory.

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

Business Outlook

LTG has ended FY21 on a good note and sustained momentum across the business, with high-quality earnings from SaaS and long-term contracts. The acquisition strategy of LTG is focused on two key aspects - expanding the addressable market and focusing more on cross-selling opportunities. With the acquisition of GP Strategies, the Company has upgraded its margin expectations and targets an EBIT margin of around 12% during FY22. Meanwhile, the enlarged group aims to serve a much larger proportion of the £100 billion addressable markets. Overall, the Company remained confident regarding significant progress in FY22, driven by several acquisition deals completed in FY21.

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 solid growth in dividend payments, upgraded profitability guidance, acquisition benefits, strong top-line business growth, 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 market price of GBX 120.72 (as of 10 June 2022 at 08:46 AM GMT+1), with lower-double digit upside potential based on 17.29x 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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