There could be a good long term benefit if this works out - "Potential for cross-selling will help to underpin further opportunities for growth". I haven't noticed anything about how it's likely to split between customers for learning using the recruitment software, and the other way round. There could be more opportunities for recruitment customers to use the learning, because of the size of PeopleFluent's revenue, at "2017: c.£82.8 million", compared to £52.2m for LTG alone (based on "Would take LTG to c.£135 million revenue business"). But, PeopleFluent's revenue is expected to reduce in the near term.
I've done some maths. I'm assuming this is about PeopleFluent, not LTG - "Revenues are expected to reduce in the near term; however, management are confident of their ability to materially improve EBIT margin".
I assume a total acquisition cost of £110m, from "cash consideration of $150 million (£107 million)" plus "Total non-recurring costs of up to $3.0 million will be incurred in order to deliver these synergies and make important investments related to the PeopleFluent Business".
Adjusted EBIT £9.2m
"Target EBIT margin of at least 20% for PeopleFluent in FY 2019"
20% of the £82.8m revenue is £16.56m, which is 15.05% of the acquisition cost of £110m (or, the acquisition cost is 6.64x 2019 EBIT).
If PeopleFluent's revenue drops 10%, to £74.5m, the 20% margin gives EBIT of £14.9m, which is 13.54% of the acquisition cost (which is 7.38x 2019 EBIT).
For a 20% drop, it's £66.2m revenue, £13.2m EBIT or 12.00% of the acquisition cost, which is 8.33x 2019 EBIT.
Note, my calculations are for PeopleFluent's 2019 revenue, EBIT and ratios to acquisition cost. My 20% drop-in-revenue case might be pessimistic, but the size of the revenue reduction isn't specified, and neither is the "near term". My simple math won't be relevant if the revenue drops much more than 20%, or if the 2019 EBIT margin is way off the 20% target. To state the blindingly obvious, EBIT doesn't include interest and tax, which are real costs. I don't actually know how cyclical recruitment software is, I just hope the recurring revenue (86% of PeopleFluent's total revenue) keeps recurring when recruitment is in a downturn.
I would have thought that whatever risk there is to the focus on LTG's core learning activities being diluted, (and, yes, there is some risk), I think it likely that there will be more overall gain from the significant opportunities now arising from the very much larger customer base in the USA. This really does enhance the attraction, for me, of having this company as a long term core holding.
Despite the impression that LTG is trying to create, Peoplefluent is a recruitment software company so this represents a significant move away from LTG's focus on learning technologies. Not sure about this, will have to wait and see how it works out but I have a feeling it will increase risk for shareholders.
Just short of @@53p for a 7.5% profit over 4 months.
Hoping the price falls back again like it did after the last results, so that I can buy back in at a better entry price, perhaps @45p
- I also needed to get this stock out of my SIPP. Its too slow moving for me to trade around a position, my preferred method of building a long term holding, in that particular account, which has little cash on hand.
Good luck to all those holding, I'm convinced this company is a continued winner longer term.
... not really reflected in the share price as yet. We may see the highs after the last results repeated if reported in the media ... I was tempted to sell at a very small profit, but check out the forward guidance. Just wish the stock was more liquid.
· Revenue increased to £21.5m (H1 2016: £12.8 million) - up 68%
· Organic revenue grew to £17.6m - up 33%
· Recurring revenues increased to 37% (H1 2016: 24%) - up 153%
· Revenues generated outside the UK increased to 46% (H1 2016: 32%) - up 140%
· Adjusted EBIT increased to £4.1 million (H1 2016: £2.9 million) - up 41%
· Adjusted EBIT margin of 19.2% (H1 2017: 23.0%) - down 380bp due to NetDimensions
· Adjusted diluted eps of 0.523p (H1 2016: 0.597pps) - down 7% due to NetDimensions
· Proposed interim divi of 0.09 pence per share (H1 2016: 0.07 pence) - up 29%
· Successful debt refinancing provides LTG with £20m facility for five years
· Strong balance sheet -adjusted net debt of £9.8m - c1.1x Net Debt/LTM EBITDA
· Excellent progress in delivering on LTG's strategic ambition to build an international full-service digital learning offering for corporate and government
· Successful acquisition in March 2017 of NetDimensions brings to the Group a leading proprietary Learning Management System and adds the final key technical capability to LTG's service offering
· Integration of NetDimensions completed on time and to plan in Q2 2017; the majority of the annualised incremental EBIT benefits of c$8 million (c£6.2 million), as stated at the time of the acquisition being announced, have been realised and the remainder will be realised in Q4 2017
· Civil Service Learning ('CSL') project being delivered in line with expectations
* Strong start to H2 2017 with trading ahead of management's expectations and order book significantly ahead of the prior year on a like for like basis *
DB75, "They are already a leading player, so how (apart from increasing revenue) can they increase their market value? "
Well, the chairman says, "The e-learning industry is highly fragmented, comprising a multitude of small operators with each offering a limited range of services. There are few providers that are able to offer clients truly comprehensive services, which meet their evolving requirements for data driven solutions, and have the scale and in-depth experience to service large corporations and government organisations. We believe LTG is the only player to provide such a broad service offering.
The market opportunity for LTG is to build the leading end-to-end workplace digital learning solutions provider, which partners its global clients through the creation, implementation and maintenance of their integrated e-learning strategies"
One key word for me, there. FRAGMENTED. Note the acquisitions they are making, and don't be surprised if they become a target themselves with the growth that they have been displaying, and continue to increase, so far as we know.
You can bet innovations in the space will come increasingly quickly, and the best way to include them in your offering, in my opinion, is let others invent them and try them, and if those 'small operators' appear to have introduced something that customers want, and they have copyright or IP rights, then buy them out to add the service to your offering.
If you have identified potential correctly, them someone else will buy them, or will try to, if you don't. Many smaller companies are happy to take the money and run. Others may look for some sort of deal in which they continue to manage their own area of the business. Nothing wrong with that, you probably need them on board initially if its truly innovative anyway.
Just look at the list of acquisitions in the 2016 results, plus NetDimensions after the results period, which they are 'very excited' about. OK, management always say that, but this does have a ring of authenticity about expanding growth potential ...
"The acquisition brings to LTG the final major pillar of its strategic ambition [Oh really? - Until the next innovation comes along - Eadwig] to build a comprehensive full-service digital learning offering encompassing strategic consultancy, content, delivery and analytics capabilities for corporate and government clients. It deepens our expertise in highly regulated sectors such as financial services, defence and security [I want to hear about LTG developing AI systems to take take over in many of these areas very soon. If they don't develop them, others will and are doing. - Eadwig] whilst opening up access to the South East Asian market. Other LTG businesses will also have the opportunity to offer their technical capability and vertical sector specialisms to an extended client base [and get rid of back office staff overhead, hopefully - Eadwig]"
RE: A.I. above. I'm not sure if its taboo, but none of the 'divisions', lets call them, that they have bought and integrated into their overall package mentions 'A.I.' or 'expert' systems.
The fact is, many such systems when it comes to compliance with regulations, customer advice on same, analytics etc are going to be delivered solely by software very soon. Why train lots of people to travel around the world teaching others about regulations and compliance, when it can be done by a piece of software? And probably more accurately, and will always be up to date with the latest additions too. You don't need the trainers at LTG, and their customers don't need the people they are training. They need the software that LTG supplies and keeps up to date.
LTG doesn't specifically say they're working on it, but they must be. As I have bought a tranche now the pullback after the results seems to have gone as far as its going, I'll have to find time to search through their final report risk assessment.
This is an interesting company to be following they have made some great acquisitions recently which has brought them into the software world. I see the NetDimensions acquisition as a good investment the market is competitive but they have a good presence and client base. Gomo is increasing its market presence. The Civil Service contract should be delivering revenue ( to be clarified in the forthcoming results). My only concerns are where is this company going and what the long term plan is. They are already a leading player, so how (apart from increasing revenue) can they increase their market value?
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