learning
technologies
group
Learning Technologies Group plc
ANNUAL
REPORT
2015
For the year ended 31 December 2015 CONTENTS
4
9
Chairman’s Statement
Strategic Report for the year ended 31
December 2015
17
Directors’ Report for the year ended 31
December 2015
23
Corporate Governance Report
26
Report of the Audit Committee
28
Report of the Remuneration Committee
31
32
34
35
36
Directors’ Responsibilities Statement in
respect of the Annual Report and the
Financial Statements
Independent Auditor’s Report to the
Members of Learning Technologies
Group plc
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of Changes
in Equity
37
Consolidated Statement of Cash Flows
39
87
88
90
Notes to the Consolidated Financial
Statements for the year ended 31
December 2015
Company Statement of Financial
Position
Company Statement of Changes
in Equity
Notes to the Company Financial
Statements for the year ended 31
December 2015
99
Company information
4
plc Annual Report 2015
CHAIRMAN’S STATEMENT
I am pleased to report a successful year in the development of Learning Technologies Group plc (“LTG”) as a
market-leader in the fast growing learning technologies sector.
We made a number of important strategic acquisitions and investments to
build our end-to-end offer, whilst also driving good organic growth through our
enhanced capabilities. As a result, the Group delivered strong growth in revenue,
operating profit and earnings for the financial year ended 31 December 2015.
Market opportunity
Strategic progress
In an increasingly fast moving global service-based
economy, organisations are becoming more
aware of the significant impact that incremental
improvements in staff performance can have on
their businesses, particularly in efficiency, customer
service and profitability.
The global corporate training market, of which
LTG is focused on the digital learning segment, is
estimated to be worth £140 billion in 2016 with a
five year compound annual growth rate (CAGR) of
23%. Organisations are now looking to measure
more precisely which learning interventions are
most effective, using adaptive models which draw
data from multiple sources to establish returns on
e-learning investment. 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 a truly comprehensive solution,
which meets 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 e-learning solution, which
partners its global clients through the creation,
implementation and maintenance of their integrated
e-learning strategies.
In 2015, we built on the foundations laid in 2014
with the acquisitions of LINE and Preloaded. In
July, the Group acquired Eukleia Training Limited
(“Eukleia”), a provider of e-learning services to the
financial services sector. This acquisition marked
LTG’s first move into a vertical sector specialism,
which complements the Group’s existing expertise in
e-learning strategy and implementation.
After the year end, we announced on 29 January
2016 that LTG had acquired the entire issued
share capital of Rustici Software LLC (‘Rustici’), the
expert in digital learning interoperability. Rustici
is the acknowledged global leader in SCORM
conformance (the de facto industry standard for
e-learning interoperability), which enables online
learning content and management systems to
communicate and work together.
At the same time, we acquired a 27.3% stake in
Watershed Systems Inc (‘Watershed’). Watershed
has developed a SaaS-based learning analytics
capability, which evaluates the impact and
effectiveness of learning programmes, which is
a significant advance for the e-learning industry.
The acquisition of Rustici and our investment in
Watershed have substantially enhanced the Group’s
ability to capture rich data about the learner and
analyse and assess the impact of e-learning on
organisational performance.
plc Annual Report 2015 5
We are beginning to see the benefits of our blended
service strategy, through increasing take-up by our
customers. Our consultative and comprehensive
approach is driving organic growth and, with the
integration of our businesses and implementation
of best practice, we realised impressive increases in
profits and margins in 2015.
The success of our strategy was best exemplified by
the landmark deal announced in December 2015,
to design and develop a new learning architecture
and to create and deliver blended courses that
incorporate a combination of digital, informal
and classroom components for the entire UK Civil
Service, alongside our strategic partner KPMG UK
LLP. Civil Service Learning (‘CSL’) delivers learning
to more than 400,000 civil servants for whom we
are designing and developing blended learning
across 15 curriculum areas, from leadership and
management, diversity, EU practices, through to
project management and digital delivery. This
demonstrates the credibility and scale of LTG’s
offering and capabilities.
Dividend and Annual General Meeting
In light of the results for 2015 and to demonstrate
our confidence in the prospects for the Group in
2016, the Board is recommending an increased final
dividend of 0.10p per share (2014: 0.07p per share),
giving a total dividend for the year of 0.15p per share
(2014: 0.10p per share). This final dividend is subject
to shareholder approval at the forthcoming Annual
General Meeting to be held on 19 May 2016.
Board changes
I am delighted to announce that Peter Gordon will
join the Board as a Non-executive Director with effect
from 1 April 2016. Peter brings with him 20 years of
venture and private capital expertise at 3i Group
plc and over the past year has assisted LTG in the
successful acquisitions of Eukleia and Rustici.
Current trading and outlook
The Group has enjoyed a strong start to 2016 and is
trading in line with management’s expectations. We
expect the current financial year to benefit from a
healthy order book, increased sales resulting from
our compelling blended learning capability and
continuing strong margins. The acquisition of Rustici
and the investment in Watershed firmly places LTG at
the heart of a rapidly evolving e-learning industry.
The CSL contract will require a significant “up-front”
cash investment in 2016. The financial returns on
this investment are expected to begin accruing in
the second half of the current financial year with
substantial returns expected in 2017 and 2018.
The Board is therefore confident in the Group’s
prospects and expects to report further progress
during 2016.
If approved, the final dividend will be paid on 4 July
2016 to all shareholders on the register at 10 June
2016.
Andrew Brode
Chairman
People
The Group has enjoyed a transformational year
in which we have seen margins improve and the
benefits of our blended offering begin to have a
marked effect. This could not have been achieved
without the skill, passion and hard work of all of our
staff. On behalf of the Board, I would like to thank
them for their efforts during the year.
6
plc Annual Report 2015
MOVING LEARNING TO THE HEART OF BUSINESS STRATEGY
a comprehensive e-learning solution
learning
technologies
group
MOVING LEARNING TO THE HEART OF BUSINESS STRATEGY
a comprehensive e-learning solution
plc Annual Report 2015 7
Blended learning advisory
Strategic
Operational
Defining success
Personalisation
Subject matter expertise
C o n sultancy
Content
Bespoke
Generic
Video
Games with purpose
Virtual Reality (VR)
Augmented Reality (AR)
Face to face
Feedback
Learner
Company
Corporate initiatives
n
tio
c
A
C
r
e
a
t
i
o
n
A
n
alysis
e liv ery
D
Learner data
Analytics
Measurement
Platforms
PCs
Smartphones
Tablets
Portals
Localisation
Helpdesk
8
plc Annual Report 2015
STRATEGIC
REPORT
plc Annual Report 2015 9
STRATEGIC REPORT
For the year ended 31 December 2015
Financial results
During 2014, LTG made its first two acquisitions,
LINE Communications Holdings Limited (‘LINE’) and
Preloaded Limited (‘Preloaded’). On 31 July 2015, LTG
acquired Eukleia Training Limited (‘Eukleia’).
In the year ended 31 December 2015, the Group
generated revenue of £19.9 million (2014: £14.9
million), a 33% increase.
Adjusted EBITDA increased by 107% to £4.3
million (2014: £2.1 million). To provide a better
understanding of the underlying business
performance, adjusted EBITDA excludes the
amortisation of acquisition-related intangible assets,
the amortisation of internal capitalised development
costs, depreciation, share based payment charges
and other exceptional items.
£4.3m
£2.1m
£1.5m
2013
2014
2015
Significant increase in EBITDA
margin to 21% (2014: 14%)
Unadjusted
operating profit
increased by 441%
to £1.8 million (2014:
£0.3 million).
The implementation
of operational best
practice across
the Group, a
restructuring of the
delivery teams in the
second half of 2015 and increased economies of
scale contributed towards a significant improvement
in adjusted EBITDA margins in the year to 21% (2014:
14%).
On a like-for-like basis, as if the businesses that LTG
owned at the end of 2015 had been owned at the
end of 2014, the order book is broadly in line with the
prior year. The order book is defined as the value of
contracts won but not yet delivered. The Civil Service
Learning (CSL) multi-year contract win should add
substantially to the order book during 2016 and we
will update the market on this in due course.
The amortisation charge for acquisition-related
intangible assets was £1.2 million (2014: £0.6 million)
and is discussed further in Note 11. The amortisation
charge for internally generated development costs
was £0.2 million (2014: £0.1 million) and relates to
the development of ‘gomo’, the Group’s award-
winning multi-device authoring tool, various software
tools used within the Eukleia business and an
internally generated library of governance, risk and
compliance (‘GRC’) materials used to service clients.
The share-based payment charge increased from
£0.6 million in 2014 to £0.8 million in 2015. Further
details are provided in Note 22.
Integration costs of £0.1 million (2014: £0.3 million)
relate to restructuring costs following the acquisition
of Eukleia in July 2015.
Profit before tax was £1.5 million (2014: loss of £0.1
million) and adjusted profit before tax (see Note 9)
increased by 113% to £3.8 million in 2015 (2014: £1.8
million). Costs of acquisitions in 2015 were £0.2 million
(2014: £0.3 million) and finance charges related
to contingent consideration of the acquisitions of
Preloaded and Eukleia, were £0.2 million (2014: £0.2
million).
The income tax expense of £0.1 million in 2015 (2014:
£35,000) is stated after adjusting for the effect of
the release of deferred tax on the amortisation of
acquired intangibles and a deferred tax asset related
to the anticipated vesting of share options. Further
details are provided in Note 8.
On a statutory basis, basic earnings per share
(‘EPS’) increased to 0.382 pence (2014: loss of 0.049
pence). Based on the average number of shares
in issue and adjusted operating profit during the
year, adjusted basic EPS increased by 106% to
0.809 pence (2014: 0.393 pence). Further details are
provided in Note 9.
On 31 July 2015 the Group acquired 100% of the
issued share capital of Eukleia, a specialist provider
of governance, risk and compliance services to
the financial services sector. Initial consideration
10
plc Annual Report 2015
STRATEGIC REPORT (continued)
For the year ended 31 December 2015
comprised £6.8 million cash and £1.5 million in LTG
equity. A capped earn-out of up to £3.5 million
over 2 years is subject to demanding revenue
growth targets. Goodwill on acquisition has been
calculated at £4.6 million with acquisition-related
intangible assets of £4.7 million represented mainly
by customer relationships. Eukleia contributed £2.5
million revenue and £0.4 million profit before tax to
the Group in the final five months of 2015. Further
details of the acquisition are provided in Note 29.
EPS up
102%
Adjusted diluted EPS increases
to 0.756p (2014: 0.375p)
LTG partly funded its
acquisition of Eukleia
through the placing
of 35,714,286 shares
at 21 pence per
share, raising £7.5
million.
Subsequent to the
financial year end,
on 29 January
2016, LTG acquired Rustici, the global market leader
in digital learning interoperability, for an initial
consideration of USD 26.0 million of which USD 20.0
million was paid in cash and USD 6.0 million in newly
issued LTG shares at 29.19 pence per share. Further
performance based payments, capped at USD 11.0
million, are payable based on ambitious revenue
growth targets over the next 3 years. 80% of Rustici’s
current revenues are from recurring subscription fees.
LTG also acquired a 27.3% investment in Watershed,
the developer of the next generation learning
analytics platform, for USD 3.0 million. Further details
are provided in Note 30.
The Group has a strong balance sheet with
shareholders’ equity at 31 December 2015 of £25.5
million, equivalent to 6.3 pence per share (2014:
shareholders’ equity of £14.4 million, equivalent to
4.1 pence per share). The gross cash position at 31
December 2015 was £7.3 million (2014: £4.4 million).
The Group had no debt at 31 December 2015.
As a result of strong cash conversion, net cash
generated from operating activities was £4.0
million (2014: £0.9 million) and the operating cash
conversion rate (the percentage by which cash
generated from operations covers adjusted EBITDA)
was 105%. Corporation tax payments were £0.5
million (2014: £32,000). Cash outflows from investing
activities were £6.2 million (2014: £4.9 million) and
included £1.9 million in contingent consideration
payments to Preloaded vendors following the strong
performance of the company in 2014. Cash inflows
from financing activities were £5.1 million (2014: £7.2
million) and are stated after dividend payments
which increased to £0.4 million following a maiden
dividend payment of £0.1 million in 2014. Debtor
days were 64 days (2014: 49 days), reflecting the
extended payment terms agreed with some clients
but combined debtor and WIP days were 34 days
(2014: 34 days), following the implementation of
accelerated invoicing.
Dividend up
50%
On 3 March 2015 the
Group incorporated
Learning
Technologies
Group (Trustee)
Limited, a wholly
owned subsidiary
of Learning
Technologies Group
plc. The purpose
of the company is to act as an Employee Benefit
Trust (‘EBT’) for the benefit of current and previous
employees of the Group. At 31 December 2015
the EBT holds 404,340 ordinary shares in LTG. These
shares are held in treasury.
Proposed full year dividend
increased to 0.15p (2014: 0.10p)
Our strategy
LTG’s aim is to create a group of market-leading
businesses providing complementary services in
the fast growing learning technologies sector to
form an international business of size and scale that
is able to meet the demanding expectations of
corporate and government customers. This strategy
is being delivered through a mixture of ‘best in class’
acquisitions that will help us create a comprehensive
e-learning solution for our customers, as well as
through targeted investment in internally generated
intellectual property and the extension of best
working practices to deliver strong organic growth.
plc Annual Report 2015 11
We continue to pursue our strategy of helping
organisations adopt learning at a strategic level.
‘Moving learning to the heart of business strategy’ is
achieved through our end-to-end service offering
which enables us to partner with global clients
throughout the creation, implementation and
maintenance of their learning strategies. We deliver
transformational results through learning innovation
and the effective use of learning. However the
vital piece that has been missing is the ability to
accurately measure and assess the impact of
learning on the performance of an organisation’s
people.
This is similar to the challenge faced by the
marketing profession a decade ago, when they
began the measurement revolution which has
allowed marketeers to track individual responses to
campaigns through to eventual sale. We believe the
learning industry is at the same tipping point; finally
we are in the position where enough sufficiently
rich data about the learner can be captured
and assimilated to analyse and quantify the
organisational impact.
Our capabilities
LTG offers a wide range of learning solution
capabilities which enables us to offer a
comprehensive service to our customers. These
capabilities range from industry-leading strategic
consultants, through implementation advisory
services, bespoke e-learning content, Learning
Management Systems platform implementation and
management, to learning game design and cloud-
based authoring products.
LEO is the Group’s main operating business which
brings together these capabilities. During 2015,
the business restructured its operations to focus on
account management, bringing the most effective
solutions to its customers. Although LEO had some
tough comparatives from 2014 to beat, it delivered
impressive margin improvements in the year.
The Group’s increased breadth of offering enabled
LEO to provide more comprehensive solutions to
its customers and to help position the Group as a
strategic partner to its clients, helping them realise
their strategic ambitions from base principles all
the way through to compelling blended learning
solutions. The CSL contract win in December 2015
highlighted LEO’s thought leadership and wholly
scalable e-learning solutions for large corporates
and government.
‘Gamification’ or more particularly games with
purpose, is one of many exciting developments
in the e-learning industry. LTG is at the forefront of
this development through its BAFTA award-winning
business, Preloaded.
Preloaded had an exceptional year delivering
learning game solutions to the British Museum and
MyCognition. In October 2015, Preloaded finished
the development of a learning application for
McDonalds. This game was successfully launched
in 42 countries across Europe and has achieved
phenomenal take-up and retention rates. We are
continuing to build on this work in 2016. Preloaded
has seen early success in 2016 in diversifying its client
base and leveraging the wider LTG network.
LTG’s cloud-based multi device authoring tool,
gomo, made good progress in 2015, following
the launch of gomo 3.0 in March. gomo won the
prestigious 2015 Brandon Hall Gold Award for the Best
Advance in Content Authoring Technology. The SaaS
tool enables a variety of users, from single authors
to large multi-national enterprise solution clients,
to collaborate and publish rich and compelling
learning content to a variety of platforms (including
PCs, tablets and smartphones) in real-time. Clients
include Nike, United Healthcare and J.P.Morgan and
we are seeing strong retention rates as clients renew
their annual licences.
Alongside expanding LTG’s functional capabilities,
which are applied across a wide variety of markets,
LTG is also looking to invest in specific sector
specialisms, particularly in more regulated markets
such as pharmaceuticals, healthcare and resources.
The acquisition of Eukleia in July 2015 was the
Group’s first move into subject-matter specialism –
Governance, Risk and Compliance (GRC). Eukleia
is an industry leader in the GRC space specialising
in the financial services sector. The integration of
Eukleia is already complete and the business is
operating to plan.
The acquisition of Rustici and investment in
Watershed post year end in January 2016 has moved
LTG to the heart of the e-learning industry. Rustici is
the acknowledged global leader in SCORM, the de
12
plc Annual Report 2015
STRATEGIC REPORT (continued)
For the year ended 31 December 2015
facto industry standard for e-learning interoperability,
enabling online learning content and learning
management systems to communicate and work
together. As the global market leader, Rustici was
asked by Advanced Distributed Learning, a US
government body, to lead the industry in creating the
next generation of learning interoperability standards.
It created a global standard to capture rich data on
every aspect of learning experiences - xAPI.
Watershed focuses on developing learning analytics
that provide actionable insights to customers who
want to adapt their learning strategy, creating
more effective learning experiences and ultimately
generating verifiable business results. We view the
ability to measure the impact of learning as the next
major disruption in the learning profession and LTG is
placed in the vanguard of this crucial change.
LTG is also looking to develop its capabilities, in
particular through the ability to further personalise the
learning experience, through more social learning
environments and technology advances such as
augmented reality.
Our market sectors
Through its established operating companies LTG has
extensive experience in a variety of market sectors.
These include the Defence sector where during 2015,
LEO continue its support of the Defence Learning
Environment, Virtual Task Trainer and redesigned and
delivered a Chief Petty Officer training programme.
In the Automotive sector, LEO has produced mobile
delivered sales enablement tools to teach staff and
support customers on the new Jaguar Land Rover
range, and create product launch training for Volvo.
LEO’s expertise across government is extensive.
In addition to the transformational contract that
was won with CSL in December 2015, building on
long-standing relationships going back to 2011,
LEO has undertaken projects for the Department
for Education, National Health Service, and the
Department for Work & Pensions.
LEO has a growing presence in the FMCG and luxury
goods markets with Mars, Anheuser-Busch, L’Oreal
and IwC amongst LEO’s clients. In addition the
infrastructure and transport industry sector business
remains buoyant with HS2, Brambles and British
Airways leveraging LEO’s extensive expertise.
The Group has strengthened its presence in the
financial services sector through the acquisition
of Eukleia. Alongside Eukleia’s specialist bespoke
content services, the company offers blended
learning solutions such as generic content and
instructor-led training given by industry-leading
experts. Clients include HSBC, Barclays and
Deutsche Bank. The company is looking to extend its
compliance offering into other industry sectors and
in the past few months has won contracts with clients
such as Novartis and Brambles to deliver anti-bribery
and code of conduct training.
LTG is seeking opportunities to strengthen its position
in other market sectors, including retail, media and
pharmaceuticals.
Our international
reach
£19.9m
£7.6m
£14.9m
With offices in
London, Brighton and
Sheffield, LTG is the
leading e-learning
business in the UK
and through its office
in Zurich LTG is able
to service clients
throughout Europe.
LEO has also set up operations in North and South
America.
Revenues increased by 33%
in 2015
2014
2015
2013
LEO Learning Inc was established in New York in 2012.
After a successful 2014, the company had a slow
start to 2015. Following the appointment of a new
Senior Vice President in March 2015, the company
has seen impressive growth with new clients such as
Amazon, SAP and Anheuser-Busch. In November,
the company opened an office in Bloomington,
Indiana to provide a new production facility, and with
plc Annual Report 2015 13
the acquisition of Rustici in Nashville, Tennessee, the
Group is further cementing its position in the world’s
largest e-learning market – the US.
In 2011, LEO established a joint venture in Brazil, LEO
Brazil. The JV has had success in winning projects
with Brazilian firms such as Instituto Unibanco and
Unicarioca, as well as the local operations of a
number of multi-nationals including TIM, Shell and
Coca-Cola. Headquartered in Rio de Janeiro, the
company had a particularly strong sales year, and
our production investment programme in the first
half of the year had a marked impact on improving
margins in the second half of the year. The
company continues to invest in sales and marketing
in order to grow the top line and opened a second
sales office in Sao Paulo.
Over the medium term, LTG is focused on
strengthening its presence in the US and European
markets and on leveraging its industry-leading
capabilities for the benefit of its global clients.
Key Performance Indicators
The Key Performance Indicators (‘KPIs’) are sales, profit
and cash flow. The sales of the business are tracked
through the Order Book (unworked contracted sales).
Profitability of the business, with its relatively low
fixed-cost base, is managed primarily via the review
of revenue with secondary measures of consultant
utilisation and monthly project margin reviews.
Working capital is reviewed by measures of debtor
days and combined debtor and WIP days.
Principal risks and uncertainties
In addition to the financial risks discussed in Note
27, the Directors consider that the principal risks and
uncertainties facing the Group and a summary of
the key measures taken to mitigate those risks are as
follows:
Potential downturn in the market for outsourced
e-learning services
LTG is dependent on the market for outsourced
e-learning services. An economic downturn or
instability may cause customers to delay or cancel
e-learning development projects and/or related
services, or to use internal resources to achieve their
business goals.
The Group seeks to mitigate this risk by diversifying
exposure across geographical markets, increasing
the number of market sectors in which the Group
operates, diversifying the type of customers with
whom the Group operates, increasing the range
of service offerings that the Group provides and
marketing activities to inform current and prospective
customers about the benefits of outsourced
e-learning services and LTG’s proven ability to fulfil
those objectives.
Attracting and retaining talented staff
LTG is a market leader and we will ensure that
all our operating companies are regarded as
excellent employers within the e-learning industry.
We benchmark ourselves against our peers regularly
and are satisfied we offer competitive salaries and
outstanding personal development opportunities
that are further enhanced by LTG’s ambitious growth
plans. We have been successful in recruiting and
retaining high calibre staff. However we recognise we
must continue our focus as competition for talented
people intensifies within the learning technologies
sector.
Project overruns
Projects may overrun and/or may fail to meet
specified milestones. The majority of LTG’s projects
are contracted on a fixed price basis. Project
overruns can lead to loss of margin on projects and
overall profitability for the Group.
The Group seeks to mitigate this risk by operating a
formal bid review process, incorporating appropriate
risk premiums into agreements if appropriate,
conducting regular project reviews to assess whether
the revenue recognised on work-in-progress is a
fair representation of actual costs incurred and
estimated costs to completion, and management
meetings with clients to review progress on projects.
Reputational risk
Failings in service provision are almost certainly
going to be caused by human error. LTG has refined
its ISO 9001 management processes over the last
two decades and constantly reviews and updates
them based on ‘lessons learned’. Furthermore, all
projects are reviewed regularly for performance
against customer expectation, delivery milestones
and forecast margins. Extensive work is undertaken in
14
plc Annual Report 2015
STRATEGIC REPORT (continued)
For the year ended 31 December 2015
reviewing customer feedback and any complaints
are reported to the Board.
Integrating acquisitions
LTG aims to grow its businesses organically
but also consolidate the sector by selective
acquisitions of high quality companies. The
challenge is to integrate them into the Group,
which may require merging them with existing
operations, without losing key staff or customers.
LTG seeks to structure purchase terms to incentivise
and retain key staff and ensure that customers
receive the ‘first-class customer experience’ that is
already a fundamental aspect of LTG’s success.
In addition to the principal risks and uncertainties
above, the Group faces other risks that include but
are not limited to:
• Increased competition
• Failure to retain customer contracts
• Customer concentration
• Technology leadership
• Counterparty risk
Corporate responsibility
LTG takes its responsibilities as a corporate citizen
seriously. The Board’s primary goal is to create
shareholder value but in a responsible way which
serves all stakeholders. Furthermore, LTG seeks to
continually enhance and extend its contribution
to society through the work the Group undertakes
with its clients and in areas where the Group
decides to invest and explore directly.
Governance
The Board considers sound governance as
a critical component of LTG’s success and
the highest priority. LTG has an effective and
engaged Board, with a strong non-executive
presence from diverse backgrounds, and well-
functioning governance committees. Through
the Group’s compensation policies and variable
components of employee remuneration, the
Remuneration Committee of the Board seeks to
ensure that the company’s values are reinforced
in employee behaviour and that effective risk
management is promoted.
More information on our corporate governance
can be found on page 23.
Employees and their development
LTG is dependent upon the qualities and skills
of its employees, and the commitment of its
people plays a major role in the Group’s business
success. The Group invests in training and
developing its staff through internally arranged
knowledge sharing events and through external
courses.
Employees’ performance is aligned to the
Group’s goals through an annual performance
review process and via LTG’s incentive
programmes. LTG provides employees with
information about its activities through regular
briefings and other media. LTG operates a
number of bonus and sales commission
schemes, share option schemes and a
Sharesave scheme operated at the discretion of
the Remuneration Committee.
Diversity and inclusion
LTG’s employment policies are non-
discriminatory on the grounds of age,
gender, nationality, ethnic or racial origin,
non-job-related-disability, sexual orientation
or marital status. LTG gives due consideration
to all applications and provides training and
the opportunity for career development
wherever possible. The Board does not support
discrimination of any form, positive or negative,
and all appointments are based solely on merit.
plc Annual Report 2015 15
Health and Safety
Environment
LTG’s policy with regard to the environment is to
ensure that we understand and effectively manage
the actual and potential environmental impact of
our activities. The Group’s operations are conducted
such that compliance is maintained with legal
requirements relating to the environment in areas
where the Group conducts its business. During the
period covered by this report LTG has not incurred
any fines or penalties or been investigated for any
breach of environmental regulations.
Jonathan Satchell
Chief Executive Officer
LTG endeavours to ensure that the working
environment is safe and conducive to healthy, safe
and content employees who are able to balance
work and family commitments. The Group has a
Health and Safety at Work policy which is reviewed
regularly by the Board. The Board Executive Director
responsible for health and safety is the COO. The
Group is committed to the health and safety of its
employees, clients, sub-contractors and others who
may be affected by the Group’s work activities. The
Group evaluates the risks to health and safety in the
business and manages this through a Health and
Safety Management System. The Group provides
necessary information, instruction, training and
supervision to ensure that employees are able to
discharge their duties effectively. The Health and
Safety Management System used by the Group
ensures compliance with all applicable legal and
regulatory requirements and internal standards and
seeks by continuous improvement to develop health
and safety performance.
Community activities
LTG operates a Corporate Social Responsibility
agenda that encourages employees to be involved
in their local communities. In 2015 the Group
supported charitable activities by staff which raised a
total of £5,000 (2014: £5,000) and made charitable
contributions totalling £29,000 during the year (2014:
£14,000).
The Group has, with other leading companies in the
industry, set up an industry-wide charity foundation,
Learn Appeal (www.learnappeal.com) and is an
active contributor to its activities. Learn Appeal has
developed the ‘Learn Appeal Capsule’, a standalone
unit that includes a Raspberry Pi2 computer and SD
card. With a content library, LMS and Wi-Fi with up to
1km range, the device can be used in remote areas
without internet connectivity to allow up to 250 users
to simultaneously access learning materials.
16
plc Annual Report 2015
DIRECTORS’
REPORT
plc Annual Report 2015 17
DIRECTORS’ REPORT
For the year ended 31 December 2015
The Directors present their report on the Group, together with the audited
Consolidated Financial Statements for the year ended 31 December 2015.
Principal activities
Business review and future developments
The principal activity of the Group is the provision
of e-learning services. The principal activity of the
Company is that of a parent holding company
which manages the Group’s strategic direction and
underlying subsidiaries.
Details of the business activities and acquisitions
made during the year can be found in the Strategic
Report on pages 9 to 15 and in Note 29 to the
Consolidated Financial Statements respectively.
Cautionary statement
The review of the business and its future development
in the Strategic Report has been prepared solely to
provide additional information to shareholders to
assess the Group’s strategies and the potential for
these strategies to succeed. It should not be relied
on by any other party for any other purpose. The
review contains forward-looking statements which
are made by the Directors in good faith based on
information available to them up to the time of the
approval of the reports and should be treated with
caution due to the inherent uncertainties associated
with such statements.
Results and dividends
The results of the Group are set out in detail on
page 34.
At the time of LTG’s admission to AIM in November
2013, the Board stated that they would pursue a
progressive dividend policy. On 30 October 2015, the
Company paid an interim dividend of 0.05 pence
per share (2014: 0.03 pence per share). The Directors
propose to pay a final dividend of 0.10 pence
per share for the year ended 31 December 2015,
equating to a total payout in respect of the year of
0.15 pence per share (2014: 0.10 pence per share).
Subject to shareholder approval at the Annual
General Meeting, the final dividend will be paid on
4 July 2016 to all shareholders on the register at 10
June 2016.
Political donations
The Group made no political donations during the
year (2014: nil).
Financial instruments and risk management
Disclosures regarding financial instruments are
provided within the Strategic Report and Note 27 to
the Financial Statements.
Capital Structure
Details of the Company’s share capital, together with
details of the movements therein are set out in Note
21 to the Financial Statements. The Company has
one class of ordinary share which carries no right to
fixed income.
Research and development
The main area of research and development has
been the continued work on the gomo multi-device
authoring tool as covered in the Strategic Report on
pages 9 to 15.
Post balance sheet events
Details of post balance sheet events can be found in
Note 30 to the Consolidated Financial Statements.
18
plc Annual Report 2015
DIRECTORS’ REPORT (continued)
For the year ended 31 December 2015
Directors
The Directors of the Company who served during the year were:
Director
Andrew Brode †
Harry Hill †
Non-executive
Chairman
Non-executive Deputy
Chairman
22/05/2014
22/05/2014
Leslie-Ann Reed
Non-executive Director
21/05/2015
Jonathan Satchell
Chief Executive Officer
21/05/2015
Neil Elton
Piers Lea
Group Finance Director
21/05/2015
Chief Strategy Officer
21/05/2015
Dale Solomon
Chief Operating Officer
21/05/2015
Board Committee abbreviations are as follows:
A = Audit Committee; R = Remuneration Committee
†
Retires by rotation and will offer himself for
re-election at next AGM
Role at 31
December 2015
Date of
(re-) appointment
Retired
Board Committee
R
R
A
A
Board of Directors
plc Annual Report 2015 19
Andrew Brode
Non-executive Chairman
Andrew Brode is a Chartered Accountant and was a former
chief executive of Wolters Kluwer (UK) plc from 1978 to 1990.
In 1990, he led the management buy-out of the Eclipse
Group, which was sold to Reed Elsevier in 2000. In 1995, he
led the management buy-in, and is Executive Chairman
of RWS Group plc, Europe’s largest technical translations
group, listed in the Top 30 of AIM companies.
He is also Non-Executive Director of AIM quoted Electric
Word plc and a number of private equity-financed media
companies. He acquired Epic Group Limited (‘Epic’)
together with Jonathan Satchell (Chief Executive) in 2008.
Andrew Brode is the Chair of the Remuneration Committee
and a member of the Audit Committee of LTG.
Harry Hill
Non-executive Deputy Chairman
Harry Hill was Chief Executive Officer of Countrywide plc for 20
years until 2008. During his tenure at Countrywide, it founded and
subsequently sold Chesnara plc and Rightmove plc. He was also
responsible for forming Countrywide Property Lawyers, which was
established to take advantage of conveyancing referrals from
within the estate agency chain. His current directorships include
Landwood Property Group and Hunters and Clarke Hillyer. He is
also a trustee of Launch 22, a Shoreditch-based charity seeking
to help young entrepreneurs.
Harry Hill is on the Remuneration Committee of LTG.
Jonathan Satchell
Chief Executive Officer
Jonathan Satchell is responsible for the overall strategic development of LTG
with a particular focus on innovation and international opportunities. He has a
strong sales and entrepreneurial background, having started his first business
in 1992 selling subscriptions for Accountancy TV, a joint venture of the Institute
of Chartered Accountants in England and Wales and the BBC which created
continued professional development content for training programmes. He has
been involved in the education and training industry ever since, acquiring EBC
in 1997, which he helped to transform from a provider of training videos to a
bespoke e-learning company. The company was sold to Futuremedia in 2006.
He became interim Managing Director of Epic in 2007 and the following year
he purchased the Company with Andrew Brode. Jonathan Satchell oversaw
the transformation of Epic from a custom content e-learning company to an
international and growing learning technologies agency.
20
plc Annual Report 2015
DIRECTORS’ REPORT (continued)
For the year ended 31 December 2015
Leslie-Ann Reed
Non-executive Director
Neil Elton
Group Finance Director
Leslie-Ann Reed was appointed Chief Financial Officer of Go
Industry Dovebid plc in 2010 until July 2012 when the business
was sold to Liquidity Services Inc. Prior to this, she served as
Chief Financial Officer of Metal Bulletin plc and as an adviser
to Marwyn Investment Management. She has extensive
international experience in the media industry having served
as Chief Financial Officer of PolyGram Film Operations and
also worked at Warner Communications and EMI. She qualified
as a Chartered Accountant with Cocke, Vellacot & Hill before
moving to Arthur Andersen to continue to develop her financial
management expertise.
Leslie-Ann Reed is the Chair of the Audit Committee of LTG.
Neil Elton is a Chartered Accountant and was appointed
as Group Finance Director of LTG in 2014. An experienced
listed company Finance Director, he has worked with and
successfully built a number of fast-growing companies.
He joined from Sagentia Group plc, a Cambridge-based
technology research and development company, where
he was Group Finance Director from 2010 to 2014. Between
2007 and 2010, he was Finance Director at Concateno plc,
Europe’s largest tester of drugs of abuse. Prior to Concateno
he was Finance Director at Mecom Group plc, an acquisitive
AIM listed European media group. During the earlier part of
his career Neil Elton worked at Trinity Mirror plc and trained at
Arthur Andersen and Deloitte & Touche.
Piers Lea
Chief Strategy Officer
Dale Solomon
Chief Operating Officer
Piers Lea founded LINE Communications Holdings Limited in 1989,
which was acquired by LTG in April 2014. He has over 30 years’
experience in distance learning and communications and is
widely considered a thought leader in the field of e-learning. Piers
Lea continues to aid clients in achieving results through the use of
learning technologies.
Dale Solomon was appointed Commercial Director of Epic in
2010. Prior to this, he spent 12 years as a learning consultant
working with global organisations to help them achieve
measurable return on investment. Dale Solomon was instrumental
in the successful opening of the company’s first international
offices in Rio de Janeiro and New York in 2011 and 2012
respectively. He became Chief Operating Officer of LTG following
the creation of LEO in 2014. He is now responsible for overseeing
central support functions of the Group, including Sales, Marketing,
Bid, IT & Facilities, Human Resources and Quality as well as the
operations of LEO.
plc Annual Report 2015 21
Directors’ interests in shares and contracts
Directors’ interests in the shares of LTG at 31
December 2015 and 31 December 2014, and any
changes subsequent to 31 December 2015, are
disclosed in Note 7. Directors’ interests in contracts
of significance to which LTG was a party during the
financial year are disclosed in Note 25.
Substantial interests
As at the date of this report, LTG has been advised of the following significant interests (greater than 3%) in its
ordinary share capital:
Shareholder
Andrew Brode
Jonathan Satchell
Liontrust Asset Management
Hargreave Hale
Piers Lea
Vasconcelos family
Nigel Wray
Ordinary Shares held
113,215,005
105,289,995
26,626,008
20,481,923
17,023,383
13,250,000
12,668,214
% held
27.19%
25.29%
6.40%
4.92%
4.09%
3.18%
3.04%
Except as referred to above, the Directors are not aware of any person who held an interest of 3% or more of the
issued share capital of the company or could directly or indirectly, jointly or severally, exercise control.
22
plc Annual Report 2015
DIRECTORS’ REPORT (continued)
For the year ended 31 December 2015
Annual General Meeting
The Annual General Meeting (‘AGM’) will be held
at 2pm on 19 May 2016 at DWF LLP, 20 Fenchurch
Street, London, EC3M 4AD. The notice of the
AGM contains the full text of the resolutions to be
proposed.
Independent auditors
In accordance with Section 489 of the Companies
Act 2006, a resolution proposing that Crowe Clark
Whitehill LLP be re-appointed will be proposed at the
Annual General Meeting.
Provision of information to auditors
Each of the persons who are Directors at the
time when this Directors’ Report is approved has
confirmed that:
• So far as that Director is aware, there is no relevant
audit information of which the Company’s
auditors are unaware, and
• That Director has taken all the steps that ought
to have been taken as a Director in order to
be aware of any information needed by the
Company’s auditors in connection with preparing
their report and to establish that the Company’s
auditors are aware of that information.
Signed by order of the Board
Neil Elton
Group Finance Director
29 March 2016
plc Annual Report 2015 23
CORPORATE GOVERNANCE REPORT
The Company is registered in England and Wales and listed on the Alternative
Investment Market of the London Stock Exchange (‘AIM’).
Statement about applying the principle of
the QCA Guidelines
The Board recognises the value of good governance
and attempts to comply with the best practice
outlined in the QCA guidelines wherever possible
given the size and nature of the company.
The Company has adopted a share dealing code
for the Board and employees of the Company
which is in conformity with the requirements of Rule
21 of the AIM Rules for Companies. The Company
takes steps to ensure compliance by the Board and
applicable employees with the terms of such code.
Board of Directors
The Board is responsible for formulating, reviewing
and approving the Group’s strategy, budgets and
corporate actions. The Board holds Board meetings
at least ten times a year and at other times as and
when required.
Biographical details of the Directors are included on
page 19 and 20.
At 31 December 2015, the Board comprised a Non-
executive Chairman, Chief Executive, Group Finance
Director, Chief Strategy Officer, Chief Operating
Officer and two independent Non-executive
Directors. All Directors bring a wide range of skills
and international experience to the Board. The
Non-executive Directors hold meetings without the
executive Directors present. The Chairman is primarily
responsible for the working of the Board of LTG. The
Chief Executive is primarily responsible for the running
of the business and implementation of the Board
strategy and policy. The Chief Executive is assisted
in the managing of the business on a day-to-day
basis by the Managing Directors of the operating
businesses, the Group Finance Director and the
Executive team of LTG.
High-level strategic decisions are discussed and
taken by the full Board. Investment decisions (above
a de minimis level) are taken by the full Board.
Operational decisions are taken by the Managing
Directors within the framework approved in the
annual financial plan and within a framework of
Board-approved authorisation levels.
The Board met fourteen times during 2015 (2014:
10). The Board regulations define a framework of
high-level authorities that maps the structure of
delegation below Board level, as well as specifying
issues which remain within the Board’s preserve. The
Board typically meets ten times a year to consider a
formal schedule of matters including the operating
performance of the business and to review LTG’s
financial plan and business model. Non-executive
Directors are appointed for a three-year term after
which their appointment may be extended by
mutual agreement after due consideration by the
Board.
In accordance with the Company’s Articles of
Association, the longest serving Director must retire
at each Annual General Meeting and each Director
must retire in any three-year period, so that over
a three year period all Directors will have retired
from the Board and been subject to shareholder
re-election. All Directors have access to the advice
and services of the Company Secretary and other
independent professional advisers as required. Non-
executive Directors have access to key members
of staff and are entitled to attend management
meetings in order to familiarise themselves with all
aspects of LTG.
It is the responsibility of the Chairman and the
Company Secretary to ensure that Board members
receive sufficient and timely information regarding
corporate and business issues to enable them to
discharge their duties.
24
plc Annual Report 2015
CORPORATE GOVERNANCE REPORT (continued)
For the year ended 31 December 2015
Relations with shareholders
Board committees
The Board maintains two standing committees,
being the Audit and Remuneration Committees.
The minutes of all sub-committees are circulated for
review and consideration by all relevant Directors,
supplemented by oral reports from the Committee
Chairmen at Board meetings.
Audit Committee
The Audit Committee is chaired by Leslie-Ann Reed
and currently comprises Leslie-Ann Reed and Andrew
Brode. The Audit Committee met three times during
2015 (2014: 3). Further details on the Audit Committee
are provided in the Report of the Audit Committee.
Remuneration Committee
The Remuneration Committee is chaired by
Andrew Brode and also comprises Harry Hill. The
Remuneration Committee met once during 2015
(2014: 1). Further details on the Remuneration
Committee are provided in the Report of the
Remuneration Committee.
The Directors seek to build on a mutual
understanding of objectives between LTG and its
major shareholders by meeting to discuss long-
term issues and receive feedback, communicating
regularly throughout the year and issuing trading
updates as appropriate. The Board also seeks to use
the Annual General Meeting to communicate with its
shareholders.
Balanced and understandable assessment
of position and prospects
The Board has shown its commitment to presenting
balanced and understandable assessments of LTG’s
position and prospects by providing comprehensive
disclosures within the Financial Report in relation to
its activities. The Board has applied the principles of
good governance relating to Directors’ remuneration
as described below. The Board has determined
that there are no specific issues which need to be
brought to the attention of shareholders.
Remuneration strategy
LTG operates in a competitive market. If LTG is to
compete successfully, it is essential that it attracts,
develops and retains high quality staff. Remuneration
policy has an important part to play in achieving this
objective. LTG aims to offer its staff a remuneration
package which is both competitive in the relevant
employment market and which reflects individual
performance and contribution. For 2015 the
remuneration package comprised salary, pension
contributions, bonus or sales commission schemes,
a Sharesave scheme and, where appropriate, share
options.
plc Annual Report 2015 25
Meetings of the Board and sub-committees during 2015 were as follows:
Board meetings
Audit Committee
Remuneration
Committee
Number of meetings held in 2015
Andrew Brode
Harry Hill
Jonathan Satchell
Neil Elton
Piers Lea
Dale Solomon
Leslie-Ann Reed
*Attendance by invitation
14
14/14
14/14
14/14
14/14
13/14
13/14
14/14
3
3/3
1/1*
3/3*
3/3*
1/1*
1/1*
3/3
1
1/1
1/1
1/1*
-
-
-
-
26
plc Annual Report 2015
REPORT OF THE AUDIT COMMITTEE
Audit Committee
The Audit Committee is chaired by Leslie-Ann Reed
and currently comprises Leslie-Ann Reed and Andrew
Brode. The Audit Committee has written terms of
reference and provides a mechanism through which
the Board can maintain the integrity of the Financial
Statements of LTG and any formal announcements
relating to LTG’s financial performance; to review
LTG’s internal financial controls and LTG’s internal
control and risk management systems; and to
make recommendations to the Board in relation
to the appointment of the external auditor, their
remuneration both for audit and non-audit work, the
nature, scope and results of the audit and the cost
effectiveness and the independence and objectivity
of the auditors. A recommendation regarding the
auditors is put to shareholders for their approval in
general meetings.
Provision is made by the Audit Committee to meet
the auditors at least twice a year.
Internal controls
In applying the principle that the Board should
maintain a sound system of internal control to
safeguard shareholders’ investment and LTG’s
assets, the Directors recognise that they have
overall responsibility for ensuring that LTG maintains
systems to provide them with reasonable assurance
regarding effective and efficient operations, internal
control and compliance with laws and regulations
and for reviewing the effectiveness of that system.
However, there are inherent limitations in any system
of control and accordingly even the most effective
system can provide only reasonable and not
absolute assurance against material mis-statement
or loss, and that the system is designed to manage
rather than eliminate the risk of failure to achieve the
business objectives.
LTG has established procedures for the running of
the Audit Committee. This includes identification,
categorisation and prioritisation of critical risks within
the business and allocation of responsibility to its
Executives and senior managers. The key features of
the internal control system are described below:
Control environment – LTG is committed to high
standards of business conduct and seeks to maintain
these standards across all of its operations. There
are also policies in place for the reporting and
resolution of suspected fraudulent activities. LTG has
an appropriate organisational structure for planning,
executing, controlling and monitoring business
operations in order to achieve its objectives.
Risk identification – management is responsible
for the identification and evaluation of key risks
applicable to their areas of business. These risks
are assessed on a continual basis and may be
associated with a variety of internal and external
sources, including infringement of IP, sales
channels, investment risk, staff retention, disruption
in information systems, natural catastrophe and
regulatory requirements.
Information systems – Group businesses participate
in periodic operational/strategic reviews and annual
plans. The Board actively monitors performance
against plan. Forecasts and operational results
are consolidated and presented to the Board
on a regular basis. Through these mechanisms,
performance is continually monitored, risks identified
in a timely manner, their financial implications
assessed, control procedures re-evaluated and
corrective actions agreed and implemented.
Main control procedures – LTG has implemented
control procedures designed to ensure complete
and accurate accounting for financial transactions
and to limit the exposure to loss of assets and fraud.
Measures taken include segregation of duties and
reviews by management.
plc Annual Report 2015 27
Monitoring and corrective action – there are clear
and consistent procedures in place for monitoring
the system of internal financial controls.
This process, which operates in accordance with
the FRC guidance, was maintained throughout the
financial year, and has remained in place up to the
date of the approval of these Financial Statements.
The Board, via the Audit Committee, has reviewed
the systems and processes in place in meetings
with the Finance Director and LTG’s auditors during
2015. No internal audit function is operated outside
of the systems and processes in place, as the
Board considers that LTG is too small for a separate
function. The Board considers the internal control
system to be adequate for LTG. The auditors have
provided services in relation to the annual audit of
the Group, advice and compliance work in relation
to taxation, transaction services and other advisory
work during the year. The Audit Committee reviews
the scope and scale of the non-audit services
undertaken by the auditors in order to ensure that
their independence and objectivity is safeguarded.
28
plc Annual Report 2015
REPORT OF THE REMUNERATION COMMITTEE
Remuneration Committee
The Committee, which is chaired by Andrew Brode,
also comprises Harry Hill.
The Remuneration Committee monitors the
remuneration policies of LTG to ensure that they
are consistent with LTG’s business objectives. Its
terms of reference include the recommendation
and execution of policy on Director and Executive
management remuneration and for reporting
decisions made to the Board. The Committee
determines the individual remuneration package
of the executive management of the Board. In
accordance with ‘best practice’, this responsibility
includes pension rights and any other compensation
payments.
The Remuneration Committee recognises that
incentivisation of staff is a key issue for LTG, which
depends on the skill of its people for its success.
The Remuneration Committee seeks to incentivise
employees by linking individual remuneration to
individual performance and contribution, and to LTG
results. During the year the Remuneration Committee
approved grants of share options and confirmed a
number of KPI-related bonus schemes for the Group
for 2015.
The aim of the Board and the Remuneration
Committee is to maintain a policy that:
• Establishes a remuneration structure that will
attract, retain and motivate Executives, senior
managers and other staff of appropriate calibre;
• Rewards Executives and senior managers
according to both individual and Group
performance;
• Establishes an appropriate balance between
fixed and variable elements of total remuneration,
with the performance-related element forming
a potentially significant proportion of the total
remuneration package;
• Aligns the interests of Executives and senior
managers with those of shareholders through the
use of performance-related rewards and share
options in LTG.
From time to time the Committee may obtain market
data and information as appropriate when making
its comparisons and decisions and is sensitive to the
wider perspective, including pay and employment
conditions elsewhere in LTG, especially when
undertaking salary/remuneration reviews.
The remuneration package comprises the following
elements:
• Basic salary – normally reviewed annually
and set to reflect market conditions, personal
performance and benchmarks in comparable
companies. The Chairman does not receive a
basic salary;
• Annual performance-related bonus – executives,
managers and employees receive annual
bonuses related to specific KPIs or overall Group
performance. The Non-executive Directors do not
participate in the performance-related bonus
scheme;
• Benefits – benefits include life assurance and
pension contributions. The Non-executive Directors
do not receive these benefits;
• Share options – share option grants are reviewed
regularly.
Full details of each Director’s remuneration package
and their interests in shares and share options can
be found in Note 7 to the Financial Statements. There
are no elements of remuneration, other than basic
earnings, which are treated as being pensionable.
plc Annual Report 2015 29
Service contracts
The Executive Directors have employment contracts
that contain notice periods of six months. Non-
executive Directors’ service contracts may be
terminated on three months’ notice. There are no
additional financial provisions for termination.
Share option plans
The Company operates three long-term equity
incentive plans:
• EMI share option plan
• Unapproved share option plan
• Sharesave Scheme
Further details are provided in Note 22.
The market price of the shares at 31 December 2015
was 30.25 pence (31 December 2014: 21.25 pence).
The highest and lowest price during the year was
31.00 pence and 19.00 pence respectively.
plc Annual Report 2015 30
DIRECTORS’
RESPONSIBILITIES
STATEMENT
plc Annual Report 2015 31
DIRECTORS’ RESPONSIBILITIES STATEMENT IN RESPECT OF THE ANNUAL
REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Strategic Report, the Directors’
Report, Annual Report and the Group and parent Company Financial Statements
in accordance with applicable law and regulations.
Group and hence for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.
They are further responsible for ensuring that the
Strategic Report and the Directors’ Report and other
information included in the Annual Report and
Financial Statements is prepared in accordance with
applicable law in the United Kingdom.
The maintenance and integrity of the Learning
Technologies Group plc website is the responsibility
of the Directors; the work carried out by the auditors
does not involve the consideration of these
matters and, accordingly, the auditors accept
no responsibility for any changes that may have
occurred in the accounts since they were initially
presented on the website.
Legislation in the United Kingdom governing the
preparation and dissemination of the accounts and
the other information included in Annual Reports may
differ from legislation in other jurisdictions.
Company law requires the Directors to prepare
Financial Statements for each financial year. Under
that law the Directors have elected to prepare
the Financial Statements in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the EU and applicable law. The Directors
must not approve the Financial Statements unless
they are satisfied that they give a true and fair view
of the state of affairs of the Group and Company
and of the profit or loss of the group for that period.
In preparing these Financial Statements, the Directors
are required to:
• Select suitable accounting policies and then
apply them consistently;
• Make judgements and accounting estimates that
are reasonable and prudent;
• State whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the
financial statements;
• Prepare the Financial Statements on the going
concern basis unless it is inappropriate to assume
that the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Company and the Group and
enable them to ensure that the Financial Statements
comply with the Companies Act 2006 and, as
regards the Group Financial Statements, Article 4
of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the
32
plc Annual Report 2015
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LEARNING
TECHNOLOGIES GROUP PLC
We have audited the financial statements of
Learning Technologies Group plc for the year
ended 31 December 2015 which comprise the
Consolidated Statement of Comprehensive Income,
the Consolidated and Parent Statement of Financial
Position, the Consolidated Statement of Cash Flows,
the Consolidated and Parent Statement of Changes
in Equity, and the related Notes to the Consolidated
Financial Statements numbered 1 to 30 and
numbered 1 to 15 for the Parent.
The financial reporting framework that has been
applied in the preparation of the group financial
statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted
by the European Union. The financial reporting
framework that has been applied in the preparation
of the Parent Company Financial Statements is
applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted
Accounting Practice).
This report is made solely to the Company’s
members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the
Company’s members those matters we are required
to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone
other than the Company and the Company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of Directors
and auditors
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for
the preparation of the financial statements and for
being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion
on the financial statements in accordance with
applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
Scope of the audit of the financial
Statements
An audit involves obtaining evidence about the
amounts and disclosures in the financial statements
sufficient to give reasonable assurance that
the financial statements are free from material
misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting
policies are appropriate to the Company’s
circumstances and have been consistently applied
and adequately disclosed; the reasonableness
of significant accounting estimates made by the
Directors; and the overall presentation of the financial
statements.
In addition, we read all the financial and non-
financial information in the Strategic Report and the
Directors’ Report and any other surround information
to identify material inconsistencies with the audited
financial statements and to identify any information
that is apparently materially incorrect based on,
or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit.
If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial Statements
In our opinion:
• the Financial Statements give a true and fair
view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2015 and
of the Group’s profit for the year then ended;
• the Group Financial Statements have been
properly prepared in accordance with IFRSs as
adopted by the European Union;
• the Parent Company Financial Statements have
been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
• the Financial Statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
plc Annual Report 2015 33
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion the information given in the Strategic
Report and the Directors’ Report for the financial year
for which the Financial Statements are prepared is
consistent with the Financial Statements.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
• adequate accounting records have not been
kept by the Parent Company, or returns adequate
for our audit have not been received from
branches not visited by us; or
• the Parent Company financials are not in
agreement with the accounting records and
returns; or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Richard Baker
Senior Statutory Auditor
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
29 March 2016
34
plc Annual Report 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
Year ended
31 Dec 2015
Year ended
31 Dec 2014
Revenue
Operating expenses
Share of losses of joint venture
Operating profit
Adjusted EBITDA
Depreciation
Amortisation of intangibles
Share-based payment costs
Integration costs
Operating profit
Fair value movement on contingent
consideration
Costs of acquisition
Finance expense
Interest receivable
Profit/(loss) before taxation
Income tax expense
Profit/(loss) for the year
Profit/(loss) per share attributable to owners of the Parent:
Basic, (pence)
Diluted, (pence)
Adjusted earnings per share:
Basic, (pence)
Diluted, (pence)
Profit/(loss) for the year
Note
4
12
10
11
22
29
5
5
5
8
9
9
9
9
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations
Total comprehensive income/(loss) for the year attributable to
owners of the parent Company
£’000
19,905
(18,075)
1,830
(62)
1,768
4,276
(214)
(1,419)
(776)
(99)
1,768
198
(234)
(195)
12
1,549
(120)
1,429
0.382
0.357
0.809
0.756
1,429
33
1,462
£’000
14,920
(14,433)
487
(160)
327
2,065
(171)
(659)
(583)
(325)
327
-
(296)
(162)
4
(127)
(35)
(162)
(0.049)
(0.049)
0.393
0.375
(162)
17
(145)
plc Annual Report 2015 35
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 Dec 2015
31 Dec 2014
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments
Current assets
Trade receivables
Other receivables, deposits and prepayments
Amounts recoverable on contracts
Cash and bank balances
Total assets
Current liabilities
Trade and other payables
Corporation tax
Amount owing to related parties
Non-current liabilities
Deferred tax liabilities
Other long-term liabilities
Provisions
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium account
Merger relief reserve
Reverse acquisition reserve
Share-based payment reserve
Foreign exchange translation reserve
Accumulated losses
Total equity attributable to the owners of the parent
Note
10
11
17
12
13
14
15
16
18
25
17
19
20
21
24
24
24
24
24
£’000
543
19,803
1,029
-
21,375
4,201
554
1,853
7,305
13,913
35,288
5,835
309
2
6,146
1,182
2,382
99
3,663
9,809
25,479
1,506
21,839
22,269
(22,933)
2,273
50
475
25,479
£’000
339
11,364
618
16
12,337
2,762
337
1,806
4,358
9,263
21,600
4,832
352
-
5,184
446
1,512
49
2,007
7,191
14,409
1,329
13,098
22,269
(22,933)
1,203
17
(574)
14,409
The Notes on pages 38 to 85 form an integral part of these Consolidated Financial Statements.
The Financial Statements on pages 34 to 85 were approved by the Board of Directors on 29 March 2016 and signed on its behalf
by Neil Elton, Group Finance Director.
36
plc Annual Report 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
Balance at
1 January 2014
Loss for period
Exchange differences on
translating foreign operations
Total comprehensive
loss for the period
Issue of shares
Costs of issuing shares
Share-based payment charge
credited to equity
Deferred tax credit on share
options
Transfer on exercise and lapse
of options
Dividend paid
Transactions
with owners
Balance at
31 December 2014
Profit for the period
Exchange differences on
translating foreign operations
Total comprehensive loss for
the period
Issue of shares
Costs of issuing shares
Sale of treasury shares
Share-based payment charge
credited to equity
Deferred tax credit on share
options
Transfer on exercise and lapse
of options
Dividends paid
Transactions
with owners
Balance at
31 December 2015
Share
capital
£’000
Share
premium
£’000
Merger relief
reserve
£’000
Reverse
acquisition
reserve
£’000
Share based
payments
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Total equity
£’000
1,034
1,159
22,269
(22,933)
547
-
-
-
295
-
-
-
-
-
-
-
-
12,211
(272)
-
-
-
-
295
11,939
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
583
356
(283)
-
656
1,329
13,098
22,269
(22,933)
1,203
-
-
-
177
-
-
-
-
-
-
-
-
-
8,958
(257)
40
-
-
-
-
177
8,741
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
776
362
(68)
-
1,070
-
-
17
17
-
-
-
-
-
-
-
17
-
33
33
-
-
-
-
-
-
-
-
(588)
(162)
-
1,488
(162)
17
(162)
(145)
-
-
-
-
283
(107)
12,506
(272)
583
356
-
(107)
176
13,066
(574)
14,409
1,429
1,429
-
33
1,429
1,462
-
-
-
-
-
68
(448)
(380)
9,135
(257)
40
776
362
-
(448)
9,608
1,506
21,839
22,269
(22,933)
2,273
50
475
25,479
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2015
Note
Cash flows from operating activities
Profit/(loss) before taxation
Adjustments for:
Share based payment charge
Amortisation of intangible assets
Depreciation of plant and equipment
Share of loss of joint venture
Finance expense
Fair value movement on contingent
consideration
Interest income
Operating cash flows before working capital
changes
(Increase)/decrease in trade and other
receivables
(Increase) in amount recoverable on contracts
Increase/(decrease) in payables
Interest received
Income tax paid
Net cash flows from operating activities
Cash flows used in investing activities
Purchase of property, plant and equipment
Development of intangible assets
Acquisition of subsidiaries, net of cash acquired
Investment in joint venture
Net cash flows in investing activities
Cash flows from financing activities
Dividends paid
Issue of ordinary share capital net of share
issue costs
Repayment of bank loans
Sale of treasury shares
Contingent consideration payments in
the period
Net cash flows from/(used) in financing activities
Net increase in cash and cash
equivalents
Cash and cash equivalents at beginning
of the year
Exchange gains on cash
Cash and cash equivalents at end of the year
16
plc Annual Report 2015 37
Year ended
31 Dec 2015
Year ended
31 Dec 2014
£’000
1,549
776
1,419
214
62
195
(198)
(12)
4,005
(49)
(62)
607
4,501
12
(483)
4,030
(232)
(310)
(5,617)
(46)
(6,205)
(448)
7,379
-
40
(1,882)
5,089
2,914
4,358
33
7,305
£’000
(127)
583
659
171
160
162
-
(4)
1,604
507
(668)
(507)
936
4
(32)
908
(123)
(198)
(4,407)
(179)
(4,907)
(107)
7,756
(465)
-
-
7,184
3,185
1,170
3
4,358
38
plc Annual Report 2015
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
plc Annual Report 2015 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
1. General information
Learning Technologies Group plc (‘the Company’)
and its subsidiaries (together, ‘the Group’) provide
a range of e-learning services and technologies
to corporate and government clients. The principal
activity of the Company is that of a holding
company for the Group, as well as performing all
administrative, corporate finance, strategic and
governance functions of the Group.
The Company is a public limited company,
which is listed on the AIM Market of the London
Stock Exchange and domiciled in England and
incorporated and registered in England and Wales.
The address of its registered office is 52 Old Steine,
Brighton, East Sussex, BN1 1NH. The registered number
of the Company is 07176993.
2. Summary of significant accounting
policies
The principal accounting policies applied in the
preparation of these Consolidated Financial
Statements are set out below. These policies have
been consistently applied unless otherwise stated.
a) Basis of preparation
The Consolidated Financial Statements of Learning
Technologies Group plc have been prepared in
accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs
as adopted by the EU), issued by the International
Accounting Standards Board (IASB), including
interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC), and
the Companies Act 2006 applicable to companies
reporting under IFRS. The Consolidated Financial
Statements have been prepared under the historical
cost convention, as modified for any financial assets
which are stated at fair value through profit or loss.
The Consolidated Financial Statements of Learning
Technologies Group plc are presented in pounds
sterling, which is the presentation currency for the
Consolidated Financial Statements. The functional
currency of each of the group entities is the local
currency of each individual entity and figures have
been rounded to the nearest thousand.
The preparation of Financial Statements in
conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management
to exercise its judgement in the process of applying
the Group’s accounting policies. The areas involving
a higher degree of judgement and complexity,
or areas where assumptions and estimates are
significant to the Consolidated Financial Statements
are disclosed in Note 3.
Going concern
At 31 December 2015 the Group had £7.3 million
of net cash and good cash conversion. Having
undertaken a detailed budgeting exercise, the
Directors have a reasonable expectation that the
Group has adequate resources to continue in
operational existence for the foreseeable future and
therefore continue to adopt the going concern basis
of accounting in preparing the annual Financial
Statements.
Adoption of new and revised International Financial
Reporting Standards
A number of new standards and amendments to
standards and interpretations have been issued but
are not yet effective and in some cases have not yet
been adopted by the EU.
The Directors do not expect that the adoption
of these standards will have a material impact
on the financial statements of the Company in
future periods, except that IFRS 9 will impact both
the measurement and disclosures of financial
instruments, IFRS 15 may have an impact on revenue
recognition and related disclosures and IFRS 16 will
have an impact on the recognition of operating
leases. At this point it is not practicable for the
Directors to provide a reasonable estimate of the
effect of these standards as their detailed review of
these standards is still ongoing.
40
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
(b) Basis of consolidation
A subsidiary is defined as an entity over which the
Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has
the ability to affect those returns through its power
over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the
Group. They are deconsolidated from the date that
control ceases.
The share for share acquisition of Epic Performance
Improvement Limited and its subsidiary companies
by Epic Group Limited on 10 May 1996 was that
of a re-organisation of entities which were under
common control. As such, that combination also falls
outside the scope of IFRS 3 ‘Business Combinations’
(Revised 2008). The Directors have therefore decided
that it is appropriate to reflect the combination using
the merger basis of accounting in order to give a
true and fair view. No fair value adjustments were
made as a result of that combination.
The basis of consolidation of the acquisition of Epic
Group Limited by the Company in November 2013 is
described below:
The substance of the share for share acquisition of
Epic Group Limited and its subsidiary companies
by In-Deed Online plc on 8 November 2013 was
outside the scope of IFRS 3 ‘Business Combinations’
(Revised 2008) on the basis that the Directors made
a judgement that prior to the transaction, In-Deed
Online plc was not a business under IFRS 3 Appendix
A. The Directors have therefore decided that it is
appropriate to reflect the combination using the
merger basis of accounting in order to give a true
and fair view. No fair value adjustments were made
as a result of that combination.
Business combinations other than noted above are
accounted for under the acquisition method.
Under the acquisition method, the results of the
subsidiaries acquired or disposed of are included
from the date of acquisition or up to the date of
disposal. At the date of acquisition, the fair values
of the subsidiaries’ net assets are determined and
these values are reflected in the Consolidated
Financial Statements. The cost of acquisition is
measured at the aggregate of the fair values, at
the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments
issued by the Group in exchange for control of the
acquiree, plus any costs directly attributable to the
business combination. Any excess of the purchase
consideration of the business combination over
the fair value of the identifiable assets and liabilities
acquired is recognised as goodwill. Goodwill, if
any, is not amortised but reviewed for impairment
at least annually. If the consideration is less than
the fair value of assets and liabilities acquired, the
difference is recognised directly in the statement of
comprehensive income.
Acquisition-related costs are expensed as incurred.
Intra-group transactions, balances and unrealised
gains on transactions are eliminated; unrealised
losses are also eliminated unless cost cannot be
recovered. Where necessary, adjustments are made
to the Financial Statements of subsidiaries to ensure
consistency of accounting policies with those of the
Group.
(c) Joint arrangements
The Group has applied IFRS 11 to all joint
arrangements as of 1 January 2012. Under IFRS 11
investments in joint arrangements are classified as
either joint operations or joint ventures depending
on the contractual rights and obligations of each
investor. The Company has assessed the nature of its
joint arrangements and determined them to be joint
ventures which are accounted for using the equity
method.
Under the equity method of accounting, interests
in joint ventures are initially recognised at cost and
adjusted thereafter to recognise the Group’s share of
plc Annual Report 2015 41
the post-acquisition profits or losses and movements
in other comprehensive income. When the Group’s
share of losses in a joint venture equals or exceeds
its interests in the joint ventures, the Group does
not recognise further losses, unless it has incurred
obligations or made payments on behalf of joint
ventures.
Unrealised gains on transactions between the Group
and its joint ventures are eliminated to the extent of
the Group’s interest in the joint ventures. Unrealised
losses are also eliminated unless the transaction
provides evidence of an impairment of the asset
transferred. Accounting policies of the joint ventures
have been changed where necessary to ensure
consistency with the policies adopted by the Group.
(d) Intangible assets
All intangible assets, except goodwill, are stated
at cost less accumulated amortisation and any
accumulated impairment losses.
Goodwill
Goodwill represents the amount by which the fair
value of the cost of a business combination exceeds
the fair value of the net assets acquired. Goodwill
is not amortised and is stated at cost less any
accumulated impairment losses.
The recoverable amount of goodwill is tested for
impairment annually or when events or changes in
circumstance indicate that it might be impaired.
Impairment charges are deducted from the carrying
value and recognised immediately in the income
statement. For the purpose of impairment testing,
goodwill is allocated to each of the Group’s cash
generating units expected to benefit from the
synergies of the combination. If the recoverable
amount of the cash generating unit is less than the
carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment
loss recognised for goodwill is not reversed in a
subsequent period.
Acquisition-related intangible assets
Net assets acquired as part of a business
combination includes an assessment of the fair
value of separately identifiable acquisition-related
intangible assets, in addition to other assets, liabilities
and contingent liabilities purchased. These are
amortised over their useful lives which are individually
assessed.
Branding
2-5 years
Customer contracts and relationships
2-5 years
Research and development expenditure
Research expenditure is recognised as an expense
when it is incurred.
Development expenditure is recognised as an
expense except that costs incurred on development
projects are capitalised as long-term assets to
the extent that such expenditure is expected to
generate future economic benefits. Development
expenditure is capitalised if, and only if, an entity can
demonstrate all of the following:
(i) Its ability to measure reliably the expenditure
attributable to the asset under development;
(ii) The product or process is technically and
commercially feasible;
(iii) Its future economic benefits are probable;
(iv) Its ability to use or sell the developed asset; and
(v) The availability of adequate technical, financial
and other resources to complete the asset
under development.
Capitalised development expenditure is measured
at cost less accumulated amortisation and
impairment losses, if any. Development expenditure
initially recognised as an expense is not recognised
as assets in subsequent periods.
Capitalised development expenditure is amortised
on a straight-line method over a period of between
three and five years when the products or services
are ready for sale or use. In the event that it is no
longer probable that the expected future economic
42
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
benefits will be recovered, the development
expenditure is written down to its recoverable
amount.
(e) Functional and foreign currencies
(i) Functional and presentation currency
The individual Financial Statements of each entity
in the Group are presented in the currency of
the primary economic environment in which the
entity operates, which is the functional currency.
The Consolidated Financial Statements are
presented in Pounds Sterling, which is the Group’s
presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are converted
into the respective functional currencies on
initial recognition, using the exchange rates
approximating those ruling at the transaction
dates. Monetary assets and liabilities at the end
of the reporting period are translated at the rates
ruling as of that date. Non-monetary assets and
liabilities are translated using exchange rates that
existed when the values were determined. All
exchange differences are recognised in profit or
loss.
(iii) Foreign operations
Assets and liabilities of foreign operations are
translated to Pounds Sterling at the rates of
exchange ruling at the end of the reporting
period. Revenues and expenses of foreign
operations are translated at the average rate
of exchange. All exchange differences arising
from translation are taken directly to other
comprehensive income and accumulated in
equity under the foreign exchange translation
reserve. On the disposal of a foreign operation,
the cumulative amount recognised in other
comprehensive income relating to that particular
foreign operation is reclassified from equity to
profit or loss.
Goodwill and fair value adjustments arising from
the acquisition of foreign operations are treated
as assets and liabilities of the foreign operations
and are recorded in the functional currency
of the foreign operations and translated at the
closing rate at the end of the reporting period.
Exchange differences are recognised in other
comprehensive income.
(f) Financial instruments
Financial instruments are recognised in the
statements of financial position when the Group has
become a party to the contractual provisions of the
instruments.
Financial instruments are classified as liabilities or
equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains
and losses relating to a financial instrument classified
as a liability are reported as an expense or income.
Distributions to holders of financial instruments
classified as equity are charged directly to equity.
Financial instruments are offset when the Group has
a legally enforceable right to offset and intends to
settle either on a net basis or to realise the asset and
settle the liability simultaneously.
A financial instrument is recognised initially at its fair
value plus, in the case of a financial instrument not
at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition or
issue of the financial instrument.
Financial instruments recognised in the statements
of financial position are disclosed in the individual
policy statement associated with each item.
Financial assets are derecognised when the
contractual rights to receive cash flows from
the financial assets have expired or have been
transferred and the Group has transferred
substantially all the risks and rewards of ownership.
On derecognition of a financial asset in its entirety,
the difference between the carrying amount and
plc Annual Report 2015 43
the sum of the consideration received and any
cumulative gain or loss that had been recognised in
other comprehensive income is recognised in profit
or loss.
(i) Financial assets
On initial recognition, financial assets are
classified as either financial assets at fair
value through profit or loss, held-to-maturity
investments, loans and receivables financial
assets, or available-for-sale financial assets, as
appropriate.
Management determines the classification of
its financial assets at initial recognition.
• Loans and receivables financial assets
Trade receivables and other receivables that
have fixed or determinable payments that are
not quoted in an active market are classified as
loans and receivables financial assets. Loans
and receivables financial assets are measured
at amortised cost using the effective interest
method, less any impairment loss. Interest
income is recognised by applying the effective
interest rate, except for short-term receivables
when the recognition of interest would be
immaterial. The Group’s loans and receivables
financial assets comprise ‘trade and other
receivables’ and cash and cash equivalents
included in the Consolidated Statement of
Financial Position.
(ii) Financial liabilities
Financial liabilities are recognised when, and
only when, the Group becomes a party to the
contractual provisions of the financial instrument.
All financial liabilities are recognised initially at fair
value plus directly attributable transaction costs
and subsequently measured at amortised cost
using the effective interest method other than
those categorised as fair value through profit or
loss.
Fair value through the profit or loss category
comprises financial liabilities that are either
held for trading or are designated to eliminate
or significantly reduce a measurement or
recognition inconsistency that would otherwise
arise. Derivatives are also classified as held for
trading unless they are designated as hedges.
A financial liability is derecognised when the
obligation under the liability is discharged,
cancelled or expires. When an existing financial
liability is replaced by another from the same
party on substantially different terms, or the terms
of an existing liability are substantially modified,
such an exchange or modification is treated as
a derecognition of the original liability and the
recognition of a new liability, and the difference in
the respective carrying amounts is recognised in
the profit or loss.
(iii) Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a
deduction, net of tax, from proceeds. Dividends
on ordinary shares are recognised when paid.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses,
if any. The cost of an item of property, plant and
equipment initially recognised includes its purchase
price and any cost that is directly attributable to
bringing the asset to the location and condition
necessary for it to be capable of operating in the
manner intended by management.
Depreciation is calculated under the straight-line
method to write off the depreciable amount of the
assets over their estimated useful lives. Depreciation
of an asset does not cease when the asset becomes
idle or is retired from active use unless the asset is
fully depreciated. The principal annual rates used for
this purpose are:
Computer equipment
Furniture and fittings
Office equipment
Leasehold improvements
33.33%
20%
20%
Over the remaining
life of the lease
44
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
The depreciation method, useful lives and residual
values are reviewed, and adjusted if appropriate, at
the end of each reporting period to ensure that the
amounts, method and periods of depreciation are
consistent with previous estimates and the expected
pattern of consumption of the future economic
benefits embodied in the items of the property, plant
and equipment.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as
appropriate, only when the cost is incurred and
it is probable that the future economic benefits
associated with the asset will flow to the Group and
the cost of the asset can be measured reliably.
The carrying amount of parts that are replaced is
derecognised. The costs of the day-to-day servicing
of property, plant and equipment are recognised
in profit or loss as incurred. Cost also comprises the
initial estimate of dismantling and removing the asset
and restoring the site on which it is located for which
the Group is obligated to incur when the asset is
acquired, if applicable.
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected from its use or
disposal. The gain or loss on retirement or disposal
is determined as the difference between any sales
proceeds and the carrying amounts of the asset
and is recognised in the income statement within
other income / (expenses). Any revaluation reserve
included in equity is transferred directly to retained
profits on retirement or disposal of the asset.
(h) Long-term contracts
The amount of profit attributable to the stage of
completion of a long-term contract is recognised
when the outcome of the contract can be foreseen
with reasonable certainty. Revenue for such
contracts is stated at cost appropriate to their stage
of completion plus attributable profits, less amounts
recognised in previous years. Provision is made for
any losses as soon as they are foreseen.
Contract work in progress is stated at costs incurred,
less those amounts transferred to profit or loss, after
deducting foreseeable losses and payments on
account not matched with revenue.
Amounts recoverable on contracts are included in
current assets and represent revenue recognised in
excess of payments on account.
(i) Impairment
(i) Impairment of financial assets
All financial assets (other than those categorised
at fair value through profit or loss), are assessed at
the end of each reporting period as to whether
there is any objective evidence of impairment as
a result of one or more events having an impact
on the estimated future cash flows of the asset.
An impairment loss in respect of loans and
receivables financial assets is recognised in
profit or loss and is measured as the difference
between the asset’s carrying amount and the
present value of estimated future cash flows,
discounted at the financial asset’s original
effective interest rate.
In a subsequent period, if the amount of the
impairment loss decreases and the decrease
can be related objectively to an event occurring
after the impairment was recognised, the
previously recognised impairment loss is reversed
through profit or loss to the extent that the carrying
amount of the asset at the date the impairment
is reversed does not exceed what the amortised
cost would have been had the impairment not
been recognised.
(ii) Impairment of non-financial assets
The carrying values of intangible assets are
reviewed at the end of each reporting period
for impairment when there is an indication that
the assets might be impaired. Impairment is
measured by comparing the carrying values of
plc Annual Report 2015 45
that future taxable profits will be available against
which the deductible temporary differences, unused
tax losses and unused tax credits can be utilised. The
carrying amounts of deferred tax assets are reviewed
at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient
future taxable profits will be available to allow all or
part of the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the period
when the asset is realised or the liability is settled,
based on the tax rates that have been enacted or
substantively enacted at the end of the reporting
period.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to set off current
tax assets against current tax liabilities and when the
deferred income taxes relate to the same taxation
authority.
Unrecognised deferred tax assets are reassessed
at each reporting date and are recognised to the
extent that it has become probable that future
taxable profit will allow deferred tax assets to be
recovered.
Deferred tax relating to acquired intangible assets
is recognised outside profit or loss. Deferred tax
items are recognised in correlation to the underlying
transactions either in other comprehensive income or
directly in equity.
Deferred tax arising from a business combination is
included in the resulting goodwill or excess of the
acquirer’s interest in the net fair value of the acquired
the assets with their recoverable amounts. The
recoverable amount of the assets is the higher
of the assets’ fair value less costs to sell and their
value in use, which is measured by reference to
discounted future cash flow.
An impairment loss is recognised in profit or loss
immediately.
In respect of assets other than goodwill, and
when there is a change in the estimates used
to determine the recoverable amount, a
subsequent increase in the recoverable amount
of an asset is treated as a reversal of the previous
impairment loss and is recognised to the extent
of the carrying amount of the asset that would
have been determined (net of amortisation and
depreciation) had no impairment loss been
recognised. The reversal is recognised in profit or
loss immediately.
(j) Income taxes
Income tax for each reporting period comprises
current and deferred tax.
Current tax is the expected amount of income taxes
payable in respect of the taxable profit for the year
and is measured using the tax rates that have been
enacted or substantively enacted at the end of the
reporting period.
Deferred tax is provided in full, using the liability
method, on temporary differences arising between
the tax bases of assets and liabilities and their
carrying amounts in the Financial Statements.
Deferred tax liabilities are recognised for all taxable
temporary differences other than those that arise
from goodwill or excess of the Group’s interest in the
net fair value of the acquired company’s identifiable
assets, liabilities and contingent liabilities over
the business combination costs or from the initial
recognition of an asset or liability in a transaction
which is not a business combination and at the time
of the transaction, affects neither accounting profit
nor taxable profit.
Deferred tax assets are recognised for all deductible
temporary differences, unused tax losses and
unused tax credits to the extent that it is probable
46
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
company’s identifiable assets, liabilities and
contingent liabilities over the business combination
costs.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand,
bank balances, deposits with financial institutions
and short-term, highly liquid investments that are
readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes
in value.
(l) Employee benefits
(i) Short-term benefits
Wages, salaries, paid annual leave and sick
leave, bonuses and non-monetary benefits are
accrued in the period in which the associated
services are rendered by employees of the
Group.
(ii) Defined contribution plans
A defined contribution plan is a pension plan
under which the Group pays fixed contributions
into a separate entity. The Group has no legal or
constructive obligations to pay further amounts
if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee
service in the current and prior periods. The
Group’s contributions to defined contribution
plans are recognised in profit or loss in the period
to which they relate.
(m) Provisions, contingent liabilities and contingent
assets
Provisions for property lease dilapidations are
recognised when the Group has a present or
constructive obligation as a result of past events,
when it is probable that an outflow of resources
embodying economic benefits will be required to
settle the obligation, and when a reliable estimate of
the amount can be made. Provisions are reviewed
at the end of each financial reporting period and
adjusted to reflect the current best estimate. Where
the effect of the time value of money is material,
the provision is the present value of the estimated
expenditure required to settle the obligation.
A contingent liability is a possible obligation that
arises from past events and whose existence will only
be confirmed by the occurrence of one or more
uncertain future events not wholly within the control of
the Group. It can also be a present obligation arising
from past events that is not recognised because it is
not probable that outflow of economic resources will
be required or the amount of obligation cannot be
measured reliably.
A contingent liability is not recognised but is
disclosed in the Notes to the Financial Statements.
When a change in the probability of an outflow
occurs so that the outflow is probable, it will then be
recognised as a provision.
A contingent asset is a probable asset that
arises from past events and whose existence will
be confirmed only by the occurrence or non-
occurrence of one or more uncertain events not
wholly within the control of the Group. The Group
does not recognise contingent assets but discloses
its existence where inflows of economic benefits are
probable, but not virtually certain.
(n) Related parties
A party is related to an entity if:
(i) Directly, or indirectly through one or more
intermediaries, the party:
• Controls, is controlled by, or is under common
control with, the entity (this includes Parents,
subsidiaries and fellow subsidiaries);
• Has an interest in the entity that gives it
significant influence over the entity; or
• Has joint control over the entity;
(ii) The party is an associate of the entity;
(iii) The party is a joint venture in which the entity is
a venturer;
plc Annual Report 2015 47
(iv) The party is a member of the key management
personnel of the entity or its parent;
(v) The party is a close member of the family of any
individual referred to in (i) or (iv);
(vi) The party is an entity that is controlled, jointly
controlled or significantly influenced by, or for
which significant voting power in such entity
resides with, directly or indirectly, any individual
referred to in (iv) or (v); or
(vii) The party is a post-employment benefit plan for
the benefit of employees of the entity, or of any
entity that is a related party of the entity.
Close members of the family of an individual are
those family members who may be expected to
influence, or be influenced by, that individual in their
dealings with the entity.
(o) Revenue and other income
Group revenue represents the fair value of the
consideration received or receivable for the
rendering of services, net of value added tax
and other similar sales based taxes, rebates and
discounts after eliminating intercompany sales.
Revenue from services is recognised on the
percentage of completion method unless the
outcome of the contract cannot be reliably
determined, in which case contract revenue is only
recognised to the extent of contract costs incurred
that are recoverable. Foreseeable losses, if any, are
provided for in full as and when it can be reasonably
ascertained that the contract will result in a loss. The
stage of completion is determined based on the
proportion of contract costs incurred compared to
total estimated contract costs.
Revenue from subscriptions such as licences is
amortised over the contractual period of the licence
with the exception of perpetual licences where all
revenue is recognised at time of contract.
Interest income is recognised as other income on an
accruals basis based on the effective yield on the
investment.
(p) Operating segments
The Group operates as one reportable segment,
that of the production of interactive multimedia
programmes. An operating segment is a component
of the Group that engages in business activities
from which it may earn revenues and incur
expenses, including revenues and expenses that
relate to transactions with any of the Group’s other
components. An operating segment’s operating
results are reviewed regularly by the chief operating
decision maker to make decisions about resources
to be allocated to the segment and assess its
performance, and for which discrete financial
information is available.
(q) Share-based payment arrangements
Equity-settled share-based payments to employees
and others providing similar services are measured
at the fair value of the equity instruments at the grant
date. Details regarding the determination of the fair
value of equity-settled share-based transactions
are set out in Note 22 to the Consolidated Financial
Statements.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based
on the Group’s estimate of equity instruments that
will eventually vest, with a corresponding increase
in equity. At the end of each reporting period, the
Group revises its estimate of the number of equity
instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised
in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding
adjustment to other reserves.
(r) Leases
The Group leases certain property under operating
leases. Operating lease payments are recognised
as an expense on a straight-line basis over the lease
term, except where another systematic basis is more
representative of the time pattern in which economic
benefits from the leased asset are consumed.
There were no leases classified under the category of
finance leases.
48
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
3. Summary of critical accounting estimates
and judgements
The preparation of financial information in conformity
with IFRS requires the use of certain critical
accounting estimates. It also requires the Directors to
exercise their judgement in the process of applying
the accounting policies which are detailed above.
These judgements are continually evaluated by
the Directors and management and are based on
historical experience and other factors, including
expectations of future events that are believed to be
reasonable under the circumstances.
The key estimates and underlying assumptions
concerning the future and other key sources of
estimation uncertainty at the statement of financial
position date, that have a significant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next financial period,
are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period
in which the estimate is revised if the revision affects
only that period, or in the period of the revision and
future periods if the revision affects both current and
future periods.
Revenue recognition
The Group recognises revenue from service contracts
with customers.
Revenue is recognised on the percentage of
completion method unless the outcome of the
contract cannot be reliably determined, in which
case contract revenue is only recognised to the
extent of contract costs incurred that are considered
to be recoverable. Foreseeable losses, if any, are
provided for in full as and when it can be reasonably
ascertained that the contract will result in a loss.
The stage of completion is determined based on the
proportion of contract costs incurred compared to
total estimated contract costs.
In making its judgement, management considered
the detailed criteria for the recognition of revenue set
out in IAS 18 ‘Revenue’. The Directors are satisfied that
the significant risks and rewards are transferred and
that the recognition of revenue over the duration of a
contract is appropriate.
Amounts recoverable on contracts
In making its judgement as to the amounts
recoverable on contracts, management considers
estimates of anticipated revenues and costs
from each contract and monitors the need for
any provisions for losses arising from adjustments
to underlying assumptions if this indicates it is
appropriate. The amount of profit or loss recognised
on a contract has a direct impact on the Group’s
results and carrying value of amounts recoverable
on contracts. The Directors are satisfied that their
judgement is based on a reasonable assessment of
the future prospects for each contract.
Contingent consideration
In some instances the cost of acquiring a business
will not be known at the time of acquisition as it
will depend in part on the achievement of certain
performance criteria at a future date. Management
exercise their judgement in discounting the future
value of the anticipated deferred consideration.
See Note 29 for details of how these estimates and
judgements have been applied.
Valuation of intangible assets
The determination of the fair value of assets and
liabilities including goodwill arising on the acquisition
of businesses, the acquisition of industry-specific
knowledge, software technology, branding and
customer relationships, whether arising from separate
purchases or from the acquisition as part of business
combinations, and development expenditure
which is expected to generate future economic
benefits, are based, to a considerable extent, on
management’s judgement.
plc Annual Report 2015 49
The fair value of these assets is determined by
discounting estimated future net cash flows
generated by the asset where no active market for
the assets exists. The use of different assumptions
for the expectations of future cash flows and the
discount rate would change the valuation of the
intangible assets.
Allocation of the purchase price affects the results
of the Group as finite lived intangible assets are
amortised, whereas indefinite lived intangible assets,
including goodwill, are not amortised and could
result in differing amortisation charges based on the
allocation to indefinite lived and finite lived intangible
assets.
The useful life used to amortise intangible assets
relates to the expected future performance of the
assets acquired and management’s estimate of the
period over which economic benefit will be derived
from the asset.
The estimated useful life principally reflects
management’s view of the average economic life of
each asset and is assessed by reference to historical
data and future expectations. Any reduction in the
estimated useful life would lead to an increase in the
amortisation charge.
See Notes 11 and 29 for details of how these
estimates and judgements have been applied.
Impairment reviews
IFRS requires management to undertake an annual
test for impairment of indefinite lived assets and, for
finite lived assets, to test for impairment if events or
changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.
Impairment testing is an area involving management
judgement, requiring assessment as to whether the
carrying value of assets can be supported by the net
present value of future cash flows derived from such
assets using cash flow projections which have been
discounted at an appropriate rate. In calculating the
net present value of the future cash flows, certain
assumptions are required to be made in respect of
highly uncertain matters including management’s
expectations of:
• Growth in EBITDA, calculated as adjusted
operating profit before;
• Depreciation and amortisation;
• Long-term growth rates; and
• The selection of discount rates to reflect the risks
involved.
The Group prepares and approves a detailed annual
budget, three year strategic plan and five-year
management plan for its operations, which are used
in the value in use calculations.
See Note 11 for details of how these estimates and
judgements have been applied.
Changing the assumptions selected by
management, in particular the discount rate and
growth rate assumptions used in the cash flow
projections, could significantly affect the Group’s
impairment evaluation, and hence results.
4. Segment analysis
IFRS 8 requires operating segments to be identified
on the basis of internal reports about components
of the Group that are regularly reviewed by the chief
operating decision maker (which takes the form of
the Board of Directors of the Company) as defined in
IFRS 8, in order to allocate resources to the segment
and to assess its performance.
The Directors of the Company consider the
principal activity of the Group to be the production
of interactive multimedia programmes, and to
constitute one reportable segment, that of the
production of interactive multimedia programmes. A
majority of sales were generated by the operations
in the United Kingdom in the two years ended 31
December 2014 and 2015.
All other segments primarily comprise income and
expenses relating to the Group’s administrative
functions. Interest income and interest expense
are not allocated to segments, as this type of
activity is driven by the central treasury function,
which manages the cash position of the Group.
Accordingly, this information is not separately
reported to the Board of Directors.
50
plc Annual Report 2015
plc Annual Report 2015 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
Geographical information
All revenues of the Group are derived from its principal activity, the production of interactive multimedia
programmes. The Group’s revenue from external customers and non-current assets by geographical
location are detailed below.
UK
£’000
Switzerland
£’000
Italy
£’000
Rest of
Europe
£’000
United
States
£’000
Canada
£’000
Rest of
World
£’000
31 December
2015 revenue
Non-current
assets
31 December
2014 revenue
Non-current
assets
17,528
539
21,354
-
-
-
20
-
21
1,638
110
12,246
339
170
135
1,977
12,315
-
-
-
6
Total
£’000
19,905
21,375
14,920
12,337
70
-
53
16
-
-
-
Information about major customers
In both the year ended 31 December 2014 and the year ended 31 December 2015, no customer accounted for
more than 10 per cent of reported revenues.
5. Profit/(loss) before taxation
Profit/(loss) before taxation is arrived at after charging/(crediting):-
Costs of acquisition
Integration costs
Amortisation of acquired intangible assets
Amortisation of software development costs
Auditors’ remuneration
Other fees payable to auditors
• Acquisition costs
• Taxation
Depreciation of property, plant and equipment
31 Dec 2015
£’000
31 Dec 2014
£’000
234
99
1,203
216
40
96
30
214
296
325
570
89
43
72
15
171
52
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
Directors’ fees
Directors’ pension contributions
Staff costs (including Directors):
• Salaries, allowances and bonuses
• Social security costs
• Defined contribution pension plan costs
Rental of offices
Research and development
Finance charges
Fair value movement on contingent consideration
Interest income
6. Staff costs
The average monthly number of employees was:
Production
Administration
Management
Aggregate remuneration (including Directors):
Wages and salaries (including bonuses)
Social security costs
Share-based payments
Pension costs
31 Dec 2015
£’000
31 Dec 2014
£’000
678
21
9,305
942
180
540
5
195
(198)
(12)
500
3
7,565
796
188
365
50
162
-
(4)
Year ended
31 Dec 2015
Year ended
31 Dec 2014
No.
188
30
7
225
No.
163
28
7
198
31 Dec 2015
£’000
31 Dec 2014
£’000
9,305
942
776
180
11,203
7,565
796
583
188
9,132
plc Annual Report 2015 53
7. Directors’ remuneration, interests and transactions
The Directors of the Company are considered to be the key management personnel of the Group.
Directors’ emoluments and benefits include:
Year ended 31 Dec 2015
Salary or fees
£’000
Bonuses
£’000
Pension
contribution
£’000
Share-based
payments
£’000
Total
£’000
Andrew Brode
Harry Hill
Jonathan Satchell
Neil Elton
Piers Lea
Dale Solomon
Leslie-Ann Reed
-
46
200
142
120
140
30
678
-
-
70
45
45
45
-
205
-
-
12
4
4
1
-
21
-
-
-
68
-
325
-
393
Year ended 31 Dec 2014
Salary or fees
£’000
Bonuses
£’000
Pension
contribution
£’000
Share-based
payments
£’000
Andrew Brode
Harry Hill
Jonathan Satchell
Neil Elton
Piers Lea
Dale Solomon
Leslie-Ann Reed
Peter Mountford
Richard Jones
-
30
200
21
62
72
15
65
35
500
-
-
25
-
-
21
-
-
-
46
-
-
-
-
1
1
-
-
1
3
-
-
-
-
-
163
-
133
38
334
-
46
282
259
169
511
30
1,297
Total
£’000
-
30
225
21
63
257
15
198
74
883
54
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
Directors’ emoluments and benefits are stated for the
Directors of Learning Technologies Group plc only.
The amounts shown were recognised as an expense
during the year.
Total social security costs related to Directors during
the year was £92,000 (2014: £50,000).
The above figures for emoluments do not include
any gains made on the exercise of share options
received under long-term incentive schemes.
There were no other short-term or long term benefits,
post-employment benefits or termination benefits
paid to Directors in either of the years ended 31
December 2015 or 31 December 2014.
Directors’ interests in the shares of the Company at 31 December 2015 and 31 December 2014, and any
changes subsequent to 31 December 2015, are as follows:
LTG
Ordinary
Shares of
£0.00375
each
Andrew Brode
Harry Hill
Jonathan
Satchell
Leslie-Ann
Reed
Neil Elton
Piers Lea
Dale Solomon
Options
Shares
2015
2014
2015
2014
2015
2014
Weighted Average Exercise
Price (pence)
Number
Number
-
-
-
-
19.000
-
5.468
6.066
-
-
-
-
-
-
5.428
5.428
-
-
-
-
1,000,000
-
-
-
-
-
-
-
113,215,005
113,215,005
2,008,000
1,830,000
107,039,995
113,214,995
750,000
160,000
-
-
17,023,383
17,023,383
21,626,013
21,866,013
-
-
22,626,013
21,866,013
240,196,383
245,283,383
plc Annual Report 2015 55
Dale Solomon was granted 16,002,452 unapproved
share options on 17 February 2014. The exercise
price was 5.88 pence and the vesting of the new
share options are subject to the achievement of
demanding performance criteria based upon
significant share price increases. On 21 November
2014, he exercised 200,000 options granted in May
2012.
Peter Mountford resigned as a Director of the
Company with effect from 23 September 2014. Of
the 11,033,000 share options that he held, 8,033,000
were forfeited. The balance remains exercisable.
Richard Jones resigned as a Director of the
Company with effect from 3 November 2014. Of the
9,345,887 share options that he held, 5,668,473 were
forfeited. The balance remains exercisable.
On 26 January 2015, Jonathan Satchell sold
3,000,000 shares and on the same day Leslie-
Ann Reed acquired 750,000 shares and Neil Elton
acquired 160,000 shares in the Company.
On 26 January 2015, the Company granted to
Neil Elton 1,000,000 new EMI share options over
the Company’s shares at an exercise price of
19.000 pence per share. The vesting of the new
share options are subject to the achievement of
demanding performance criteria based upon
significant share price increases.
On 29 September 2015, Dale Solomon exercised
240,000 options granted in May 2012. On the
same day Harry Hill acquired 165,000 shares and
Jonathan Satchell disposed of 3,175,000 shares in
the Company.
On 30 September 2015, Harry Hill acquired 13,000
shares in the Company.
On 29 January 2016 Jonathan Satchell disposed of
1,750,000 shares in the Company.
The aggregate gain made by Directors on the
exercise of options in the year amounted to £50,000
(2014: £31,000).
See Note 22 for further details on share option plans.
56
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
8. Income tax
Current tax expense:
- UK Current Tax on profits for the year
- Adjustments in respect to prior years
- Foreign Current Tax on profits for the year
Total current tax
Deferred tax (Note 17):
- Origination and reversal of temporary differences
- Adjustments in respect to prior years
Total deferred tax
Income tax expense
31 Dec 2015
£’000
31 Dec 2014
£’000
546
(169)
56
433
(341)
28
(313)
120
176
-
38
214
(210)
31
(179)
35
A reconciliation of income tax expense applicable to the loss before taxation at the statutory tax rate to the
income tax expense at the effective tax rate of the Group is as follows:
31 Dec 2015
£’000
31 Dec 2014
£’000
Profit / (loss) before taxation
Tax calculated at domestic tax rates applicable to
profits in respective countries:
Tax effects of:
Income not subject to tax
Expenses not deductible for tax purposes
Joint venture results reported net of tax
Re-measurement of deferred tax - change in
Share option value
Difference of deferred rate and current tax rate
Adjustments in respect to prior years
1,549
332
(70)
121
13
(138)
3
(141)
(127)
(35)
(60)
54
44
-
1
31
120
35
The weighted average statutory applicable tax rate was 21.43% (2014: 27.70%). The decrease in the weighted
average statutory applicable tax rate reflects a relative increase in profits generated in the UK which are subject
to lower rates of tax than in the US.
Deferred tax directly credited to equity amounted to £362,000 (2014: £356,000).
plc Annual Report 2015 57
9. Earnings per share
Basic profit/loss per share
Diluted profit/loss per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
31 Dec 2015
Pence
31 Dec 2014
Pence
0.382
0.357
0.809
0.756
(0.049)
(0.049)
0.393
0.375
Basic earnings per share is calculated by dividing the
profit/loss after tax attributable to the equity holders
of the Group by the weighted average number of
shares in issue during the year.
Diluted earnings per share is calculated by adjusting
the weighted average number of shares outstanding
to assume conversion of all potential dilutive shares,
namely share options.
In order to give a better understanding of the
underlying operating performance of the Group,
an adjusted earnings per share comparative has
been included. Adjusted earnings per share is stated
after adjusting the profit/(loss) after tax attributable to
equity holders of the Group for certain charges as set
out in the following table below.
58
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
The calculation of earnings per share is based on the following earnings and number of shares.
Profit after
tax £’000
2015
Weighted
average
number of
shares
‘000
Pence per
share
(Loss)/Profit
after tax
£’000
2014
Weighted
average
number of
shares
‘000
Pence per
share
1,429
373,505
0.382
(162)
332,027
(0.049)
1,203
776
99
234
(198)
(12)
195
120
2,417
3,846
(824)
570
583
325
296
-
(4)
162
35
-
-
-
0.647
-
1,967
1,805
(0.220)
(500)
-
-
-
0.592
-
(0.150)
3,022
373,505
0.809
1,305
332,027
0.393
Basic earnings per
ordinary share
Effect of adjustments:
Amortisation of acquired
intangibles
Share based payment costs
Integration costs
Cost of acquisitions
Fair value movement on
contingent consideration
Interest receivable
Finance expense
Income tax expense
Effect of adjustments
Adjusted profit before tax
Adjusted weighted tax
charge 21.43% (27.70%)
Adjusted basic earnings
per ordinary share
Effect of dilutive potential ordinary shares:
Share options
-
26,406
(0.053)
-
16,063
(0.018)
Adjusted diluted earnings
per ordinary share
3,022
399,911
0.756
1,305
348,090
0.375
plc Annual Report 2015 59
10. Property, plant and equipment
Computer
equipment
£’000
Fixtures and
fittings
£’000
Leasehold
improvements
£’000
Cost
At 1 January 2014
Additions on acquisitions
Additions
Foreign exchange differences
At 31 December 2014
Additions on acquisitions
Additions
Foreign exchange differences
At 31 December 2015
Accumulated Depreciation
At 1 January 2014
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
Net book value
At 31 December 2014
At 31 December 2015
867
101
114
6
1,088
48
160
-
1,296
718
102
820
135
955
268
341
201
22
3
-
226
21
58
-
305
111
54
165
62
227
61
78
90
13
1
-
104
117
14
-
235
79
15
94
17
111
10
124
Total
£’000
1,158
136
118
6
1,418
186
232
-
1,836
908
171
1,079
214
1,293
339
543
60
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
11. Intangible assets
Cost
At 1 January 2014
Additions
At 31 December 2014
Additions on acquisition
Additions
At 31 December 2015
Accumulated amortisation
At 1 January 2014
Amortisation charged in year
At 31 December 2014
Amortisation charged in year
At 31 December 2015
Carrying amount
At 31 December 2014
At 31 December 2015
Goodwill
£’000
Customer
contracts and
relationships
£’000
Branding
£’000
IP and
Software
development
£’000
-
9,615
9,615
-
4,637
14,252
-
-
-
-
-
9,615
14,252
-
1,880
1,880
-
4,411
6,291
-
546
546
1,063
1,609
1,334
4,682
-
180
180
-
248
428
-
24
24
140
164
156
264
Total
£’000
367
11,873
12,240
252
9,606
367
198
565
252
310
1,127
22,098
217
89
306
216
522
259
605
217
659
876
1,419
2,295
11,364
19,803
plc Annual Report 2015 61
Goodwill and acquisition-related intangible assets
recognised have arisen from acquisitions. Refer to
Note 29 for further details of acquisitions undertaken
during the year. IP and software development
reflects the recognition of development work
undertaken in-house.
CGU
LEO
Preloaded
Eukleia
Goodwill
£’000
7,435
2,180
4,637
14,252
The Group tests goodwill annually for impairment or
more frequently if there are indications that goodwill
might be impaired. The recoverable amounts of
the CGUs are determined from value in use. The
key assumptions for the value in use calculations
are those regarding the discount rates, growth rates
and future operating margins. The Group monitors its
pre-tax Weighted Average Cost of Capital and those
of its competitors using market data. In considering
the discount rates applying to CGUs, the Directors
have considered the relative sizes, risks and the inter-
dependencies of its CGUs. The impairment reviews
use a discount rate adjusted for pre-tax cash flows.
The Group prepares cash flow forecasts derived
from the most recent financial plan approved by
the Board and extrapolates revenues, net margins
and cash flows for the following four years based
on forecast growth rates of the CGUs. Cash flows
beyond this five-year period are also considered in
assessing the need for any impairment provisions.
The growth rates are based on internal growth
forecasts of between 8% and 9% for the first five
years. The terminal rate used for the value in use
calculation thereafter is 2.25%.
No reasonably possible change in a key assumption
would produce a significant movement in the
carrying value of goodwill allocated to a CGU and
therefore no sensitivity analysis is presented.
Goodwill acquired in a business combination is
allocated, at acquisition, to the cash generating
units (‘CGUs’) that are expected to benefit from that
business combination. The Group has three CGUs.
Following the acquisition of LINE and its merger
with Epic in July 2014, to form LEO, management
have determined that LEO represents one CGU. The
carrying amount of goodwill has been allocated as
follows:
Growth rate
%
Pre-tax discount rate
%
8%
9%
9%
11.0%
12.5%
12.5%
Customer contracts, relationships and
branding
These intangible assets include the Group’s
aggregate amounts spent on the acquisition of
industry-specific knowledge, software technology,
branding and customer relationships. These
assets arose from acquisition as part of business
combinations.
The fair value of these assets is determined by
discounting estimated future net cash flows
generated by the asset where no active market for
the assets exists.
The cost of these intangible assets is amortised over
the estimated useful life of each separate asset of
between two and five years.
IP and software development
IP and software development costs principally
comprise expenditure incurred on major software
development projects and the production of generic
e-learning content where it is reasonably anticipated
that the costs will be recovered through future
commercial activity.
Capitalised development costs are amortised over
the estimated useful life of between three and five
years.
62
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
12. Investments accounted for using the equity method
Investment in joint venture:
Cost of investment
Share of accumulated losses
Foreign exchange differences
The movements in joint venture investments is as follows:
Balance at beginning of year
Share of losses for the year
Investment during the year
Foreign exchange differences
Joint venture
31 Dec 2015
£’000
31 Dec 2014
£’000
274
(271)
(3)
-
228
(209)
(3)
16
31 Dec 2015
£’000
31 Dec 2014
£’000
16
(62)
46
-
-
-
(160)
179
(3)
16
The Group acquired a 50% interest in LEO Brasil Tecnologia Educaional Ltda (‘LEO Brazil’) in November 2011, for a
total consideration of 150,000 Brazilian Real (BRL); equivalent to approximately £49,000.
In the year ended 31 December 2014, the Group invested an additional capital sum of BRL 748,000
(approximately £179,000) alongside that of the other party to the joint venture.
In the year ended 31 December 2015, the Group invested an additional capital sum of BRL 232,000
(approximately £46,000) alongside that of the other party to the joint venture.
The joint venture has share capital consisting solely of ordinary shares, which are held directly by the Group. The
nature of the investment at 31 December 2014 and 31 December 2015 is listed below.
plc Annual Report 2015 63
Name of entity
Country of registration
or incorporation
Principal
activity
Percentage of Ordinary
Shares held by Group
LEO Brasil Tecnologia
Educacional Ltda (formerly
Epic Brasil Tecnologia
Educacional Ltda)
Brazil
Bespoke e-learning
50%
The joint venture is a private company and there is no quoted market price available for its shares. The
accounting reference date of the joint venture is coterminous with that of the Company.
There are no contingent liabilities or commitments relating to the Group’s interest in the joint venture.
Summarised financial information for the joint venture
Set out below is summarised financial information for LEO Brazil which is accounted for using the equity method.
The information reflects the amounts presented in the Financial Statements of the joint venture adjusted for
differences in accounting policies between the Group and the joint venture where appropriate, and not the
Group’s share of those amounts.
Summarised statement of financial position:
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Current liabilities
Other current liabilities (including trade payables)
Net (liabilities) / assets
31 December
2015
£’000
31 December
2014
£’000
29
4
178
182
(302)
(302)
(91)
51
7
207
214
(232)
(232)
33
64
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
Summarised statement of comprehensive income:
Revenue
Depreciation and amortisation
Loss from continuing operations
Income tax expense / release
(Loss) for the year
Other comprehensive (expense) / income
Total comprehensive (loss) for the year
Year ended
31 Dec 2015
£’000
Year ended
31 Dec 2014
£’000
629
(9)
(215)
-
(215)
-
(215)
776
(11)
(251)
-
(251)
-
(251)
Where the Group’s share of losses in a joint venture exceeds its interests in the joint venture, the Group does not
recognise further losses as it has no further obligation to make payments on behalf of the joint venture. Such
losses not recognised in the year ended 31 December 2015 totalled £46,000 (year ended 31 December 2014:
£nil).
Reconciliation of summarised financial information:
Opening net assets/(liabilities) at 1 January
(Loss) for the year
Issue of share capital or capital contribution
Foreign exchange differences
Closing net (liabilities)/assets at 31 December
Interest in joint venture at 50%
Unrecognised losses
Carrying value
31 Dec 2015
£’000
31 Dec 2014
£’000
33
(215)
92
(1)
(91)
(46)
46
-
(62)
(251)
323
23
33
16
-
16
plc Annual Report 2015 65
31 Dec 2015
£’000
31 Dec 2014
£’000
4,241
(40)
4,201
10
30
-
40
2,772
(10)
2,762
10
-
-
10
13. Trade receivables
Trade receivables
Allowance for impairment losses
Impairment losses:
At 1 January
Additions
Amounts written-back
At 31 December
The Group’s normal trade credit term is 30 days. Other credit terms are assessed and approved on a case-by-
case basis.
The fair value of trade receivables approximates their carrying amount, as the impact of discounting is not
significant. No interest has been charged to date on overdue receivables.
14. Other receivables, deposits and prepayments
Sundry receivables
Prepayments
31 Dec 2015
£’000
31 Dec 2014
£’000
38
516
554
12
325
337
66
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
15. Amount recoverable on contracts
Amount recoverable on contracts
31 Dec 2015
£’000
31 Dec 2014
£’000
1,853
1,853
1,806
1,806
16. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:
Cash and bank balances
17. Deferred tax assets/(liabilities)
Deferred tax assets
At 1 January
Acquisition of subsidiaries
Deferred tax charge directly to the income statement
Deferred tax charge directly to equity
At 31 December
Deferred tax liabilities
At 1 January
Deferred tax on acquired intangibles and via acquisition
Deferred tax charge directly to the income statement
At 31 December
31 Dec 2015
£’000
31 Dec 2014
£’000
7,305
4,358
31 Dec 2015
£’000
31 Dec 2014
£’000
618
-
49
362
1,029
1
69
192
356
618
31 Dec 2015
£’000
31 Dec 2014
£’000
(446)
(1,000)
264
(1,182)
-
(433)
(13)
(446)
plc Annual Report 2015 67
The deferred tax balances relate to temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the Financial Statements. Deferred tax assets are recognised to the extent that it is
probable that the future taxable profits will allow the deferred tax assets to be recovered. An analysis of deferred
tax assets and liabilities is as follows:
Deferred tax assets
Deferred tax on share options
Temporary differences
Deferred tax assets
Deferred tax liabilities
Deferred tax on intangible assets
Temporary differences
Deferred tax liabilities
18. Trade and other payables
Trade payables
Payments received on account
Tax and social security
Contingent consideration
Accruals and others
31 Dec 2015
£’000
31 Dec 2014
£’000
1,029
-
1,029
548
70
618
31 Dec 2015
£’000
31 Dec 2014
£’000
(996)
(186)
(1,182)
(313)
(133)
(446)
31 Dec 2015
£’000
31 Dec 2014
£’000
814
1,858
1,140
405
1,618
5,835
546
1,505
672
1,290
819
4,832
The contingent consideration relates wholly to the acquisition of Preloaded Limited.
68
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
19. Other long-term liabilities
Contingent consideration
31 Dec 20154
£’000
31 Dec 2014
£’000
2,382
2,382
1,512
1,512
Of the contingent consideration balance, £430,000 relates to Preloaded Limited and is payable over the period
2017 to 2019. The balancing contingent consideration balance of £1,952,000 relates to the acquisition of Eukleia
Training Limited. Further details are provided in Note 29.
20. Provisions
Property costs
At 1 January – brought forward
Paid in the year
Addition via acquisition
Addition
At 31 December
31 Dec 2015
£’000
31 Dec 2014
£’000
49
-
50
-
99
30
-
-
19
49
The provision relates to the Group’s share of dilapidation costs in respect of costs to be incurred at
the end of property leases.
plc Annual Report 2015 69
Number of
shares
Share capital
£’000
Share
premium
£’000
Total
£’000
354,495,446
1,329
13,098
14,427
35,714,286
134
-
-
26
-
17
7,366
(257)
1,474
40
118
7,500
(257)
1,500
40
135
21. Share capital
Shares were issued during the year as follows:
At 1 January 2015
Placing of shares
Issuance costs
Issue of shares to acquire Eukleia Training Limited
6,818,182
Sale of Treasury shares
-
Shares issued on the exercise of options
4,651,903
At 31 December 2015
401,679,817
1,506
21,839
23,345
The par value of all shares is £0.00375. All shares in issue were allotted, called up and fully paid.
On 31 July 2015, the Company announced that
it had agreed to acquire the entire issued share
capital of Eukleia Training Limited (’Eukleia’). The
cash element of the acquisition consideration was
funded from part of the proceeds of the placing of
35,714,286 new shares in the Company to raise £7.5
million at 21 pence per share. A further 6,818,182
new shares were issued in the Company in part
consideration of the acquisition of Eukleia. Further
details are provided in Note 29.
4,651,903 ordinary shares were issued during the
course of the year as a result of the exercise of
employee share options.
On 3 March 2015 the Group incorporated Learning
Technologies Group (Trustee) Limited, a wholly owned
subsidiary of the Company. The purpose of the
company is to act as an Employee Benefit Trust (‘EBT’)
for the benefit of current and previous employees of
the Group. During the year the EBT received 604,340
existing shares in the Company for nominal value
and sold 200,000 shares for a net gain of £40,000.
At 31 December 2015 the EBT holds 404,340 ordinary
shares in the Company. These shares are held in
treasury.
70
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
22. Share-based payment transactions
The Group operates an Approved and Unapproved share option plan and Sharesave option scheme. The
Group’s share-based payment arrangements are summarised below.
(a) Share option plans
As part of its strategy for executive and key employee
remuneration, on Admission to AIM the Company
established a Share Option Scheme under which
share options may be granted to officers and
employees or members of the Group. Under the
rules of the Share Option Scheme, the Company
may grant EMI options and/or unapproved options.
Prior to the reverse takeover by LTG in November
2013, Epic Group Limited ran their own share option
scheme. Option holders in this plan either exercised
their options or modified them into share options in
the new scheme, such that they had a neutral effect
on the option holders immediately before and after
the amendment of the options.
There is no limit on the number of shares, or the
percentage of issued share capital, that can be
used by the Company for share options. The rules of
the Share Option Scheme do not comply with the
ABI’s guidelines on policies and practices in respect
of executive remuneration.
Number of
options
Year ended
31 Dec 2015
Weighted
average
exercise price
(pence)
Approved share option plan - Enterprise Management Incentive (‘EMI’):
At 1 January
Options granted by Company
Forfeited
Exercised during the year
At 31 December
25,248,910
4,928,370
(1,400,000)
(4,327,366)
24,449,914
6.530
20.839
18.321
2.809
9.397
Number of
options
24,240,723
6,000,000
(3,633,861)
(1,357,952)
25,248,910
Year ended
31 Dec 2014
Weighted
average
exercise price
(pence)
3.790
17.060
5.880
5.880
6.530
EMI options are granted to employees of the Group and vesting criteria are subject to challenging
performance targets such as share price growth or other criteria such as annual sales. Except where agreed
by the Board options, will lapse if an option holder ceases to be an employee of the Group. All EMI options
are settled by equity.
plc Annual Report 2015 71
Unapproved share option plan:
At 1 January
Granted by Company
Forfeited
Exercised during the year
At 31 December
Number of
options
2015 Weighted
average
exercise price
(pence)
16,402,452
1,409,901
(125,000)
(275,000)
17,412,353
5.688
22.413
1.882
1.882
7.130
Number of
options
4,070,269
22,787,747
(10,455,564)
-
16,402,452
2014 Weighted
average
exercise price
(pence)
5.106
5.880
5.880
-
5.688
EMI options are granted to employees of the Group
and vesting criteria are subject to challenging
performance targets such as share price growth or
other criteria such as annual sales. Except where
agreed by the Board options will lapse if an option
holder ceases to be an employee of the Group. All
EMI options are settled by equity.
(b) Sharesave option scheme
The Company established the 2014 and 2015
Learning Technologies Group plc Sharesave Scheme
in April 2014 and April 2015 respectively. The scheme
enables UK permanent employees of the Group to
buy shares in the Company at a discount on maturity
of a three-year savings contract, unless they are
made redundant, in which case they can exercise
their options, at the time of redundancy. The savings
are held with the Yorkshire Building Society.
Each member of the scheme may save a fixed
amount of up to £500 per month for three years
at the end of which period, each employee may
buy shares at a fixed price of 16.25 and 18.8 pence
per share respectively (the ‘Option Price’), being a
discount of 20% on the share price as of 28 April
2014 and 24 April 2015 respectively. At the end of
three years, an employee may either opt to buy
shares at the Option Price or take the savings in cash.
72
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
Sharesave Option Scheme:
At 1 January
Granted by Company
Forfeited
Exercised during the year
At 31 December
Number of
options
2015 Weighted
average
exercise price
(pence)
3,987,857
573,500
(596,783)
(49,537)
3,915,037
16.25
18.800
16.414
16.250
16.599
Number of
options
-
5,042,363
(1,054,506)
-
2014 Weighted
average
exercise price
(pence)
-
16.250
16.250
-
3,987,857
16.250
At 31 December 2014, options granted to subscribe for Ordinary Shares of the Company, and the valuation
criteria are as follows:
plc Annual Report 2015 73
Number of shares under option
Date of
grant
Approved
Unapproved
scheme
Sharesave
Scheme
Exercise
Price
(pence)
Remaining
vesting
period
Fair value
of options
(pence)
Life (years)
Volatility
May 2012
5,790,582
Jun 2013
1,931,824
Nov 2013
7,399,138
-
-
-
Feb 2014
Feb 2014
Feb 2014
-
-
-
8,001,226
4,000,613
4,000,613
Mar 2014
400,000
Mar 2014
400,000
Mar 2014
400,000
Mar 2014
400,000
Apr 2014
-
Nov 2014
650,000
Nov 2014
250,000
Nov 2014
900,000
Nov 2014
900,000
Nov 2014
900,000
Jan 2015
500,000
Jan 2015
250,000
Jan 2015
250,000
Apr 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Dec 2015
200,000
200,000
Dec 2015
675,000
200,000
Dec 2015
675,000
200,000
Dec 2015
588,271
200,000
Dec 2015
200,000
Dec 2015
200,000
-
-
Dec 2015
590,099
609,901
-
-
-
-
-
-
-
-
-
-
1.882
2.718
5.880
5.880
5.880
5.880
-
-
-
Feb 2017
Feb 2017
Feb 2017
15.500
Mar 2015
15.500
Dec 2015
15.500
Dec 2016
15.500
Dec 2017
3,379,834
16.250
-
-
-
-
-
-
-
-
-
17.625
17.625
17.625
17.625
17.625
19.000
19.000
19.000
Nov 2015
Jan 2016
Jan 2017
Jan 2018
Jan 2019
Jan 2016
Jan 2016
Jan 2016
535,203
18.800
-
-
-
-
-
-
-
-
20.250
Jan 2017
20.250
Jan 2018
20.250
Jan 2019
20.250
Jan 2020
25.250
Dec 2017
25.250
Dec 2018
25.250
Dec 2019
Totals
24,449,914
17,412,353
3,915,037
12.52
11.96
10.46
4.91
3.28
2.40
8.76
8.76
8.76
8.76
7.57
9.96
9.96
9.96
9.96
9.96
8.81
3.35
2.59
9.47
4.22
5.77
6.95
7.94
6.71
8.18
9.40
10
10
10
10
10
10
10
10
10
10
3
10
10
10
10
10
10
10
10
3
10
10
10
10
10
10
10
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
74
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
The expense and equity reserve arising from share-
based payment transactions recognised in the
year ended 31 December 2015 was £776,000 (year
ended 31 December 2014: £583,000).
The weighted average share price at the date of
exercise of options under the EMI Share Option
Scheme was £0.2376.
The weighted average share price at the date of
exercise of options under the Unapproved Scheme
was £0.20.
The weighted average share price at the date of
exercise of options under the Sharesave Scheme was
£0.2185.
The number of options that are exercisable at 31
December 2015 is 9,528,897 (2014: 13,256,263)
An option-holder has no voting or dividend rights in
the Company before the exercise of a Share option.
The weighted average share price of the options
granted during the year of the EMI Option Scheme
was £0.1991 (2014: £0.170) and estimated fair value
of each share option granted was £0.07234 (2014:
£0.0964).
The weighted average share price of the options
granted during the year in the Unapproved Share
Option Scheme was £0.2075 (2014: £0.180) and the
estimated fair value of each share option granted
was £0.0622 (2014: £0.03875).
The weighted average share price at grant date of
the Sharesave Scheme was £0.234 (2014:£0.195) and
the estimated fair value of each share option was
£0.0947 (2014:£0.0757). It is assumed that 75% of
members will remain in the Group after three years.
A 1.78% (2014: 1.78%) risk-free interest rate has been
assumed for all three schemes.
This estimated fair value was calculated by applying
a Black-Scholes option pricing model. In the
absence of a liquid market for the share capital of
the Group, the expected volatility of its share price
is difficult to calculate. Therefore the Directors have
considered the expected volatility used by listed
entities in similar operating environments to calculate
the expected volatility.
plc Annual Report 2015 75
23. Subsidiaries of the Group
The principal subsidiaries of the Group, all of which are private companies limited by shares, as at 31 December
2015 are as follows:
Country
of registration
or incorporation
Principal
activity
Percentage of
Ordinary Shares
held by Company
Epic Group Limited
England and Wales
Holding company
gomo Learning Limited
England and Wales
Mobile e-learning
Leo Learning Limited
England and Wales
Bespoke e-learning
Leo Learning Ag (formerly
Line Communications Ag)
Switzerland
Bespoke e-learning
Leo Learning Inc
USA
Bespoke e-learning
Preloaded Limited
England and Wales
Educational Games
Learning Technologies
Group (Trustee) Limited
England and Wales
Employee Benefit Trust
Eukleia Training Limited
England and Wales
Bespoke e-learning
Line Communications
Holdings Limited
Line Communications
Group Limited
England and Wales
Dormant
England and Wales
Dormant
Line Learning Limited
England and Wales
Dormant
Line On-Line Limited
England and Wales
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The accounting reference date of each of the subsidiaries is coterminous with that of the Company.
76
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
24. Reserves
The share premium account represents the amount
received on the issue of ordinary shares by the
Company in excess of their nominal value and is
non-distributable.
The merger relief reserve arose on the acquisition
of Leo Learning Limited (formerly Epic Performance
Improvement Limited) by Epic Group Limited in
1996, and the Company’s reverse acquisition of Epic
Group Limited.
The reverse acquisition reserve was created in
accordance with IFRS3 ‘Business Combinations’.
The reserve arises due to the elimination of the
Company’s investment in Epic Group Limited. Since
the shareholders of Epic Group Limited became
25. Related party transactions
Amount owing to joint venture:
Current
Trade balances
the majority shareholders of the enlarged group,
the acquisition is accounted for as though there
is a continuation of the legal subsidiary’s Financial
Statements. In reverse acquisition accounting, the
business combination’s costs are deemed to have
been incurred by the legal subsidiary.
The share-based payment reserve arises from the
requirement to value share options in existence at
the grant date (see Note 22).
The translation reserve represents cumulative foreign
exchange differences arising from the translation of
the Financial Statements of foreign subsidiaries and is
not distributable by way of dividends.
31 Dec 2015
£’000
31 Dec 2014
£’000
2
-
The amounts due to related parties were unsecured, interest-free and repayable on demand.
Balances and transactions between the Company
and its subsidiaries are eliminated on consolidation
and are not disclosed in this Note. Balances and
transactions between the Group and other related
parties are disclosed below.
Remuneration of Directors and other
transactions
During the year there were no material transactions
between the Company and the Directors, other than
their emoluments (disclosed in Note 7). The Directors
of the Company are considered to be the key
management personnel of the entity.
During the normal course of business, the Group
purchased translation and accommodation services
from RWS Group Limited totalling £286,000 in the
year ended 31 December 2015 (2014: £185,000).
Andrew Brode is the Chairman of RWS Group Limited.
The amount due/accrued to RWS Group Limited at
31 December 2015 was £57,000 (31 December 2014:
£35,000). These balances are included in trade and
other payables (refer to Note 18).
plc Annual Report 2015 77
Transactions with joint venture
In the year ended 31 December 2015, the Group
invested an additional capital sum of 232,000 BRL
(approximately £46,000) in its joint venture, LEO Brazil,
alongside that of the other party to the joint venture.
26. Dividends paid
Final dividend paid
Interim dividend paid
31 Dec 2015
£’000
31 Dec 2014
£’000
248
200
448
-
107
107
On 30 October 2015, the Company paid an interim dividend of 0.05 pence per share (2014: 0.03 pence per
share). The Directors propose to pay a final dividend of 0.10 pence per share for the year ended 31 December
2015, equating to a total payout in respect of the year of 0.15 pence per share (2014: 0.10 pence per share). The
final dividend paid in 2015 relates to the year ending 31 December 2014.
27. Financial instruments
The Group’s activities are exposed to a variety of
market risk (including foreign currency risk, interest
rate risk and equity price risk), credit risk and liquidity
risk. The Group’s overall financial risk management
policy focuses on the unpredictability of financial
markets and seeks to minimise potential adverse
effects on its financial performance.
(a) Financial risk management policies
The Group’s policies in respect of the major areas of
treasury activity are as follows:
(i) Market risk
(i) Foreign currency risk
The Group is exposed to foreign currency risk on
transactions and balances that are denominated in
currencies other than Pounds Sterling. The currencies
giving rise to this risk are primarily the United States
Dollar, Swiss Franc, Euro and the Brazilian Real.
Foreign currency risk is monitored closely on an
ongoing basis to ensure that the net exposure is at
an acceptable level.
The Group maintains a natural hedge whenever
possible, by matching the cash inflows (revenue
stream) and cash outflows used for purposes such as
capital and operational expenditure in the respective
currencies.
78
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end
of year were as follows:
31 December 2015
Financial assets
Financial liabilities
31 December 2014
Financial assets
Financial liabilities
United States
Dollar
£’000
Brazilian
Real
£’000
Euro
£’000
Swiss
Francs
£’000
906
195
1,078
238
-
-
16
-
108
-
19
-
46
-
70
193
Total
£’000
1,060
195
1,183
431
Foreign currency risk sensitivity analysis
The following table details the sensitivity analysis to possible changes in the relative values of foreign currencies to
which the Group is exposed as at the end of each year, with all other variables held constant:
Effects on profit after taxation/equity
United States Dollar
- Strengthened by 10%
- Weakened by 10%
Brazilian Real
- Strengthened by 10%
- Weakened by 10%
Euro
- Strengthened by 10%
- Weakened by 10%
Swiss Franc
- Strengthened by 10%
- Weakened by 10%
31 Dec 2015
increase/(decrease)
£’000
31 Dec 2014
increase/(decrease)
£’000
71
(71)
-
-
11
(11)
5
(5)
84
(84)
15
(15)
2
(2)
12
(12)
plc Annual Report 2015 79
(ii) Interest rate risk
Interest rate risk is the risk that the fair value or
future cash flows of a financial instrument will
fluctuate because of changes in market interest
rates.
Interest rate risk sensitivity analysis
As the Group has no third party borrowings, a
100 basis points strengthening/weakening of the
interest rate as at the end of each year would have
immaterial impact on profit after taxation and/or
equity. This assumes that all other variables remain
constant.
(ii) Credit risk
The Group’s exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade
and other receivables. The Group manages its
exposure to credit risk by the application of credit
approvals, credit limits and monitoring procedures
on an ongoing basis. For other financial assets
(including cash and bank balances), the Group
minimises credit risk by dealing exclusively with
high credit rating counterparties.
The Group establishes an allowance for
impairment that represents its estimate of
incurred losses in respect of the trade and
other receivables as appropriate. The main
components of this allowance are a specific loss
component that relates to individually significant
exposures, and a collective loss component
established for groups of similar assets in
respect of losses that have been incurred but
not yet identified. Impairment is estimated by
management based on prior experience and the
current economic environment.
Credit risk concentration profile
Apart from one customer, which constituted
approximately 12% at 31 December 2015 (2014:
14%) of the Group’s trade receivables at that
date, the Group did not have significant credit risk
exposure to any single counterparty or any group
of counterparties having similar characteristics. The
Group defines major credit risk as exposure to a
concentration exceeding 10% of a total class of such
asset.
Exposure to credit risk
As the Group does not hold any collateral, the
maximum exposure to credit risk is represented by
the carrying amount of the financial assets as at the
end of each reporting period.
The exposure of credit risk for trade receivables by geographical region is as follows:
United Kingdom
United States
Europe
Allowance for impairment losses
31 Dec 2015
£’000
31 Dec 2014
£’000
3,645
2,463
482
114
(40)
291
18
(10)
4,201
2,762
80
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
Ageing analysis
The ageing analysis of the Group’s trade receivables is as follows:
31 Dec 2015
£’000
31 Dec 2014
£’000
2,751
1,246
1,279
211
4,241
1,287
239
2,772
(b) Capital risk management
The Group defines capital as the total equity of
the Group attributable to the owners of the parent
Company and net funds. The Group’s objectives
when managing capital are to safeguard its ability
to continue as a going concern in order to provide
returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital
structure to reduce the cost of capital and to provide
funds for merger and acquisition activity.
During 2015, the Group undertook a share placing
of £7.5 million primarily in order to part finance the
acquisition of Eukleia Training Limited. The Group has
no external debt finance and is not subject to any
external capital requirements.
The Company made dividend distributions of
0.12 pence per share during the year ended 31
December 2015 (2014: 0.03 pence per share).
Total equity increased from £14.4 million to £25.5
million during the year and net funds increased from
£4.4 million to £7.3 million.
Not past due
Past due:
- Less than three months
- Three to six months
Gross amount
Trade receivables that are individually impaired were
those in significant financial difficulties and have
defaulted on payments. These receivables are not
secured by any collateral or credit enhancement.
Collective impairment allowances are determined
based on estimated irrecoverable amounts from
the sale of goods, determined by reference to
experience of past defaults.
Trade receivables that are past due but not
impaired
The Group believes that no impairment allowance is
necessary in respect of these trade receivables. They
are substantial companies with good collection track
record and no recent history of default.
(iii) Liquidity risk
Liquidity risk is the risk that the Group will not be
able to meet its financial obligations as they fall
due. The Group’s exposure to liquidity risk arises
primarily from mismatches of the maturities of
financial assets and liabilities.
The Group maintains a level of cash and
cash equivalents and bank facilities deemed
adequate by management to ensure, as far as
possible, that it will have sufficient liquidity to meet
its liabilities when they fall due. All Current Liabilities
are repayable within one year.
plc Annual Report 2015 81
31 Dec 2015
£’000
31 Dec 2014
£’000
4,201
1,854
7,305
13,360
2,787
2,787
3,572
2
3,574
2,762
1,806
4,358
8,926
2,802
2,802
3,542
-
3,542
(c) Classification of financial instruments
Financial assets
Loans and receivables financial assets
Trade receivables
Amounts recoverable on contracts
Cash and bank balances
Financial liabilities
Fair value through the profit and loss:
Contingent consideration
At amortised cost
Trade and other payables
Amount owing to related parties
(d) Fair values of financial instruments
The financial assets and financial liabilities maturing
within the next 12 months approximate their fair
values due to the relatively short-term maturity of the
financial instruments.
The group holds certain financial instruments on the
statement of financial position at their fair value. The
following table provides an analysis of those that
are measured subsequent to initial recognition at
fair value through profit or loss, grouped into levels 1
to 3 based on the degree to which the fair value is
observable.
• Level 1 - Fair value measurements are those
derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities:
• Level 2 - Fair value measurements are those
derived from inputs other than quoted prices
included in level 1 that are observable for the
asset or liability, either directly or indirectly (derived
from prices), and
• Level 3 - Fair value measurements are those
derived from the valuation techniques that
include inputs for the asset or liability that are not
based on observable market data (unobservable
inputs). The fair value of the contingent
consideration is calculated using earnout metrics
and related actual and forecast results.
There have been no transfers between these
categories in the current or preceding year.
82
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
2015
Contingent consideration
2014
Contingent consideration
Level 1
£’000
Level 2
£’000
Level 3
£’000
-
-
-
-
-
-
-
-
2,787
2,787
2,802
2,802
Total
£’000
2,787
2,787
2,802
2,802
28. Commitments
The Group had no material capital commitments contracted but not provided for in the Financial Statements.
Operating lease payments represent rental payable by the Group for its office properties.
The amounts of minimum lease payments under non-cancellable operating leases are as follows:
Operating leases which are due:
Within one year
In the second to fifth years inclusive
Over five years
31 Dec 2015
land and
buildings
£’000
31 Dec 2014
land and
buildings
£’000
473
704
616
1,793
312
455
-
767
plc Annual Report 2015 83
29. Acquisitions
Eukleia Training Limited
On 31 July 2015, the Company acquired 100% of
the issued share capital of Eukleia Training Limited
(’Eukleia’), a provider of e-learning services to the
financial services sector.
The initial consideration comprised £6,822,000 cash,
and £1,500,000 in newly issued LTG shares.
Further performance based payments, capped at
£3,500,000 are payable on the achievement of
demanding revenue growth targets in each of the
years ending 31 December 2016 and 2017. Of this
contingent consideration up to £3,150,000 is payable
to the vendors of Eukleia.
Of the potential contingent consideration payable
to the vendors of Eukleia, £1,872,000 has been
recognised as a cost of acquisition, reflecting the
discounted value of future estimated payments over
the next 2 years. A finance expense of £80,000 in
the year reflects the prorated finance charge for
the discounted element of the contingent deferred
consideration, discounted at 10%. Together these
liabilities of £1,872,000 are held on the balance sheet
under long-term liabilities (see Note 19). Contingent
consideration to vendors is payable in cash with LTG
having the option to settle 25% of the consideration
in LTG shares.
The remaining £350,000 of contingent consideration
is payable to Eukleia staff, the earnout criteria
being aligned with the same revenue targets as the
vendors. This earnout bonus will be charged to the
Statement of Comprehensive Income as the benefit
accrues and does not form part of the capitalised
consideration.
Acquisition costs of £234,000 were expensed in the
year.
The following table summarises the consideration
paid for Eukleia, the fair value of assets acquired and
liabilities assumed at the acquisition date.
Consideration
Cash
Equity instruments (6,818,182 ordinary shares)
Contingent consideration due in 2017
Contingent consideration due in 2018
Total consideration
Fair value
£’000
6,822
1,500
819
1,053
10,194
84
plc Annual Report 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
Recognised amounts of identifiable assets acquired and liabilities assumed
Book value
£’000
Fair value
£’000
Cash and cash equivalents
Property, plant and equipment
Internally generated intangible assets
Gross trade and other receivables
Trade and other payables
Amount recoverable on contracts
Corporation tax
Deferred tax liabilities
Deferred tax liabilities on acquisition
Intangible assets identified on acquisition
Total identifiable net assets
Goodwill
Total
1,204
186
252
1,608
(1,330)
(14)
(8)
(68)
-
-
1,830
1,204
186
252
1,608
(1,330)
(14)
(8)
(68)
(932)
4,659
5,557
4,637
10,194
The goodwill arising is attributable to the acquired
workforce, anticipated future profit from expansion
opportunities and synergies of the business. Fair
value adjustments have been recognised for
acquisition-related intangible assets and related
deferred tax and in alignment with accounting
policies.
Acquisition related intangible assets of £4.4 million
relate to the valuation of the customer relationships
which are amortised over a period of five years and
£0.3 million which relates to the value of the Eukleia
brand and is amortised over five years.
A deferred tax liability of £0.9 million in respect of the
acquisition-related intangible assets was established
on acquisition (refer to Note 17). None of the goodwill
is expected to be deductible for income tax
purposes.
Goodwill arising from the acquisition has been
allocated to the Eukleia CGU.
Eukleia contributed £2.5 million of revenue for the
period between the date of acquisition and the
balance sheet date and £0.4 million of profit before
tax. If the acquisition of Eukleia had been completed
on the first day of the financial year, Group revenues
would have been £3.7 million higher and group profit
attributable to equity holders of the parent would
have been £0.5 million higher.
Details regarding the strategic decision to acquire
Eukleia can be found in the Chairman’s statement
and Strategic report on pages 4 and 9 respectively.
plc Annual Report 2015 85
30. Events since the reporting date
On 29 January 2016, LTG acquired the entire issued
share capital of Rustici Software LLC (‘Rustici’),
the global market leader in digital learning
interoperability for an initial consideration of USD
26.0 million of which USD 20.0 million was paid in
cash and USD 6.0 million in newly issued LTG shares.
Cash consideration was adjusted to take account of
surplus cash in Rustici at completion.
Further performance based payments, capped at
USD 11.0 million, are payable to Rustici vendors and
key employees based on ambitious revenue growth
targets in each of the years ending 31 December
2016, 2017 and 2018, payable with up to 25% in new
LTG shares at the option of the Company, and the
remainder in cash.
On an estimated equivalent basis to LTG’s
accounting policies under IFRS, Rustici generated
unaudited revenues of USD 6.6 million and EBITDA of
USD 2.7 million in the year-ended 31 December 2015.
It is anticipated that there will be Goodwill arising on
the acquisition.
On 29 January 2016, LTG also invested USD 3.0 million
in cash in Watershed Systems Inc (‘Watershed’), the
developer of the next generation learning analytics
platform. Following an additional investment of USD
1.0 million by Launch Tennessee, a public-private
partnership, LTG’s investment represents 27.3% of the
share capital of the company. Watershed will be
accounted for as an associate.
The above transactions were part funded by a USD
20.0 million term loan provided by Barclays Bank plc.
The loan is amortised over 5 years and repayable
in quarterly instalments with a final bullet payment
in January 2019. Interest is payable based on USD
LIBOR, plus a 2.0% margin and the loan is subject to
various financial covenants.
plc Annual Report 2015 86
COMPANY
FINANCIAL
STATEMENTS
plc Annual Report 2015 87
COMPANY STATEMENT OF FINANCIAL POSITION (Registered number: 07176993)
As at 31 December 2015
Note
31 Dec 2015
£’000
31 Dec 2014
£’000
Fixed assets
Investment in subsidiaries
Current assets
Debtors
Cash and bank balances
Creditors
Amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors
Amounts falling due after more than one year
Net assets
Capital and reserves
Share capital
Share premium account
Share based payments reserve
Retained profits
4
5
9
10
8
8
8
28,431
28,431
733
418
1,151
858
858
293
28,724
2,382
26,342
1,506
21,799
1,555
1,482
26,342
17,482
17,482
2,158
31
2,189
1,393
1,393
796
18,278
1,498
16,780
1,329
13,098
847
1,506
16,780
The Notes on pages 90 to 98 form an integral part of these Financial Statements.
The Financial Statements on pages 87 to 98 were authorised for issue by the Board of Directors on 29 March 2016 and
were signed on its behalf by:
Neil Elton
Group Finance Director
88
plc Annual Report 2015
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
Note
Share capital
£’000
Share
premium
£’000
Share based
payments
reserve
£’000
At 1 January 2014
1,034
1,159
547
Profit for the
year
Other
comprehensive
income
Total
comprehensive
income for the
period
-
-
-
Issue of shares
7
295
Costs of issuing
shares
Payment of
dividends
Share based
payment charge
credited to
equity
Transfer on
exercise and
lapse of options
Transactions with
owners
At 31 December 2014
12
-
-
-
-
-
-
-
12,211
(272)
-
-
-
-
-
-
-
-
-
583
(283)
300
847
295
1,329
11,939
13,098
Retained
profits
£’000
(441)
2,054
Total
£’000
2,299
2,054
-
-
2,054
2,054
-
-
(107)
-
-
(107)
1,506
12,506
(272)
(107)
583
(283)
12,427
16,780
plc Annual Report 2015 89
Retained
profits
£’000
1,506
2,054
Total
£’000
16,780
2,054
-
-
424
424
-
-
(448)
-
-
9,135
(257)
(448)
776
(68)
(448)
9,138
Note
Share capital
£’000
Share
premium
£’000
Share based
payments
reserve
£’000
At 31 December 2014
1,329
13,098
847
Profit for the
year
Other
comprehensive
income
Total
comprehensive
income for the
period
-
-
-
Issue of shares
7
177
-
-
-
-
12
Costs of issuing
shares
Payment of
dividends
Share based
payment charge
credited to
equity
Transfer on
exercise and
lapse of options
Transactions with
owners
At 31 December
2015
-
-
-
8,958
(257)
-
-
-
-
-
-
-
-
-
776
(68)
708
177
8,701
1,506
21,799
1,555
1,482
26,342
90
plc Annual Report 2015
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2015
1. General information
The Company is a public limited company,
which is listed on the AIM Market of the London
Stock Exchange and domiciled in England and
incorporated and registered in England and Wales.
The address of its registered office is 52 Old Steine,
Brighton, East Sussex, BN1 1NH. The registered number
of the Company is 07176993.
2. Summary of significant accounting
policies
(a) Basis of preparation
The Company’s Financial Statements have been
prepared in accordance with applicable law and
accounting standards in the United Kingdom and
under the historical cost accounting rules (Generally
Accepted Accounting Practice in the United
Kingdom).
The Company’s Financial Statements were previously
prepared in accordance with International
Financial Reporting Standards as adopted by
the European Union (IFRSs as adopted by the EU),
IFRIC interpretations and the Companies Act 2006
applicable to companies reporting under IFRS.
Following the Company’s acquisition of Epic Group
Limited in November 2013, the Directors have
continued to apply IFRS in the preparation of the
Consolidated Financial Statements of the Group but
adopted Generally Accepted Accounting Practice
in the United Kingdom for the preparation of the
Company’s Financial Statements. This change has
had an impact on share premium whereby the
reverse acquisition of Epic Group Limited has been
accounted for at par value with no share premium.
Under IFRS the acquisition is accounted for at the fair
value of the consideration paid as described in Note
2 (a) to the Consolidated Financial Statements.
The Directors have assessed the Company’s ability to
continue in operational existence for the foreseeable
future in accordance with the FRC Going Concern
and Liquidity Risk guidance (October 2009). It is
considered appropriate to continue to prepare the
Financial Statements on a going concern basis.
These financial statements have been prepared
in accordance with applicable United Kingdom
accounting standards, including Financial Reporting
Standard 102 – ‘The Financial Reporting Standard
applicable in the United Kingdom and Republic
of Ireland’ (‘FRS 102’), and with the Companies
Act 2006. The financial statements have been
prepared on the historical cost basis except for the
modification to a fair value basis for certain financial
instruments as specified in the accounting policies
below.
This is the first year in which the financial statements
have been prepared under FRS 102. Refer to Note 14
for an explanation of the transition.
The Company has taken advantage of Section 408
of the Companies Act 2006 and has not included a
Profit and Loss account in these separate Financial
Statements. The profit attributable to members of the
Company for the year ended 31 December 2015 is
£424,000 (year ended 31 December 2014: profit of
£2,054,000).
The company has taken advantage of the following
disclosure exemptions in preparing these financial
statements, as permitted by FRS 102 “The Financial
Reporting Standard applicable in the UK and
Republic of Ireland”:
• the requirements of Section 7 Statement of Cash
Flows
• the requirements of Section 11 Financial
Instruments
(b) Revenue recognition
Revenue is stated net of Value Added Tax and net
of any applicable discounts or rebates. Revenue is
recognised for the rendering of services when all the
following conditions are satisfied:
• The amount of revenue can be measured reliably
• It is probable that the economic benefits
associated with the transaction will flow to the
Company.
plc Annual Report 2015 91
(c) Interest revenue
Interest revenue is accrued on a time basis, by
reference to the principal outstanding and the
effective interest rate.
(d) Fixed asset investments
Fixed asset investments in Group undertakings are
carried at cost less any provision for impairment.
constructive obligations to pay further amounts
if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee
service in the current and prior years. The Company’s
contributions to defined contribution plans are
recognised in profit or loss in the year to which they
relate.
(i) Related parties
(e) Foreign currencies
A party is related to the Company if:
Transactions in foreign currencies are recorded
using the rate of exchange ruling at the date of
the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated
using the contracted rate or the rate of exchange
ruling at the balance sheet date and the gains or
losses on translation are included in the profit and
loss account.
(f) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand,
bank balances, deposits with financial institutions
and short-term, highly liquid investments that are
readily convertible to known amounts of cash and
which are subject to an insignificant risk of change in
value.
(g) Income taxes
The charge for taxation is based on the profit/
loss for the year and takes into account taxation
deferred because of timing differences between
the treatment of certain items for taxation and
accounting purposes.
Deferred tax is recognised in respect of all timing
differences between the treatment of certain items
for taxation and accounting purposes which have
arisen but not reversed by the balance sheet date.
(h) Pensions
Defined contribution plans
A defined contribution plan is a pension plan under
which the Company pays fixed contributions into
a separate entity. The Company has no legal or
(i) Directly, or indirectly through one or more
intermediaries, the party:
• Controls, is controlled by, or is under common
control with, the Company (this includes
parents, subsidiaries and fellow subsidiaries);
• Has an interest in the Company that gives it
significant influence over the Company; or
• Has joint control over the Company;
(ii) The party is an associate of the Company;
(iii) The party is a joint venture in which the
Company is a venturer;
(iv) The party is a member of the key
management personnel of the Company or its
parent;
(v) The party is a close member of the family of
any individual referred to in (i) or (iv);
(vi) The party is an entity that is controlled, jointly
controlled or significantly influenced by, or for
which significant voting power in such entity
resides with, directly or indirectly, any individual
referred to in (iv) or (v); or
(vii) The party is a post-employment benefit plan
for the benefit of employees of the entity, or of
any entity that is a related party of the entity.
Close members of the family of an individual are
those family members who may be expected to
influence, or be influenced by, that individual in their
dealings with the Company.
92
plc Annual Report 2015
NOTES TO THE COMPANY FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
(j) Share-based payment arrangements
Equity-settled share-based payments to employees
and others providing similar services are measured
at the fair value of the equity instruments at the grant
date. Details regarding the determination of the fair
value of equity-settled share-based transactions
are set out in Note 22 to the Consolidated Financial
Statements.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based
on the entity’s estimate of equity instruments that
will eventually vest, with a corresponding increase
in equity. At the end of each reporting period, the
entity revises its estimate of the number of equity
instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised
in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding
adjustment to other reserves.
3. Segment reporting
The principal activity of the Company is that of
a holding company for the Group, as well as
performing all administrative, corporate finance,
strategic and governance functions of the Group.
The Directors consider this to constitute one
reportable segment.
plc Annual Report 2015 93
31 Dec 2015
£’000
31 Dec 2014
£’000
17,482
10,949
-
28,431
-
-
-
3,901
13,581
-
17,482
-
-
-
28,431
17,482
4. Investment in subsidiaries
Cost
At 1 January
Additions
Disposals
At 31 December
Amortisation/impairment:
At 1 January
Provision for impairment
Disposals
At 31 December
Net Book Value
Details of the Company’s acquisitions during the year ended 31 December 2015 are set out in Note 29 to the Consolidated
Financial Statements.
Details of the Company’s subsidiaries as at 31 December 2015 are set out in Note 23 to the Consolidated Financial Statements.
94
plc Annual Report 2015
NOTES TO THE COMPANY FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
5. Debtors
Amounts due from subsidiary undertakings
Deferred tax asset (see Note 6)
Other debtors
31 Dec 2015
£’000
31 Dec 2014
£’000
602
53
78
733
2,079
35
44
2,158
Deferred tax includes £53,000 (2014: £35,000) falling due after more than one year.
6. Deferred tax assets
At 1 January
Deferred tax credit on share options in issue
7. Share capital
Details of the Company’s authorised, called-up and
fully paid share capital are set out in Note 21 to the
Consolidated Financial Statements.
The ordinary shares of the Company carry one
vote per share and an equal right to any dividends
declared.
8. Reserves
The share-based payment reserve arises from the
requirement to value share options in existence at
the fair value at the date they are granted.
The share premium account represents the amount
received on the issue of ordinary shares by the
Company in excess of their nominal value and
31 Dec 2015
£’000
31 Dec 2014
£’000
35
18
53
-
35
35
is non-distributable. In relation to the Company’s
reverse acquisition of Epic Group Limited (‘Epic’),
as the Company secured more than a 90% equity
holding in Epic on terms that the consideration for
the shares allotted was provided for the transfer to
the Company of equity shares in Epic, section 610
of the Companies Act 2006 does not apply to the
premium on those shares. Accordingly, the share
issue has been accounted for at par value with no
share premium.
plc Annual Report 2015 95
9. Creditors: amounts falling due within one year
Trade creditors
Contingent consideration
Other creditors and accruals
31 Dec 2015
£’000
31 Dec 2014
£’000
6
405
447
858
16
1,290
87
1,393
Details of the Company’s contingent consideration as at 31 December 2015 are set out in Notes 18 and 19 to the
Consolidated Financial Statements.
10. Creditors: amounts falling due after more than one year
Contingent consideration
31 Dec 2015
£’000
31 Dec 2014
£’000
2,382
1,498
The interest expense relating to the movement in present value of contingent consideration in the year ending 31
December 2015 amounted to £195,000 (2014: £162,000).
11. Related party transactions
The only key management personnel of the Company are the Directors. Details of their remuneration are
contained in Note 7 to the Consolidated Financial Statements.
The following transactions with subsidiaries occurred in the year:
Opening amount due from related parties
Amounts (repaid)/advanced by/from related parties
Closing amount due from related parties
31 Dec 2015
£’000
31 Dec 2014
£’000
2,079
(1,477)
602
(1,573)
3,652
2,079
The amounts owing to/from related parties are unsecured, interest-free and repayable on demand.
96
plc Annual Report 2015
NOTES TO THE COMPANY FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
12. Share-based payments
Details of the group share based plans are contained in Note 22 to the Consolidated Financial Statements.
The company operates an Approved share option plan. The company’s share-based payment arrangements
are summarised below.
Number of
options
2015 Weighted
average
exercise price
(pence)
Number of
options
2014 Weighted
average
exercise price
(pence)
Approved share option plan - Enterprise Management Incentive (‘EMI’):
At 31 December
3,000,000
5.88
3,000,000
5.88
At 31 December 2015, options granted to subscribe for ordinary shares of the Company, and the valuation
criteria are as follows:
Date of grant
Approved
Scheme
Exercise Price
(pence)
Remaining
vesting
period
Fair value
of options
(pence)
Life (years)
Volatility
Nov 2013
Totals
3,000,000
5.88
Nov 2016
10.46
10
45%
3,000,000
An option-holder has no voting or dividend rights in
the Company before the exercise of a share option.
The number of options that are exercisable at 31
December 2015 is nil (2014: Nil).
No options were granted, forfeited, expired or
exercised during the year (2014: nil)
A 1.78% (2014: 1.78%) risk-free interest rate has been
assumed for all three schemes.
This estimated fair value was calculated by applying
a Black-Scholes option pricing model. In the
absence of a liquid market for the share capital of
the Group, the expected volatility of its share price
is difficult to calculate. Therefore the Directors have
considered the expected volatility used by listed
entities in similar operating environments to calculate
the expected volatility.
Share based payments which were expensed in
the entity and taken to equity in the year ended 31
December 2015, amounted to £135,000 (year ended
31 December 2014: £nil). The remaining difference
between the share based payments which were
expensed as per Note 22 and the entity, relate to the
options over the Company’s share capital held by
employees of subsidiaries.
plc Annual Report 2015 97
13. Dividends paid
Final dividend paid
Interim dividend paid
31 Dec 2015
£’000
31 Dec 2014
£’000
248
200
448
-
107
107
14. Subsequent events
Disclosures in relation to events subsequent to 31 December 2015 are shown in Note 30 to the Consolidated
Financial Statements.
98
plc Annual Report 2015
NOTES TO THE COMPANY FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2015
15. Transition to FRS 102
The company has adopted FRS 102 for the year ended 2015 and has restated the comparative prior year
amounts.
Transition to FRS 102 – reconciliations
Note 1. During the year, management reviewed the deferred tax asset that relates to the future tax relief
available on the exercise of share options that is recognised in the entity, and concluded that it should
be recognised in the subsidiary where the tax relief will be realised.
Restated company statement of financial position:
Original shareholders’ funds
Reallocation of deferred tax of share based options
Note 1
Restated shareholders’ funds
Restated company profit and loss for the year ended 31 December 2014:
Original profit on ordinary activities before tax
Original tax on ordinary activities
Reallocation of deferred tax of share based options
Note 1
Restated profit for the financial year
Apart from the above change there were no further material differences.
31 Dec
2014
£’000
16,937
(157)
16,780
1 Jan
2014
£’000
2,299
-
2,299
£’000
2,019
192
(157)
35
2,054
plc Annual Report 2015 99
COMPANY INFORMATION
Directors
Andrew Brode
Non-executive Chairman
Harry Hill
Non-executive Deputy Chairman
Jonathan Satchell
Chief Executive Officer
Neil Elton
Group Finance Director
Piers Lea
Chief Strategy Officer
Dale Solomon
Chief Operating Officer
Leslie-Ann Reed
Non-executive Director
Company Secretary
Neil Elton
Company number
07176993
Registered address
52 Old Steine
Brighton
East Sussex
BN1 1NH
Independent auditors
Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Nominated adviser and broker
Numis Securities Limited
10 Paternoster Square
London
EC4M 7LT
Legal advisers
DWF LLP
Bridgewater Place
Water Lane
Leeds
LS11 5DY
Registrars
Computershare Investor Services plc
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
Principal bankers
Barclays Bank plc
1 Churchill Place
London
E14 5HP
Communications consultancy
Hudson Sandler Limited
29 Cloth Fair
London
EC1A 7NN
UK
London
Brighton
Sheffield
Brazil
Rio de Janeiro
Sao Paulo
USA
New York
Nashville
Europe
Zürich
learning
technologies
group
ltgplc.com