Learning Technologies Group plc
ANNUAL
REPORT
2018
For the year ended 31 December 2018 Introduction plc Annual Report 2018
plc Annual Report 2018 Introduction
LEARNING FOR IMPROVED
BUSINESS PERFORMANCE
LTG integrates a group of best-in-class product and service companies in
talent and learning. We have proven ability to close the gap between an
organisation’s current and future workforce capability.
Our software and service offerings extend beyond customers’ direct workforces, into their supply and distribution chains. This
reflects the evolution in traditional boundaries of learning and talent management. The sophistication of our products and their
ability to be configured to other systems enables us to fit solutions into our clients’ processes, not the other way around.
This provides competitive advantage in a supply market which often does not recognise the requirements of
complex organisations, where there are serious consequences if the workforce is not proven to be competent.
CONTENT & SERVICES
SOFTWARE & PLATFORMS
Leading the
learning
revolution
at work
Digital transformation
is fundamentally
changing how
organisations operate
and behave1. As a
result, the workplace
is evolving rapidly.
LTG’s world-class
software and
services help our
customers adapt
to these fast-
moving workplace
demands.
1 Source: Gartner. By 2022, nearly 80% of organisational skills will have to be reprioritised or revisited because of digital business transformation.
Introduction plc Annual Report 2018
plc Annual Report 2018 Introduction
LTG IS AT THE HEART OF
LEARNING AND TALENT
INNOVATION
We focus on real problems that companies and governmental bodies face
around the world, taking great pride in thinking ahead to the next challenge
and its solution.
Innovation is in our DNA – from our investment in R&D to our approach. LTG threads data into the decisions businesses take to
recruit, evolve and empower their people – in every language and region.
The challenge for companies and governmental bodies is dynamic and will not sit still.
TABLE OF CONTENTS
Chairman’s Statement
.....................................................1
Case Studies
......................................................................3
Growth Strategy
...............................................................15
Strategic Review for the year ended
31 December 2018
.........................................................17
Corporate Governance Report
...................................31
Report of the Audit & Risk Committee
........................35
Report of the Remuneration Committee
...................37
Directors’ Report for the year ended
31 December 2018
........................................................43
Directors’ Responsibilities Statement in respect
of the Annual Report and the Financial
Statements
......................................................................45
Independent Auditor’s Report to the Members
of Learning Technologies Group plc
..........................46
Consolidated Statement of Comprehensive
Income
.........................................................................50
Consolidated Statement of Financial Position
.......51
Consolidated Statement of Changes in
Equity
.............................................................................52
Consolidated Statement of Cash Flows
..................53
Notes to the Consolidated Financial
Statements for the year ended 31 December
2018
...............................................................................54
Company Statement of Financial Position
.............94
Company Statement of Changes in Equity
............95
Notes to the Company Financial Statements
for the year ended 31 December 2018
..................96
Company Information
..............................................100
LTG
Focuses on industries where talent and
learning are critical to performance
Collaborates with customers
within multinational companies
and governmental bodies with
wide and diverse audiences and
complex needs
Operates within the fast-
growing learning and talent
management markets
Helps customers scale learning to
support business performance
Supports the talent
retention and
development central to
businesses of the future
Reflects the evolution in traditional
boundaries of learning and talent
management
Understands that
learning does not
stop with the direct
workforce
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plc Annual Report 2018 2
CHAIRMAN’S STATEMENT
The Board is delighted to report a year of increased
recurring revenue, strong margins and cash generation
for Learning Technologies Group plc (‘LTG’) in 2018.
The year was notable for the transformational acquisition of
PeopleFluent Holdings Corp (‘PeopleFluent’) in May 2018. The
addition of PeopleFluent has given LTG a strong foothold in
the adjacent talent software market, complementing the
Group’s strengths in learning software, content and services,
whilst substantially deepening the Group’s presence in the
U.S. market, which accounted for 56% of Group revenues in
2018. PeopleFluent was successfully integrated into the Group
ahead of budget and expectations.
In November 2018, LTG also acquired the remaining 73%
of Watershed Inc (‘Watershed’) that it did not already hold.
Watershed is a leader in the corporate learning analytics
market. Its powerful SaaS platform is used by an increasing
number of large corporates and the Board views this as an
important strategic capability within LTG’s product offering.
Revenues increased by 83% to £93.9 million (2017: £51.4 million)
primarily driven by the acquisition of PeopleFluent and a full-
year contribution by NetDimensions (acquired in March 2017).
LTG delivered strong like-for-like organic revenue growth, on
a constant currency basis, of 9% in our Software & Platforms
division and saw organic revenues (excluding the large one-
off CSL contract) decline by 8% against tough prior year
comparatives when we had delivered exceptional 21% organic
growth. We are focused on delivering strong organic revenue
growth over the medium term, investing substantially in R&D
and business development initiatives as well as incentivising
staff through annual bonuses, sales commissions and Long-
Term Incentive Plans (‘LTIPs’) linked to revenue and profit growth.
Largely as a result of the significant increase in the proportion
of Group revenues now derived from software licence and
support contract sales, recurring revenues increased from
38% in 2017 to 68% in 2018 and represent more than 70% of
Group revenues on an annualised basis. This gives the Group
improved visibility over future revenues.
Adjusted EBIT (refer to the Strategic Review section for
definition) increased by 104% to £27.2 million (2017: £13.3
million) and adjusted EBIT margins have improved from
26% in 2017 to 29.0% in 2018 and we expect sustainable
adjusted EBIT margins in the high twenties in future periods.
Adjusted diluted EPS increased by 68% to 3.2 pence (2017: 1.9
pence). In the five years since LTG listed on the London Stock
Exchange, the Group has delivered compound annual growth
of 48% in adjusted diluted EPS.
Corporate governance
During the year, Harry Hill, Non-executive Deputy Chairman,
retired from the Board. Harry had been on the Board since
the formation of LTG, having founded In-Deed Online PLC
before its merger with Epic Group Limited. Dale Solomon,
Chief Operating Officer, also stepped down from the
Board. Dale had been with the business since 2010 and
provided invaluable insight and drive in helping to grow and
transform the Group, most recently leading the integration
of PeopleFluent. The Board thanks Harry and Dale for their
respective contributions and wishes them the very best for
the future.
Aimie Chapple joined the Board as a Non-executive Director
in September 2018, adding deep industry experience in the
talent and consulting sectors. Aimie was a senior partner
at Accenture and during a 25-year career in consulting led
practices in management consulting, human performance
and innovation. She has extensive experience of operating
in the U.S. and U.K. markets. Aimie chairs the Remuneration
Committee and sits on the Audit Committee.
The Board is actively searching for a fourth Non-executive
Director and I look forward to updating shareholders later
this year.
With effect from September 2018, LTG adopted the QCA
Corporate Governance Code. Further details are provided in
the Corporate Governance section of this report.
Dividend and Annual General Meeting
In light of the results for 2018 and to demonstrate our
confidence in the prospects for the Group in 2019, the Board
is recommending an increased final dividend of 0.35 pence
per share (2017: 0.21 pence per share), giving a total dividend
for the year of 0.50 pence per share (2017: 0.30 pence per
share) representing a 67% annual increase. This final dividend
is subject to shareholder approval at the forthcoming Annual
General Meeting to be held on 5 June 2019.
If approved, the final dividend will be paid on 28 June 2019 to
all shareholders on the register at 7 June 2019.
Current trading and outlook
LTG has made a fundamental transition in 2018 towards a
software-led, licence model delivering high-margin recurring
revenue. The acquisition and successful integration of
PeopleFluent has been central to this shift, extending LTG’s
offering into talent management and significantly growing
the Group’s U.S. revenues. This could not have been achieved
without the dedication and professionalism of all our staff
across the globe and, on behalf of the Board, I would like to
thank them for their efforts during the year.
A good start to the current year, with trading in line with
management expectations and an improving content
projects order book, supports our confidence in further
progress in 2019. This is underpinned by a strong balance
sheet, excellent cash generation, a high proportion of
recurring revenues and a healthy pipeline of attractive
acquisition opportunities.
The Board expects to report enhanced progress during 2019
and considers LTG well placed to achieve our new strategic
goal of run-rate revenues of £200m and run-rate EBIT of at
least £55m by the end of 2021.
Andrew Brode
Chairman
18 March 2019
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CASE STUDIES -
SOFTWARE & PLATFORMS
CASE STUDIES
PeopleFluent
Learning
• Morses Club PLC
PeopleFluent Talent
Manangement
• A medical technology,
services, and solutions
provider
Affirmity
• A U.S. banking
organisation
Vector VMS
• A commercial financial
services company
LEO Learning
• Fidelity International
LEO Learning
• InterContinental Hotels
Group
gomo
• A technology and multi-
industrial leader
Eukleia
• A multinational North
American financial
services company
PRELOADED
• WITHIN
Rustici Software
• CustomGuide
Watershed
• Visa
Morses Club PLC
Meeting stringent regulatory compliance
requirements and providing learning for a
mobile workforce
The challenge
As a regulated lender that is fully authorised by the FCA,
compliance training is business-critical for Morses Club and its
1,942 agents across 98 U.K. locations. However, ensuring that
this large, mostly remote workforce completes the right training
at the right time presented a major challenge – particularly for
monthly compliance training which could only be completed
via managers’ laptops at local branches.
The solution
• Morses Club implemented NetDimensions LMS over a
decade ago to launch and track its training programmes,
making full use of features such as training reminder alerts
and emails.
•
Supplying staff with tablets and introducing mobile
learning app, NetDimensions Mobile, freed up manager
laptops, allowing employees to learn on their own devices
at their own pace.
• NetDimensions Mobile, like NetDimensions LMS, allowed
for full compliance training tracking to ensure the business
can fully evidence competency.
The results
Training completion rates have risen from around 95% to
around 99%. Morses Club reports a 98% pass rate, and has
saved time and money by freeing up managers’ laptops.
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CASE STUDIES -
SOFTWARE & PLATFORMS
CASE STUDIES -
SOFTWARE & PLATFORMS
plc Annual Report 2018 6
A medical technology,
services, and solutions provider
Consolidating and streamlining compensation
management systems to save time and costs
The challenge
A major acquisition required a global medical technology company to
bring two very different compensation models together. With over 100,000
employees, primarily servicing a U.S. customer base, the business also
faced manual workarounds for hundreds of individuals with “special
arrangement” employee compensation plans. In addition, there were
major time constraints due to regulatory filings and year-end bonus
releases, as well as a significant amount of data and around 900 different
metrics to track across their manufacturing divisions.
The solution
PeopleFluent Compensation provided a flexible solution with exceptional
support for change management. It ensured:
•
•
•
•
•
The ability to model mid-year accruals in a very complex scenario
Integration of PeopleFluent’s compensation product into their existing
instance of Workday
The ability to aggregate all job types (e.g. salary, hourly) on one
compensation platform
Support for the high number of metrics-driven incentive plans
Total rewards statements to elevate employee understanding of
compensation.
The results
The business was able to eliminate complicated manual workarounds,
saving many precious hours, and reduce budget overspend. They also:
• Consolidated all compensation plans into one solution
•
•
Reduced risk and human error
Increased transparency into compensation data.
A U.S. banking organisation
Automating complex affirmative action processes
and ensuring 100% compliance
The challenge
Since 2004, Affirmity (previously operating as PeopleFluent) has provided
affirmative action2 software and support for one of the 25 largest U.S. financial
holding companies. The firm operates more than 400 banking centres and has
a long history of investing in diversity in its workforce, business and community
outreach, and supplier base. The bank needed to automate preparation of its
Affirmative Action Plans (AAPs) and ensure 100% technical compliance. But it
would take months of effort to gather and reconcile workforce data, conduct
the required analyses and prepare narratives.
The solution
The bank outsourced AAP generation to Affirmity’s expert consultants, who
produced audit-ready plans for all locations within 60 days, including data
cleansing and reconciliation, adverse impact analysis, and compensation
analysis. Affirmity also:
•
Provided training to their compliance and HR teams on good faith efforts3,
recruiting compliance and other important regulatory issues
• Conducted comprehensive pay equity studies to deliver insight into
potential imbalances and supported the customer’s efforts to ensure
employees receive equitable pay
•
Supported robust reporting against diversity initiatives, eliminating the need
to replicate compliance data in reports prepared for executive leadership.
The results
Today, the bank relies on a single data source, prepared by Affirmity
experts, that provides total visibility of workforce diversity across the
organisation and at each stage in the talent lifecycle. Their HR and
business leaders use the data to drive and track initiatives to foster a
diverse and inclusive workplace. In recognition of their successful diversity
programme, the bank has twice been ranked among the top 10 by
leading diversity publication, DiversityInc®.
2. Affirmative action refers to the practice of favouring individuals belonging to groups that have previously been discriminated against.
3. Good faith efforts in affirmative action are actions taken to prevent discrimination in the hiring process through recruitment and outreach for
minorities, women, veterans and individuals with disabilities.
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CASE STUDIES -
SOFTWARE & PLATFORMS
CASE STUDIES -
CONTENT & SERVICES
plc Annual Report 2018 8
A commercial financial
services company
Automating compliance and gaining visibility
into a growing contingent workforce
The challenge
For more than a century, this U.S.-based financial services organisation has met
the needs of individuals and businesses for banking, wealth management,
insurance, and other financial services, and now maintains over $35-billion in
assets. To efficiently operate its 500+ branches and meet customer expectations,
it relies on a growing contingent labour pool of administrative,
IT, and other professionals. However, the organisation struggled with:
• Manual systems that couldn’t scale with the expanded need for
contingent labour
• Compliance requirements that were documented manually
• A lack of visibility into headcount and spend which was hindering
strategic planning.
The solution
•
VectorVMS’ implementation services team worked closely with the
organisation to configure the VectorVMS vendor management system
according to their workflows, compliance needs, timesheets and invoicing
process.
•
Training system administrators, hiring managers, HR service team and
staffing partners ensured a smooth transition from the previous system.
The results
With a single, centralised system of record, the organisation is now able to
automate its rigorous compliance requirements review, as well as analyse spend
across the company – by position, branch location, hiring manager, staffing
supplier and more. With this granular visibility, it can manage costs effectively and
maximise value across the company.
Built-in reporting enables the company to also track the performance of their
staffing suppliers using clear vendor scorecards that capture time-to-fill, quality of
candidate, compliance and other critical supplier metrics. This data ensures the
ability to define and implement a tiered system for staffing suppliers. Its preferred,
or Tier One, suppliers receive requisitions first – meaning the organisation is able to
find and engage skilled contractors faster and at the most competitive rates.
Fidelity International
Embracing the power of LTG group-selling to deliver a
supercharged learning ecosystem
The challenge
Fidelity International, one of the world’s leading investment management
firms, needed to ensure a larger proportion of their customer-facing staff had
the skills, knowledge and confidence to guide customers on their retirement
investment options.
The solution
• The Retirement Academy is a story-driven solution that delivers emotionally
powerful learning to Fidelity’s people working in the U.K.’s pensions and
retirement business areas.
• Through microlearning, broadcast-quality video drama and animation, the
learning content reflects the choices of a fictional family as they make key
decisions about their personal finances.
• The delivery platform is an ecosystem that makes the most of Fidelity’s
existing LMS and SharePoint platforms whilst integrating gomo Authoring
and Hosting, and Watershed LRS (for learning analytics and business impact
measurement) to create a seamless and continuously improving learning
experience for staff.
The results
The full launch takes place from February-July 2019 to a cohort of
5,500 learners. In addition, in February 2019, LEO Learning launched an
interactive VR 360-degree film experience to the learner cohort as well as
employees of the Workplace Investing Communications & Engagement
team (B2B sales). Early feedback has indicated that the programme is
already having an impact on customer service and product knowledge
confidence. So far, learner feedback has been overwhelmingly positive,
with 96% volunteering to learn more. Fidelity has also noted more learners
increasing their own pension contributions following the pilot.
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CASE STUDIES -
CONTENT & SERVICES
CASE STUDIES -
SOFTWARE & PLATFORMS
plc Annual Report 2018 10
InterContinental Hotels Group
Equipping L&D with the skills to conduct their own
business-impact measurement
The challenge
InterContinental Hotels Group (IHG), a multinational hospitality company
managing more than 5,500 hotels in 100 countries, wanted to improve their
measurement capabilities. Their goal was to move from recording learning
volumes to actually identifying insights into the impact of learning. With
over 400,000 hotel staff, they needed to put in place the policy, processes
and tools required to measure L&D’s (Learning & Development) impact on
individual and business performance.
The solution
• A series of four LEO Learning-led webinars, supplemented by curated
content and formal assessments, explored measurement principles.
•
Several post-work assignments allowed delegates to apply the principles.
• Content solutions integrate with IHG’s existing Learning Experience
Platform (LXP), which allowed participants to develop their own
learning journey.
The results
IHG’s team say they have seen “amazing engagement” with the
programme – 75% of the potential audience logged in for the first webinar,
and participation in the programme was high even though it was not
compulsory. Crucially, more training managers are now seeking the
analytics team’s help to develop truly effective measurement plans for
programmes that are business-critical.
A technology and multi-
industrial leader
Creating a popular video learning platform for a
worldwide workforce
The challenge
Employing over 120,000 staff in 2,000 locations worldwide, the
organisation is a global diversified technology and multi-industrial
leader, producing automotive parts, electronics and climate control
equipment. The organisation wanted to create a culture of continuous
learning for its global employees, primarily based in China, the U.S.
and Ireland, but their existing portal was limited and lacked the ability
to generate learning videos.
The solution
• Using the gomo Video product, the organisation created an
in-house video learning platform. This allowed their Learning
& Development (L&D) team to organise their content into a
consolidated, scalable, on-demand resource, and preserve
subject matter expertise.
• Customisable chaptering and ‘deep search’ functionality allow
users to search to moments in time within videos.
• Cloud-based screen recording makes it simple for L&D as well
as employees to record, upload, share and comment on high-
quality video content.
• Multiple other file types can be added to videos and the library,
including audio files, PowerPoint presentation and PDFs.
• Dispersed learning teams can easily collaborate on content, while
robust analytics help them to produce key data at a granular and
organisation-wide level.
The results
In just 20 months, the number of user-generated videos rocketed from
150 to around 3,000, including 900 hours of SME-led and learner-
generated content. The company’s learning community now has
about 45,000 active users with about 17,000 weekly views and more
than 3,000 comments. In addition, its HR/recruitment team promotes
the learning programme as a way to attract top candidates.
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CASE STUDIES -
CONTENT & SERVICES
CASE STUDIES -
CONTENT & SERVICES
plc Annual Report 2018 12
A multinational North American
financial services company
Rebuilding technologically outdated compliance
training for a user-friendly, mobile-focused experience
The challenge
As one of North America’s biggest banks, and one of the largest
in the world based on market capitalisation, the organisation has
over 80,000 full- and part-time employees serving 16 million clients
in the U.S., Canada and 33 other countries. They wanted to rebuild
their existing course on combating money laundering and terrorist
financing, which was a highly stranded (over 10,000 possible
strand combinations), multi-language Flash course that has had
over four years of layered content updates.
The solution
• Having worked with Eukleia on the original build as well as other
projects, the bank trusted Eukleia to extensively reimagine the
course’s look and feel, and improve the user journey.
•
•
The new course is customised so that learners only receive
the content, scenarios, and assessment questions that apply
to them.
Features simplified learner testing by moving from one lengthy
assessment to per-topic testing.
• Was rebuilt as an accessible HTML5 course that’s future-proofed
for mobile learners.
• Content delivered in English as well as Italian, Dutch and French.
The results
Learner feedback has been very positive with noticeable
improvements on previous versions. For another global client, the
technical stranding process, which profiles roles and takes on board
prior learning at a granular enough level for the regulators, has
saved more than 10,000 working days per year.
WITHIN
Voice-driven Augmented Reality to
create a new type of learning experience
The challenge
WITHIN, the premier destination for innovative, entertaining,
and informative story-based Virtual and Augmented Reality
(VR and AR), was looking for partners to create compelling
content to launch Wonderscope, their iOS app that uses the
power of AR to transform ordinary spaces into extraordinary
stories. WITHIN felt PRELOADED’s expertise in creating family-
focused and immersive content made them perfect
partners to help realise their vision.
The solution
• Using the latest technology in voice-driven AR, A Brief
History of Amazing Stunts empowers the user with
narratives designed to encourage movement, reading
aloud and exploration.
• Built using Apple’s ARKit and available on iOS devices,
this immersive experience uses “spatial storytelling”
techniques to transform ordinary spaces into
extraordinary stories.
• Art direction inspired by vinyl toys uses bright palettes
and distinctive, chunky characters and props to allow
users to take part in three of history’s most impossible
stunts, and ‘meet’ and interact with the real people that
made them happen.
The results
Launching to critical acclaim in November 2018,
Wonderscope: A Brief History of Amazing Stunts won Best
AR at the 2019 Bologna Ragazzi Digital Awards. The app
is rated 4.1 out of 5 stars on the App Store, with extremely
positive user reviews.
“We loved working with PRELOADED.
Everything from their decks, to their
animations, and their interactive
sensibilities surprised us with their joyfulness,
playfulness and minute attention to detail.”
– Jonny Ahdout, Director of Development, WITHIN
“What if you could
give your child an
iPad for an hour
and not feel guilty
about it?... an app
that makes kids
smile and feel
confident as they
read absolutely
feels like a win.”
– VOGUE review
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CASE STUDIES -
SOFTWARE & PLATFORMS
CASE STUDIES -
SOFTWARE & PLATFORMS
plc Annual Report 2018 14
CustomGuide
Ensuring an optimal learning experience and guaranteed
delivery of thousands of courses to a wide variety of systems
Visa
A data-driven learning ecosystem with a Learning
Record Store (LRS) at its heart
The challenge
CustomGuide’s simulation-based training covers 300 skills to help learners
become proficient in software like Windows 10, Excel, Word and PowerPoint.
Traditionally, customers logged in to the CustomGuide LMS to access training,
but as the customer base grew, more customers wanted to import training
into their existing Learning Management Systems (LMSs). CustomGuide’s
attempts to export their course content only met with a 75% success rate.
The solution
•
•
•
•
Rustici Cross Domain (RXD) allows CustomGuide to manage content
from a single, central location and easily share access to third-party
systems as proxy files.
RXD sits on CustomGuide’s servers, which allows them to release,
update and control access to their training content.
RXD saves developer time, freeing them up to work on new projects.
Because CustomGuide is hosting the content centrally on their servers,
they have immediate access to learning data and can fully leverage
their proprietary reporting for all of their customers.
The results
Using RXD, CustomGuide is able to serve customers in whichever platform
they prefer. Since implementing, CustomGuide has:
•
Enjoyed a 100% success rate of delivering their training to their
clients’ LMSs
• Delivered over 10,000 courses and 750,000 tutorials and assessments
•
Served 900 organisations across 80 systems.
• Helped learners around the world average post-assessment scores of
95% after completing CustomGuide training, an improvement of 40%
or higher for most learners.
The challenge
In the midst of industry disruption and an ambitious business
strategy, Visa’s Learning & Development (L&D) team needed
a framework for understanding how they support the overall
business and improve alignment to business goals. In
addition, they wanted to shift L&D from a compliance-driven
to a learner-driven function. However, with multiple learning
tools, including an LMS (Learning Management System) and
an LXP (Learning Experience Platform), they struggled with no
single platform for training and inconsistent reporting.
The solution
•
•
•
Visa’s L&D team established Visa University, a physical
learning hub and a next-generation digital learning
ecosystem powered by xAPI and the Watershed LRS.
The ecosystem brings all learning together so learners
can create their own learning paths and develop skills
they want.
The ecosystem standardises all data points, including all
individual and group progress, to xAPI statements, which
Watershed tracks and visualises.
The results
Visa’s learning ecosystem allows them to better build and
maintain an ongoing culture of learning. Six months after
launch, more than 80% of the company had interacted with
the digital campus. In addition to engagement dramatically
rising, early impacts also include better engagement with
learners around strategic business needs, and enhanced
analytics which help Visa understand learning trends,
correlations and moments of need.
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GROWTH STRATEGY
Learning Technologies Group’s ambition to build a global market leader in
the digital learning and talent management software sector is undiminished.
We will continue to build the business through a mix of organic growth,
strategic cross-selling and acquisitions. This will enable us to continue
providing market-leading, seamless solutions to meet the demanding
expectations of large corporate and government customers
The core focus is to continue to develop and innovate group
brands in the learning and talent software sector.
We seek to broaden capability, extend geographical reach
and increase specialist industry expertise. This means finding
domain-specific businesses in high-consequence industries
(such as pharma, finance, energy and aviation) where
learning and talent is critical to business success.
We will continue to extend our range of software and services to
ensure LTG’s offering is truly comprehensive and differentiated
from the industry. Our base of 2,700 customers is fertile ground
and the demand for services and products being pulled
from across the Group by our larger customers shows what is
possible. We will build on this over the coming years.
With our Group capability to provide insight to customers via
measurement and analytics, first-class customer service,
and a focus on customer results, we will seek to maximise
effectiveness and value for all our stakeholders.
I C S A N D MEASURE
M
E
N
T
T
Y
L
A
N
A
I
S
E
C
V
R
E
S
&
T
N
E
T
N
O
C
S
M
R
O
F
T
A
L
P
&
E
R
A
W
T
F
O
S
Learning services - content and blends, learning campaigns, capability building and
system implementation.
Learning services for global risk and compliance - specialists in training for financial
services and investment banking.
Immersive learning - play with purpose, learning games, augmented and virtual
reality.
Integrated talent management in the cloud - recruitment, performance, succession,
compensation and learning solutions.
Learning creation and distribution - SaaS product for learning creation and
distribution, inclusive of authoring, hosting, and enterprise video.
Technical interoperability - world leader in system interoperability and
technical standards.
Analytics and measurement - industry-leading learning record store with powerful
visualisation for management decision-making.
Workforce compliance and diversity - U.S. market-leader for affirmative action
planning.
Contingent workforce management system - to control costs, maintain compliance,
and drive efficiency.
Learning
services
Risk &
Compliance
Immersive
learning
(Games,
VR & AR)
Learning
creation &
distribution
E N T & SERVIC
T
E
S
N
O
C
Learning
management
Recruitment
S
O
FT
WARE & P L A T
M S
R
O
F
Diversity
Compensation
Performance
Succession
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plc Annual Report 2018
STRATEGIC REVIEW
For the year ended 31 December 2018
Chief Executive’s review
Market overview
In an increasingly fast-moving global service-based economy,
organisations are becoming more aware of the benefit
of improvements in staff performance to their businesses,
particularly in efficiency, customer service and profitability.
There is increasing corporate demand for digital services to
develop staff.
The global corporate training market is estimated to be worth
approximately $365 billion4 and includes many product
and service offerings ranging from traditional formats, such
as classroom training, to various types of learning content
and delivery platforms. LTG is focused on the outsourced
digital learning segment of this market, which is disrupting
the more traditional methodologies and estimated to be
growing at approximately 10% per annum. The industry is
highly fragmented, comprising a multitude of small operators
with each offering a limited range of services. There are few
providers that are able to offer clients truly comprehensive
services, which meet their evolving requirements for data-
driven solutions, and have the scale and in-depth experience
to service large corporations and government organisations.
The complementary talent market is estimated to be worth
more than $6 billion and growing at approximately 9% per
annum5. Talent management software refers to the wide array
of integrated applications that companies use for recruitment,
performance management, training & development,
and compensation management of employees. Talent
management software plays a very important role in keeping
track of individual employees from the date of hiring to the
complete employee lifecycle in the organisation, facilitating
employee engagement and retention as well as helping
companies align their business strategies with the professional
development of their workforce.
Strategic goals
In November 2018, the Group set out its new strategic financial
objectives for the end of 2021. This is the third set of targets
LTG has issued since joining the AIM market five years ago.
Our first target was run-rate revenues of £50 million and EBITDA
margins of 20% by the end of 2018, which we met one year
ahead of plan. In October 2017, LTG announced new strategic
objectives to the end of 2020, to double run-rate revenues
to £100 million and for run-rate EBIT to exceed £25 million,
achieved without significant dilution to shareholders. Following
the acquisition of PeopleFluent in May 2018, the 2020 goal
was achieved more than two years ahead of plan with the
acceleration aided by a placing of new shares, equivalent to
c.15% of issued share capital.
LTG’s new goal is to achieve run-rate revenues of £200 million
and run-rate EBIT of at least £55 million by the end of 2021,
again through a combination of organic growth and strategic
acquisitions that complement the current business. It is
the intention of the Board to finance any acquisitions and
research & development that support the outlined revenue
and EBIT targets through the use of internally generated
operating cash flows and prudent debt financing.
In addition, we will continue to evaluate strategic acquisitions
of scale that may require shareholder financing and would be
additive to these targets. Strict criteria will continue to be used
in assessing all acquisitions, including the financial effects,
integration risk and prospective returns.
Investment case
The market opportunity for LTG is attractive, driven by our
clients’ desire to close the gap between current and future
workforce capability.
Our aim is to build a leading end-to-end workplace digital
talent and learning solutions provider to partner global clients
through the creation, implementation and maintenance
of their integrated talent and learning strategies. Working
as a strategic partner to our clients, we deliver unparalleled
depth in talent management solutions, learning content and
technologies, from enterprise platforms to personalised and
immersive learning experiences.
Our intention is to leverage the technical and professional
capabilities we have already developed by deepening
our presence in specific geographical markets, particularly
the U.S.; expanding our offering in highly-regulated, high-
consequence vertical markets such as healthcare, energy
and aviation; and broadening and deepening our offering to
existing customers.
LTG aims to deliver strong earnings growth over the medium to
long term through a combination of top-line organic growth,
appropriate cost control, investment in innovation, robust
operating cash conversion and strategic M&A as well as
improving the operating business models and performance of
the businesses that we acquire.
Strategy and approach
LTG aims to create a group of market-leading businesses
providing complementary services in the growing learning
and talent technologies sectors 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 solution
for our customers, strategic partnerships to deliver ‘blended’
4. Source: Training Industry, Inc. Research Data, 2018 estimated data.
5. Source: IDC Market Analysis Worldwide and U.S. Human Capital Management Applications Forecast by Lisa Rowan
plc Annual Report 2018 18
solutions combining digital and more traditional forms of
learning, as well as through targeted investment in internally-
generated intellectual property and the extension of best
working practices to deliver organic growth.
Group undertakes regular business and market surveys. LTG
has also developed some new ground-breaking software
products including gomo’s Authoring and Hosting solutions,
Watershed’s learning analytics platform and Rustici Software’ss
Content Controller.
Increasing international footprint:
revenue split by geography
Increasing recurring revenue
2017
2018
2017
2018
U.K.
U.S.
RoW
Recurring
Non-recurring
As the pace and progress of technology and innovation
increases, corporates and government bodies are realising
that to succeed, they must invest in programmes and
technologies to manage change, develop skills, grow
knowledge, and instil desired attitudes and behaviours in
their staff and their ‘extended enterprises’, including suppliers
and partners. To do so, their talent strategies are increasingly
focusing on learning. By combining PeopleFluent’s talent
software with LTG’s learning platforms and services, the Group
offers a compelling suite of industry-leading solutions.
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 technology. Our recent acquisition of market-leader,
Watershed, completes an important part of the picture,
enabling rich visualisation of clients’ learning and talent, which
in turn enables future people-related investment decisions to
be data-based.
Each of our Group businesses brings a range of capability or
sector specialisms that allow us to build on this strategic vision.
The Group’s offering comprises two principal divisions: Software
& Platforms and Content & Services.
Investment in innovation for long-term growth
Over the past three years, LTG has substantially grown its
Software & Platforms division. Most of LTG’s software solutions
are well-established products developed over many years
and enjoying high customer retention rates. The Group’s
policy is to work closely with its customers to understand their
requirements in developing LTG’s product roadmap and the
The Group currently invests approximately £17.5 million per
year on product development and software engineering,
which represents approximately 19% of related annualised
platform revenues. Of this annual investment, approximately
£5.8 million (33%) is capitalised as R&D.
Following the integration of PeopleFluent into the Group,
management has reviewed and prioritised the Group’s
product development roadmap in conjunction with feedback
from customers. Key developments already in train or planned
over the next year include:
• Developing the PeopleFluent Productivity Platform to allow
for greater integration across the component elements
of the PeopleFluent talent suite and an improved user
experience
• Opening up LTG’s software platforms through APIs to allow
for easier integration with other client business systems,
allowing them to operate LTG’s best-of-breed point solutions
as part of their overall systems architecture
• Integration of gomo and Watershed SaaS platforms into the
PeopleFluent talent suite
• Improved functionality and user experience for
PeopleFluent Talent Acquisition software
• Launch of a new Learning Experience Platform (‘LXP’) to
complement the Group’s offering in the developing LMS
(Learning Management System) market, building on the
functionality of gomo’s Authoring and Video products, Rustici’s
SCORM Engine and Watershed, plus additional features
• Launch of an Affirmity workforce diversity analysis service in
EMEA, driven by its U.S. market-leading software platform
that will build benchmarks for gender (pay equity) and
other key diversity issues.
19
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plc Annual Report 2018 20
STRATEGIC REVIEW (CONTINUED)
For the year ended 31 December 2018
The Group also continues to invest in its Content & Services
division offering, whether that be as part of PRELOADED’s
award-winning work in VR and AR (virtual and augmented
reality) solutions, or LEO’s strategic learning programmes,
combining ‘blended’ solutions incorporating products and
services from within the Group or alongside strategic partners.
For the third year in a row, LTG was identified by independent
industry analyst Fosway as the industry’s strategic leader in
digital learning.
Divisional review
Software & Platforms
The Software & Platforms division comprises on-premise and
SaaS-licenced product solutions as well as hosting, support
and maintenance services.
Overview and performance
In 2018 Software & Platforms accounted for £59.8 million or
64% of Group revenues, 70% on an annualised basis, up from
£20.9 million (41%) in 2017, aided by strong organic growth of
9% and the acquisitions of PeopleFluent and Watershed. The
Software & Platforms division contributes 90% of the Group’s
recurring revenues. Adjusted EBIT margins decreased from
37% to 33% reflecting the inclusion of PeopleFluent for the
seven months post-acquisition.
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
m
£
Software & Platforms
Software & Platforms
Software & Platforms
59.8
59.8
19.9
19.9
2018
2018
2018
EBIT Margin
EBIT Margin
20.9
20.9
7.8
7.8
2017
2017
2017
EBIT
EBIT
Revenue
Revenue
40%
40%
35%
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
The Software & Platforms division has seen a dramatic change
during 2018. PeopleFluent’s talent software solutions have
been merged with NetDimensions’ Learning Management
System (‘LMS’) under the PeopleFluent brand. The combined
offering delivers a best-of-breed integrated platform solution
encompassing talent acquisition (i.e. recruitment and
onboarding), talent management (performance, succession,
compensation and talent mapping) and a market-leading
LMS. The PeopleFluent product suite is particularly suited to
complex environments where staff and contractors are based
across multiple locations, where multiple languages and other
localisations are required, and which operate in regulated
industries where security, auditability and configurability
are important requirements. The combined business enjoys
annualised revenues of approximately $85 million and
is headquartered in the U.S. As stated at the time of the
acquisition, not all of PeopleFluent’s products have the same
high retention rates that LTG enjoys amongst its other product
offerings. Management guided that it had an ambitious goal
to arrest the decline during 2019 and build the foundations
for net sales growth in 2020. We believe that with our focus
on, and substantial investment in product development, and
the addition of other LTG products and services, we are on
track to achieve this. We are already seeing the power of LTG’s
combined offering resonate with clients through improved
retention rates and new client wins.
Rustici, the acknowledged global leader in SCORM-related
solutions, has developed a series of software products that
allow LMS providers to manage SCORM effectively and
has seen great success with the latest addition to their
portfolio, Content Controller. With Rustici being an expert in
systems connectivity, they are an integral part of the Group’s
initiatives to bring learning and other business applications
together elegantly, enabling clients to use an open systems
architecture to benefit from best practice ‘point solutions’
rather than rely on broad but shallow ‘one-size fits all’ solutions.
Rustici completed the third and final year of its acquisition-
related earn-out during which time revenues grew by a CAGR
of 27%.
LTG has developed its own cloud-based multi-device
authoring tool, gomo, which enables clients to create their
own e-learning content and to collaborate and publish rich
and compelling learning content to a variety of platforms
(including PCs, tablets and smartphones) in real-time. gomo
has won a series of significant contracts during 2018 and
through its SaaS-based annual licences is achieving retention
rates in excess of 80% and grew new sales by 37% during the
year. gomo’s offering was substantially enhanced during 2018
with the incorporation of KZO (now renamed gomo Video),
an advanced video content platform acquired as part of
PeopleFluent. gomo Video is a software tool that enables
users to collaborate, share comments and auto-translate
audio into multiple written languages. The market has reacted
positively, and the first cross-sells have already been achieved
including Comcast, Slaughter & May and Shell.
During the year, LTG acquired the remaining 73% of
Watershed. Watershed, headquartered in Nashville, is an
early-stage SaaS business that 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. After more than three years of product
development, Watershed now has a robust platform used
as part of large-scale global deployments by many large
corporates including Caterpillar, Verizon and PwC. Retention
rates during 2018 were above 90%. Watershed is targeting to
break even in 2019.
Affirmity is the renamed workforce compliance and diversity
business, which previously operated under the PeopleFluent
brand. Affirmity is a platform and services business enabling
U.S. corporates to monitor their compliance with federal
affirmative action plans. The business is the leader in the
U.S. market, accounting for approximately a quarter of U.S.
affirmative action plans produced and, given the increased
focus on diversity issues in the workplace such as gender
pay gap, LTG is looking to grow this business in the U.S. and
internationally.
VectorVMS (‘Vector’) is the new name for PeopleFluent’s vendor
management services business, which previously operated
under the PeopleFluent brand. Vector’s platforms business
allows corporates to outsource the recruitment, onboarding
and payment of their contractor workforce. We are looking
to cross-sell other LTG services through Vector in 2019 and to
answer client demand for ‘Total Talent’ solutions as businesses
increasingly move towards a ‘gig’ economy.
Content & Services
The Content & Services division comprises strategic consulting,
content creation, and platform development services and is
delivered primarily through the LEO Learning (‘LEO’), Eukleia
and PRELOADED business units.
Overview and performance
LEO provides the Group’s strategic consultancy that works
with clients to understand their requirements, build strategic
roadmaps and then help them implement the delivery of
their learning programmes. LEO is also one of the world’s
leading Moodle platform developers and hosting and support
partners and has offices in London, Brighton and Sheffield
in the U.K., New York and Atlanta in the U.S., and through its
Brazilian investment, in Rio de Janeiro and São Paulo. Working
across a broad range of industries, LEO has developed sector
expertise particularly in areas such as automotive, retail and
luxury brands and during 2018 has seen particular growth in
the oil and gas sector.
Through its Eukleia business, LTG has also acquired a specialist
expertise in governance, risk and compliance services
particularly in the financial services sector, which are delivered
from its offices in London and New York.
PRELOADED, the Group’s BAFTA award-winning agency,
is at the forefront of immersive learning content, or more
particularly ‘play with purpose’. In early 2018, it partnered
with the BBC and Google to produce the ‘BBC Earth: Life
in VR’ experience to coincide with the launch of Google’s
Daydream View headset and in early 2019, it has partnered
with the BBC again to develop an educational Augmented
Reality (‘AR’) experience for Magic Leap, a pioneer in spatial
computing via an AR headset. PRELOADED is also working with
other LTG clients to develop immersive learning experiences.
The majority of Content & Services projects are delivered on a
non-recurring, fixed-price basis. Through its well-tried systems
and processes, LTG constantly monitors the delivery of projects
to ensure that they are delivered on time, to budget, and that
they meet or exceed clients’ expections – and as a result,
achieve consistent and industry-leading gross margins.
In 2018, the Content & Services division accounted for £34
million or 36% of Group revenues (2017: £30.5 million; 59%)
and 30% on an annualised basis. Excluding the acquisitions of
PeopleFluent and Watershed, the Civil Service Learning (‘CSL’)
contract, and adjusting revenues as if all businesses that were
part of the Group in 2017 reported on a full-year basis, organic
revenue on a constant currency basis declined by 8% from
£25.4 million to £23.5 million. Adjusted EBIT margins increased
from 18% to 21%.
m
£
40
35
40
30
35
25
30
20
25
15
20
10
15
5
10
0
5
0
Content & Services
30.5
30.5
5.5
5.5
2017
EBIT
34.0
34.0
7.3
Revenue
7.3
2018
EBIT Margin
EBIT
Revenue
EBIT Margin
24%
23%
24%
22%
23%
21%
22%
20%
21%
19%
20%
18%
19%
17%
18%
16%
17%
16%
£0.7 million of the year-on-year revenue decline was
accounted for by a reduction in professional services revenue
generated from the NetDimensions business. This followed an
improvement in working practices that dramatically increased
the efficiency and profitability of the department, delivering
solutions more quickly, and for less cost to customers.
Management believes that the more appropriate delivery
times, and improved customer service levels are a key
contributor to the enhanced customer retention rates seen in
the past year.
21
plc Annual Report 2018
plc Annual Report 2018 22
STRATEGIC REVIEW (CONTINUED)
For the year ended 31 December 2018
The balance of the year-on-year revenue decline of £1.2
million was accounted for by the LEO, Eukleia, and PRELOADED
business units that had generated significant growth in 2017
and therefore faced tough prior year comparatives coming
into 2018. Over a two-year period, the Content & Services
division has delivered c.6% compound annual growth in
revenue. Projects in the Content & Services division tend to be
sold and delivered on a relatively short sales cycle and we
have seen encouraging sales in Q4 2018 and Q1 2019, which
will be delivered in 2019.
As anticipated, there was also a £3.3 million comparative
revenue decline accounted for by the cessation of revenue
from the UK Civil Service (‘CSL’) contract in H1 2018. During
2016, LEO, in partnership with KPMG LLP, completed the roll-
out of a new core-curriculum to the entire UK Civil Service.
This involved the development of 15 core-curriculum areas
ranging from leadership and management to EU practices
and including ‘blended’ course design encompassing
face-to-face training and e-learning content. The content
was designed, built and launched in less than a year as part
of a three-year contract to deliver learning to over 400,000
civil servants. LTG benefited from substantial revenues in
2017 as the courses were launched and adopted faster than
management’s expectations and as a result of the revenue
sharing structure of the partnership and the accelerated
revenue generation during the prior year, the final revenue
share contributions were received in H1 2018. The CSL contract
runs until the end of 2019 and may be extended by a further
year but the Board does not anticipate any material further
contributions over this period.
Cross-selling and partnerships
LTG is seeing increased success in delivering to its clients a
greater range of LTG’s products and services, often as part of
a strategic consultancy solution, albeit cross-selling initiatives
are at an early stage. Many of these cross-selling opportunities
are bi-lateral between LTG’s business units but are beginning to
become more multi-lateral.
Following the acquisition of PeopleFluent, LTG offers 30
discrete product and service offerings. On average, LTG’s
clients took 1.2 of these services in 2018 compared with an
average of 3.2 across LTG’s top ten clients, who together
represent approximately 15% of Group revenues.
engaging learning experience that was hosted off Fidelity’s
existing collaboration platform and LMS. The technical solution
was augmented by creating and hosting the content in
LTG’s cloud-based authoring tool, gomo, which being xAPI-
enabled, allowed the data to be published to LTG’s Watershed
analytics platform where the true effectiveness of the learning
programme could then be determined.
LTG also works with other partners to deliver learning
programmes, often as part of larger strategic initiatives. In
2018 LTG delivered a comprehensive training project for a
Middle Eastern energy company that included a strategy,
values and Code of Business Ethics programme that was
designed, built and delivered to tight deadlines and brought
together the expertise of LEO, Eukleia, PeopleFluent and
gomo. LTG is also working with another strategic partner to
deliver face-to-face training alongside LTG’s digital solutions
as part of a large scale ‘blended’ program for a U.K.-based
energy organisation.
The Group is seeking to further its cross-selling initiatives in 2019.
These encompass introducing a group-wide incentivisation
programme to encourage co-operation between businesses,
in-house training programmes to inform sales staff and
consultants, the appointment of a Group Services Sales
Director and multi-lateral marketing initiatives.
Group services
The Board believes that by building a comprehensive offering
of scale it can better deliver the services and solutions
that companies and governments demand and require.
LTG has the scale to deliver large complex projects across
numerous geographies, to thousands of people in a myriad of
languages and through many delivery platforms. The Software
& Platforms and Content & Services divisions of the Group are
supported by ‘LTG Central Services’ which comprises HR, IT,
Finance, Legal, Facilities, Bid, Marketing and Hosting services.
Each department has a centre of excellence, supported by
additional regional resources where appropriate. The provision
of LTG Central Services liberates the MDs of the Group’s
businesses to pursue their sales and delivery strategies without
needing to manage the support functions of their operations,
and the economies of scale and expertise in the centralised
functions ensures the consistent application of best practice
and helps deliver cost efficiencies.
In 2018, the Group was tasked by Fidelity International, one of
the world’s leading investment management firms, to develop
a training programme for their staff to deliver retirement
planning services to their customers; a highly-regulated, high-
consequence sector. LTG’s LEO business unit developed ‘The
Retirement Academy’, a story-driven solution that incorporated
micro-learning, video drama and animation to create an
The integration of PeopleFluent into the Group has enabled
LTG to base many of its U.S. central service functions on
PeopleFluent’s existing infrastructure, particularly in its Raleigh
office in North Carolina. CRM, finance and payroll systems
are in the process of being integrated into the merged
PeopleFluent operations. The Group’s marketing department
has made significant progress in developing the Group
The initial consideration comprised a cash
payment of £1.9 million to the other shareholders
in Watershed. The SPA contains provisions for
additional deferred consideration up to a
maximum aggregate amount of £5.8 million
payable based on stretching incremental revenue
targets over the period 2019-2021. In addition, the
Company agreed to pay a completion bonus of
£0.3 million to certain Watershed staff who held
share options in the company and a contingent
earn-out bonus equal to approximately 16% of the
total deferred consideration payable. The earn-out
bonus will be charged to the income statement as
it accrues. It has been assumed that £2.3 million
in deferred consideration will be payable over the
three-year earn-out period.
Transaction costs charged to the income statement
totalled £50,000. Goodwill on acquisition has been
calculated at £2.4 million and acquisition-related
intangibles of £3.3 million are represented primarily
by IP related to the SaaS platform.
The total consideration and fair value adjustments
to the assets and liabilities are set out in Note 12. The
acquired businesses of PeopleFluent and Watershed
have been categorised into five separate Cash
Generating Units for reporting purposes and further
details are provided in Note 13.
On 27 August 2018, LTG agreed along with its joint-
venture partner in LEO Brazil, a debt/equity swap
that reduced LTG’s equity holding from 50% to 38%.
The investment in LEO Brazil is held in LTG’s books at
nil value.
Jonathan Satchell
Chief Executive
18 March 2019
business brand offerings and the Legal department has
undertaken a comprehensive GDPR compliance programme
for existing and acquired businesses. Facilities have been
rationalised where appropriate, including the relocation of
LTG’s main London operations from Cannon Street to Fetter
Lane, to sit alongside PeopleFluent, and the closure of
PeopleFluent’s New Orleans office.
Acquisitions
A core part of LTG’s strategy is the execution of strategic M&A
that enhances the Group’s offering. During 2018, the Group
completed two acquisitions as follows:
PeopleFluent
On 31 May 2018, LTG completed the acquisition of
PeopleFluent, the leading independent provider of cloud-
based integrated recruiting, talent management, and
compensation management solutions. PeopleFluent is
headquartered in Waltham, Massachusetts and generates
approximately 85% of its revenues in the U.S. The business is
a strong strategic fit with LTG, allowing LTG to offer a full suite
of talent and learning products and services to its customers
and substantially deepen its presence in the high-growth U.S.
market.
PeopleFluent was acquired for £107.1 million in cash. The offer
was financed by way of a placing of 86.7 million LTG shares
issued at 98.0 pence per share and a new debt finance
facility, details of which are set out in Note 22. Transaction
costs charged to the income statement totalled £2.6 million.
Goodwill on acquisition has been calculated at £78.5 million
and acquisition-related intangibles of £78.5 million are
represented primarily by IP and customer relationships.
There are no deferred consideration obligations. The total
consideration and fair value adjustments to the assets and
liabilities are set out in Note 12.
Watershed (acquisition of remaining 73% stake not already
owned by LTG)
On 15 November 2018, Rustici Software LLC completed
the acquisition of the remaining 73% of the issued share
capital in Watershed Systems, Inc. (‘Watershed’) not already
held by the Group. Watershed is a leader in the burgeoning
corporate learning analytics market and has a proven ability
to harness data about learners to analyse and assess the
impact of learning and talent on organisational performance.
Over the past three years Watershed has successfully
developed its SaaS platform and increased the number of
recurring customers substantively from a standing start. The
company has also worked closely with a number of other LTG
businesses selling integrated solutions to customers and has
demonstrated the compelling power of Watershed’s service
for the Group’s customers.
23
plc Annual Report 2018
plc Annual Report 2018 24
STRATEGIC REVIEW (CONTINUED)
For the year ended 31 December 2018
Chief Financial Officer’s review
Financial results
Financial comparatives for prior periods are reported on a
restated basis. Further details are provided below.
In the year ended 31 December 2018, the Group generated
revenue of £93.9 million (2017: £51.4 million), delivering an
83% year-on-year increase. Excluding the acquisitions of
PeopleFluent and Watershed and the impact of the Civil
Service Learning (‘CSL’) project, adjusting revenues as if all
businesses that were part of the Group in 2017 reported
on a full-year basis, organic revenue growth on a constant
currency basis in 2018 was flat. The Software & Platforms division
accounted for 64% of Group revenues and grew by 9%, whilst
the Content & Services division accounts for the remainder of
revenues at 36% and declined by 8% against tough prior year
comparatives. Further details on the divisional performance are
provided in the Chief Executive’s review.
Significant revenue growth
Revenue (£m)
CAGR
82%
28.3
2016
51.4
2017
93.9
2018
Adjusted EBIT increased by 104% to £27.2 million (2017: £13.3
million). The Group measures adjusted EBIT to provide a
better understanding of the underlying operating business
performance. Adjusted EBIT is defined as the Group profit or
loss before tax, excluding share-based payment charges,
acquisition-related deferred consideration and earn-outs,
finance expenses, the Group’s share of profits or losses in
associates and joint ventures, integration costs and costs
of acquisition and amortisation of acquired intangibles as
well as other specific items. Integration, costs of acquisition,
amortisation of acquired intangibles and acquisition-related
deferred consideration and earn-outs are primarily driven by
acquisition activity rather than by the underlying performance
of the business, therefore they are excluded from adjusted
EBIT to provide a more accurate reflection of the business
performance. The share-based payment charge is calculated
based on a set of circumstances that existed at the point of
issue of the share option. The expense is therefore not seen as a
reliable indicator of the underlying performance of the business
and is excluded from adjusted EBIT.
Adjusted EBIT margins increased during the year to 29% (2017:
26%) following the successful integration of PeopleFluent during
the summer. As reported at the time of the 2018 Interim results,
the integration of PeopleFluent was ahead of expectations and
ahead of schedule, resulting in the Board increasing guidance
for full-year 2019 EBIT margins for the acquired business from
not less than 20% to not less than 25%. This is significantly
higher than the approximately 11% pre-acquisition EBIT margins
reported at the end of 2017. The Group continues to focus
on operational best practice and tight cost control, whilst the
increased economies of scale, and a change in the revenue
mix of the Group towards higher margin recurring licence
sales with a greater opportunity for operational leverage will
help underpin our aim of delivering Group margins in the late
twenties over the medium to long term.
The amortisation charge for acquisition-related intangible assets
was £15.2 million (2017: £7.8 million). A charge of £0.7 million
relates to the write-off of the NetDimensions acquired brand
intangible following the incorporation of the NetDimensions
Talent Suite into the PeopleFluent offering. Further details are set
out in Note 13. The amortisation charge for internally generated
development costs was £1.1 million (2017: £0.6 million) and
relates to the development of the various PeopleFluent talent
and learning platforms; ‘gomo’, the Group’s award-winning
multi-device authoring, hosting and video SaaS platform;
Watershed, a SaaS analytics platform; various software
tools used within the Eukleia business including an internally
generated library of governance, risk and compliance (‘GRC’)
materials used to service clients; as well as internally developed
software in Rustici including SCORM and xAPI tools.
Acquisition-related deferred consideration and earn-out
charges of £3.8 million (2017: £1.9 million) relate primarily to
the third and final year of the acquisition-related earn-out of
Rustici and reflect the strong incremental revenue growth of
the business post-acquisition. The charge also includes £0.6
million payable to key management of PeopleFluent in the six
months following acquisition and £0.3 million relating to the
Watershed acquisition. A £0.2 million credit has crystallised as a
result of the end of the PRELOADED earnout. From the beginning
of 2019 the only acquisition-related deferred consideration
arrangement in place is with Watershed. Further details are
provided in Note 12.
The share-based payment charge increased from £0.7 million
in 2017 to £1.3 million in 2018 as a result of the increase in
option grants following the acquisition of PeopleFluent. The total
number of outstanding share options at the end of 2018 was
28.3 million. Further details are provided in Note 25.
Integration costs of £2.4 million (2017: £1.2 million) relate to
various restructuring charges including redundancy costs
and onerous contract charges resulting from the integration
of PeopleFluent. The Group successfully completed this
ambitious programme between May and August as a result
of which annualised cost synergies of more than £15.0 million
have been realised.
Significant increase in adjusted EBIT
Adjusted EBIT (£m)
CAGR
98%
7.0
2016
13.3
2017
27.2
2018
Statutory profit before tax was £3.4 million compared with a
loss before tax of £11,000 in the prior year and unadjusted
operating profit was £4.0 million compared to an unadjusted
operating profit of £1.9 million in 2017. Statutory profit before tax
is stated after costs of acquisitions in 2018 of £2.6 million (2017:
£0.9 million), a share of losses in associates of £0.1 million (2017:
£0.2 million) being LTG’s share of the pre-acquisition losses of
Watershed, interest charges on the debt facility of £1.5 million
(2017: £0.6 million) and a net foreign exchange gain of £3.6
million (2017: loss of £0.2 million) resulting from the exceptional
gain made on the movement in the exchange rate between
the conversion of £72 million of placing proceeds into USD on
27 April 2018 and completion of the PeopleFluent acquisition on
31 May 2018. Adjusted profit before tax (see Note 10) increased
by 102% to £25.6 million in 2018 (2017: £12.7 million).
The income tax credit of £0.7 million in 2018 (2017: £1.1 million)
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 9.
Based on the average number of shares in issue, weighted
average number of shares outstanding and adjusted operating
profit during the year, adjusted diluted EPS increased by 68%
to 3.232 pence (2017: 1.926 pence). On a statutory basis, basic
earnings per share (‘EPS’) increased from 0.235 pence in 2017 to
0.655 pence in 2018. Further details are provided in Note 10.
Strong growth in diluted EPS
Adjusted dEPS (Pence)
CAGR
62%
1.184
2016
1.926
2017
3.232
2018
The Group has a strong balance sheet with shareholders’
equity at 31 December 2018 of £168.8 million, equivalent
to 25.3 pence per share (2017: shareholders’ equity of £75.4
million, equivalent to 13.2 pence per share). The acquisition of
PeopleFluent during the year, a business which generates the
majority of its revenues from recurring software licences which
tend to be invoiced annually in advance, has resulted in a
significant increase in trade receivables and deferred income
balances compared to the prior year.
The gross cash position at 31 December 2018 was £26.8 million
(2017: £15.7 million). The Group’s net debt at 31 December 2018
was £11.5 million (2017: net cash of £1.0 million). Net debt/cash
is defined by gross cash less borrowings.
Net cash generated from operating activities was £19.7 million
(2017: £10.8 million) equivalent to an adjusted operating cash
flow conversion rate of 83% (2017: 101%). Adjusted operating
cash flow conversion is defined by net operating cash flows
after adjusting for acquisition-related deferred consideration
and earn-out payments, transaction and integration costs,
interest and tax paid and the movement of deferred upfront
investment outflows relating to the CSL project as a proportion
of adjusted EBITDA. Operating cash flows in 2018 include
receipts from the CSL project whereas the upfront investment
outflows were paid in 2016.
Debtor days increased to 97 days (2017: 76 days) reflecting
the inclusion of PeopleFluent, whilst combined debtor, WIP
and deferred income days reduced to minus 57 days (2017:
+17 days), reflecting the greater proportion of Group revenues
generated from recurring software licences where payments
are received annually in advance.
Net corporation tax receipts were £0.4 million (2017: £0.7
million payment) reflecting repayments made on account.
Cash outflows from investing activities were £111.5 million (2017:
£47.5 million) and comprised the acquisition of PeopleFluent
for £105.9 million net of cash acquired and Watershed for
£1.5 million (2017: £45.7 million net of cash acquired), plus
capitalised investment in internally generated IP and property,
plant and equipment of £4.1 million (2017: £1.8 million).
Cash inflows from financing activities were £102.4 million (2017:
£47.6 million). At the time of the acquisition of PeopleFluent,
LTG entered into a new debt facility with Silicon Valley Bank
(‘SVB’) and Barclays Bank for $63 million accounting for £21.3
million of net debt finance receipts during the period. The
facility comprises a $42 million term loan repayable in quarterly
instalments of $2.1 million, and a $21 million multi-currency
revolving credit facility, both available for five years. The new
SVB debt facility replaced LTG’s previous £20 million debt facility.
The facility is subject to various financial covenants and interest
is charged at between 160 and 210 basis points above LIBOR
based on the covenant results. The Company has drawn down
25
plc Annual Report 2018
plc Annual Report 2018 26
2018 Pre-Acq
and prior
2018 Post-Acq
Revenue
IFRS 15
Total adjustment to Revenue
EBIT
Revenue – IFRS 15
Sales commission – IFRS 3
Rent expense – IFRS 3
R&D capitalisation
R&D amortisation
£’m
3.9
3.9
3.9
-
0.8
Total adjustment to EBIT
4.7
£’m
(1.7)
(1.7)
(1.7)
0.8
-
1.2
(0.1)
0.2
2019
£’m
(1.5)
(1.5)
(1.5)
-
(0.3)
3.5
(0.9)
0.8
2020
£’m
(0.5)
(0.5)
(0.5)
-
(0.1)
3.5
(2.1)
0.8
STRATEGIC REVIEW (CONTINUED)
For the year ended 31 December 2018
the finance facility in USD and uses this as a partial internal
hedge against movements in the exchange rates between
Sterling and the USD. The Group is a net generator of USD.
Management regularly reviews the foreign exchange exposure
of the Group. Further details are provided in Note 30.
The balance of the cash flows from financing activities include
net proceeds from a share placing of £82.8 million (2017: £45.4
million), proceeds from the exercise of employee share options
of £0.9 million (2017: £1.7 million), payment of contingent
deferred consideration related to the PRELOADED acquisition of
£0.2 million (2017: £0.1 million), and dividend payments which
increased to £2.4 million from £1.3 million in 2017.
Impact of adoption of new accounting
policies and alignment of acquisitions with
Group policies
With effect from 1 January 2018, the Group has adopted two
new accounting standards: IFRS 15 – Revenue from Contracts
with Customers, and IFRS 9 – Financial Instruments. The
financial comparatives used for prior periods in this report are
restated to reflect the impact on the financial results for the
Group as if the new standards had been adopted in the prior
year. The impact of adoption of IFRS 15 is that revenues and
adjusted EBIT were reduced by £0.7 million in 2017. The impact
of adoption of IFRS 9 is immaterial and no adjustment has
been made. Further details are provided in Note 4.
The post-acquisition results for PeopleFluent are reported in
line with LTG’s accounting policies. The main effect on the
reported results for PeopleFluent as previously reported under
U.S. GAAP are:
• Restatement of professional services revenue in line with
IFRS 15; professional fees are recognised as the work is
undertaken on a percentage complete basis for fixed-
price contracts rather than the accounting policy under
U.S. GAAP where they were recognised on completion
or delivery of the work to the client, or bundled with the
licence subscription and amortised over the licence
term. This has resulted in approximately $5.1 million of net
revenues being moved to the pre-acquisition period.
• Restatement of sales commissions in line with IFRS 15 and
IFRS 3; under IFRS 15 sales commissions on new client
wins are amortised over the period of the anticipated
client relationship rather than at the point that the sales
commission becomes due. Under IFRS 3 the fair value of
deferred sales commission at the time of completion is
valued at nil.
• Capitalisation of R&D; under U.S. GAAP PeopleFluent did
not capitalise R&D. In line with LTG’s accounting policy
under IAS 38, post-acquisition R&D is capitalised as a
long-term asset to the extent that such expenditure is
expected to generate future economic benefits. As a
result, $1.6 million of PeopleFluent R&D was capitalised in
2018 resulting in an amortisation charge of $0.2 million.
It is anticipated that run-rate R&D capitalisation for
PeopleFluent in 2019 will be approximately $4.6 million
with amortisation occurring over a period of approximately
three years.
The table opposite summarises the impact of these accounting
adjustments on revenues and adjusted EBIT reported by
PeopleFluent over various accounting periods. The phasing of
future accounting adjustments is an estimate based on current
run-rate assumptions.
A new accounting standard, IFRS 16, will be adopted by LTG with
effect from 1 January 2019, replacing IAS 17. IFRS 16 requires
lessees to capitalise all leases on the statement of financial
position by recognising a ‘right of use’ asset and corresponding
lease liability for the present value of the obligation to make
lease payments. There is likely to be significant impact on the
accounting treatment of the Group’s leases, particularly rented
properties, which the Group, as lessee, currently accounts for as
operating leases. Further details are given in Note 2.
Key Performance Indicators
The Key Performance Indicators (‘KPIs’) are sales, profit and
cash flow. The sales of the business are tracked through new
wins across both divisions and retention rates and upsells in our
Software & Platforms division. The profitability of the business, with
its relatively low fixed-cost base, is managed primarily via the
review of revenues in both divisions with secondary measures of
consultant utilisation and monthly project margin reviews for the
Content & Services division. Cash flow is reviewed on a Group
basis aided by rolling cash flow forecasts and, linked to this KPI,
working capital is reviewed by measures of debtor days and
combined debtor, WIP and deferred income days.
Neil Elton
Chief Financial Officer
18 March 2019
27
plc Annual Report 2018
plc Annual Report 2018 28
PRINCIPAL RISKS AND UNCERTAINTIES
In addition to the financial risks discussed in Note 30, 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:
d
o
o
h
i
l
e
k
i
L
%
0
8
>
h
g
H
i
%
0
8
-
%
0
2
m
u
d
e
M
i
%
0
2
<
w
o
L
8
2
4
9
5
1
3
10
6
7
Low <£1m
Medium £1m-£2m
High >£2m
Financial Impact
1. Potential downturn in the market for outsourced
6. Reputational risk
talent and learning services
2. Foreign currency risk
3. Compliance with debt finance facility covenants
4. Attracting and retaining talented staff
7. Client contractual risks
8.
Integrating acquisitions
5. Project overruns
Regulation
Trend: , , or
1. Potential downturn in the market for outsourced talent and
learning services
LTG is dependent on the markets for outsourced talent and
learning services. An economic downturn or instability may cause
customers to delay or cancel talent or 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 talent and learning
services and LTG’s proven ability to fulfil those objectives. More
than 70% of LTG’s revenues are generated from recurring software
licences and services.
2. 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 and Euro. 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. The Group
is a net generator of USD and has partly offset this exposure by
drawing down its debt finance facility in USD. The Group does not
currently use any foreign currency derivative hedge products.
3. Compliance with debt finance facility covenants
The Group has entered into a debt financing facility. This facility
is subject to certain financial covenants, which if breached
would allow the banks to take action against the Group and
may ultimately result in the bank using the security it has over the
assets of the Group to repay the outstanding debt, thus adversely
impacting shareholders. The Group undertakes regular forecasts to
monitor ongoing compliance with financial covenants, reports to
the bank on a monthly basis, and actively manages operational
cash flows. The Board has also agreed a self-imposed limit that net
debt should not exceed 2x LTM (‘Last Twelve Months’) EBITDA.
4. Attracting and retaining talented staff
As a people business we recognise that the future success of our
business is dependent on attracting, developing, motivating,
improving and retaining talent. LTG is a market leader and we
will always strive to ensure that all our operating companies are
regarded as excellent employers within the talent and learning
industries. 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 and talent technologies sector.
Projects may overrun and/or may fail to meet specified
milestones. The majority of LTG’s service-based 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.
6. 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 reviewing customer
feedback and any complaints are reported to the Board.
7. Client contractual risks
Over the past three years, the Group has become increasingly
complex, contracting in various territorial jurisdictions, and offering
a wide variety of products and services with different risk profiles,
ranging from on-premise and SaaS licences to professional
services. The Group contracts with a large number of clients who
often operate within their own contractual parameters. LTG seeks
to ensure that it enters into contractual arrangements with clients
which appropriately balance risks with commercial requirements.
LTG operates a centralised legal function which reviews client
contracts and maintains a delegated list of authorities who are
able to contract on behalf of the Group.
8. 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.
9. Business systems and process integrity
LTG is a rapidly growing business that operates across many
jurisdictions utilising multiple legacy IT systems. In such a dynamic
business environment there is a risk that IT systems may be used
ineffectively, that systems may be compromised through malware
or unpatched operating systems, or that business processes may
become inappropriate. The Group operates a central IT function
which is responsible for monitoring all IT systems operated across
the Group. A thorough review is conducted at the time of all
acquisitions and, where appropriate, systems are unified and
security protocols enforced. Business processes are reviewed and
their effectiveness continually monitored.
10. Impact of General Data Protection Regulation
The General Data Protection Regulation (GDPR), introduced
in May 2018, is the most significant revision of data privacy
legislation seen in Europe, introducing fines of up to €20 million
or 5% of revenue (whichever is the greater). LTG has appointed a
GDPR Officer who works to ensure that all existing businesses are
compliant and that acquired business operations are reviewed
and actions taken to ensure compliance. The Group has made
contingency plans for the potential impact of ‘Brexit’ requiring
data to be hosted in the EU.
In addition to the principal risks and uncertainties above, the
Group faces other risks that include but are not limited to:
• Increased competition
• Technology leadership
• Failure to retain customer contracts
• Counterparty risk
9. Business systems and process integrity
5. Project overruns
10. Impact of General Data Protection
29
plc Annual Report 2018
plc Annual Report 2018 30
Fundraising events were also held for the Phyllis Tuckwell
Hospice, British Lung Foundation, and the Whitechapel Mission
in the U.K. and Dress for Success and the Nashville Rescue
Mission in the U.S.
LTG continued to sponsor Learn Appeal, a charity providing
learning to disadvantaged communities in the U.K. and sub-
Saharan Africa as well as providing them with support with their
IT systems, and contributed to Great Ormond Street Hospital,
including the purchase of an ECMO machine.
In 2018 the Group supported charitable activities by staff which
raised a total of £8,000 (2017: £4,000) and made charitable
contributions totalling £57,000 during the year (2017: £24,000).
Environmental
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. A
number of initiatives were extended during the year including
improvements to recycling availability in UK and US offices.
Health & Safety and accidents
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 and established a group-
wide QHSE department in 2018, responsible for implementing
Health and Safety and environmental policy, and monitoring
our environmental and Health and Safety efforts. The Board
Executive Director responsible for health and safety is the
Chief Executive.
STRATEGIC REVIEW (CONTINUED)
For the year ended 31 December 2018
Corporate Social Responsibility
Introduction
At LTG, the Board has overall responsibility for Corporate
Social Responsibility (‘CSR’) with development and initiatives
being led by the Chief Executive. During the past year, we
have established a CSR Committee that oversees and co-
ordinates CSR initiatives and communicates best practice
and our achievements across the Group. LTG attempts to
combine a sense of common purpose, incorporating core
practices and values, whilst encouraging and enabling
individual employees, business units and offices to carry out
initiatives specific to their local circumstances and priorities.
LTG seeks to work to the Ten Principles of the United Nations
Global Contract (‘UNGC’), guiding principles for corporate
sustainability that encompass human rights, labour,
environment and anti-corruption.
Business Ethics and Integrity
LTG promotes a culture of honesty, integrity, trust and respect
and all members of staff are expected to operate in an
ethical manner in all their dealings, whether internal or
external. We do not tolerate behaviour which goes against this
or which could result in reputational damage to the business.
To achieve this we have in place a number of policies
and corporate training that encompasses Anti-bribery and
Corruption, Ethics and Anti-Slavery. In 2019, we will bring these
and other various company level codes into one LTG Code of
Business Conduct and Ethics. A supporting update Business
Ethics Training programme has been trialled and will be rolled
out in full during the year.
Training and development
The Group invests in training and developing its staff through
internally arranged knowledge sharing events, external courses
and an internal staff portal. LTG has a dedicated team who
develop bespoke learning programmes for staff leveraging off
LTG’s own expertise and learning solutions.
Training programs in the year included a comprehensive
General Data Protection Regulation (‘GDPR’) training
programme which included infographics, awareness posters,
online resources and e-learning. This achieved a 100%
participation rate across the Group.
Incentives
Employees’ performance is aligned to the Group’s goals
through an annual performance review process and via
LTG’s incentive programmes. All LTG staff are eligible for a
commission or annual performance bonus scheme linked
with achieving LTG’s strategic objectives.
In addition, the Group operates a share option scheme for
senior managers that rewards exceptional performance.
Options usually vest over a period of four years. The Group
runs a Sharesave scheme that allows all U.K. staff to
participate in the Group’s equity journey. To date, 53% of
all UK staff have participated in this scheme. In 2019 LTG will
launch its 6th U.K. Sharesave scheme and launch a similar
scheme for staff in the U.S.
With effect from 2019, LTG will also make a number of
awards to recognise, amongst other things, outstanding
achievements in product and service innovation and cross-
selling initiatives.
People and engagement
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.
During 2018, we have developed a Mental Health at
Work programme, a proactive Wellness Action Plan and a
comprehensive Anti-Harassment training course that will be
rolled out during 2019.
Diversity and inclusion
LTG’s employment policies are non-discriminatory on
the grounds of age, gender, nationality, ethnic or racial
origin, 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.
Communications
We communicate with our staff on a regular basis keeping
them informed of business activities, changes in practices
and procedures, and business performance. This includes a
monthly newsletter (‘LTGazette’) and a Group-wide resources
platform. During the integration programme for PeopleFluent,
we circulated weekly updates informing staff of developments
across the business.
Community and charity
LTG undertakes a number of local charitable initiatives each
year, with the Group often matching contributions raised by
staff. In 2018, local charitable initiatives included raising funds
for The Martlets Hospice in Brighton, Cancer Research UK, the
Albert Kennedy Trust, the Rainbow Centre in Sri Lanka, and
the Exiles Rugby Team, which supports vulnerable foreign
domestic helpers in Hong Kong.
The Group also undertakes regular staff surveys and feeds
back the findings and actions to staff.
31
plc Annual Report 2018
plc Annual Report 2018 32
CORPORATE GOVERNANCE REPORT
For the year ended 31 December 2018
Board of Directors
Introduction from the Chairman
As a Board, we believe that practising good Corporate
Governance is essential for building a successful and
sustainable business in the long-term interests of all LTG
stakeholders. LTG’s shares are listed on the Alternative
Investment Market (‘AIM’) of the London Stock Exchange.
With effect from September 2018 LTG has adopted the QCA
Corporate Governance Code. 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.
The following pages outline the structures, processes and
procedures by which the Board ensures that high standards of
corporate governance are maintained throughout the Group.
Further details can be found on the LTG website at www.ltgplc.
com/investor-information/corporate-governance/.
Promoting long-term value for shareholders
LTG’s strategy and business model is to build a dynamic
portfolio of complementary businesses and an international
full-service digital learning and talent management business
of scale, through a combination of strong organic growth as
well as strategic acquisitions that complement the current
business. Further details are provided in the Strategic Review
on pages 17 to 30.
Board of Directors
The Directors of the Company who served during the year were:
Relations with shareholders
The Directors seek to build on a mutual understanding of
objectives between LTG and its shareholders by meeting
to discuss long-term issues and receive feedback,
communicating regularly throughout the year.
The primary means of shareholder communications are
through our Annual Report and Accounts and Interim Report,
trading updates and Capital Market Days, the last one of
which was held on 15 November 2018. The Chief Executive
and Chief Financial Officer hold regular meetings throughout
the year with investors and the Board communicates with
private investors through the Annual General Meeting and
through our investor email at investorenquiries@ltgplc.com.
Promoting corporate culture based on ethical values and
behaviour
The Board recognises that its prime responsibility is to promote
the success of the Group for the benefit of its members as a
whole. The Board also understands that it has a responsibility
towards employees, partners, customers and suppliers.
The Group has a strong ethical culture, always challenging
itself to improve and always seeking to meet or exceed the
expectations of employees, partners, customers, suppliers
and shareholders. Further details of some of the Group’s
initiatives are included in the Corporate Social Responsibility
statement on pages 29 to 30.
Director
Role at 31
December 2018
Date of
(re-) appointment
Retired
Board Committee
Andrew Brode
Non-executive
Chairman
19/05/2016
Leslie-Ann Reed
Non-executive Director
24/05/2018
Aimie Chapple
Non-executive Director
03/09/2018
Jonathan Satchell
Chief Executive
24/05/2018
Neil Elton
Piers Lea
Harry Hill
Chief Financial Officer
24/05/2018
Chief Strategy Officer
18/05/2017
Non-executive Deputy
Chairman
19/05/2016
31/10/2018
Dale Solomon
Chief Operating Officer
18/05/2017
16/11/2018
Board Committee abbreviations are as follows:
A = Audit Committee; R = Remuneration Committee
A
A
R
R
Andrew Brode
Non-executive Chairman
Andrew Brode is a Chartered Accountant
and a former chief executive of Wolters
Kluwer (UK) plc. 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 10 of
AIM companies.
He is also Non-executive Chairman of AIM
quoted GRC International Group. He
acquired Epic Group Limited (‘Epic’)
together with Jonathan Satchell in 2008.
Leslie-Ann Reed
Independent Non-executive Director
/ Audit & Risk Committee Chair /
Remuneration Committee
Leslie-Ann Reed is a Chartered
Accountant and was formerly CFO of
the online auctioneer Go Industry plc.
Prior to this, she served as CFO of the
B2B media group Metal Bulletin plc, and
as an adviser to Marwyn Investment
Management. After a career at Arthur
Andersen, she held senior finance roles
both in the U.K. and internationally at
Universal Pictures, Polygram Music,
Warner Communications Inc. and
EMI Music. Her current Non-executive
Directorships include ZEAL Network SE
where she serves as Vice Chair and is
also Chair of the Audit Committee.
Aimie Chapple
Independent Non-executive Director /
Remuneration Committee Chair / Audit &
Risk Committee
Aimie Chapple started her career in the
talent and learning space in her native U.S.
and moved to the U.K. in 1997 where she
served on Accenture’s UKI Executive board
as the Chief Innovation Officer and Head
of Management Consulting, and was a
Director in the U.K. plc. She has led practices
in Human Performance, Health and
Innovation, and served as a talent, change
management and leadership practitioner
in many industries. She was President, Vice
President and a board member of the
Management Consultancies Association,
leading the industry through times of
change. She continues to consult
in leadership and wellness.
Jonathan Satchell
Chief Executive
Jonathan Satchell has worked in the
training industry since 1992. In 1997, he
acquired EBC, which he transformed from
a training video provider to a bespoke
e-learning company. The company
was sold to Futuremedia in 2006. He
became interim MD of Epic in 2007
and the following year he acquired the
company with Andrew Brode. He oversaw
the transformation of Epic from a custom
content e-learning company to a global,
fast-growing, full-service digital learning
company.
Neil Elton
Chief Financial Officer and Company
Secretary
Neil Elton is a Chartered Accountant
and was appointed as Chief Financial
Officer of LTG in November 2014. An
experienced Finance Director, he has
helped successfully build a number
of fast-growing listed companies. He
joined from Science Group plc, a
Cambridge-based technology research
and development company, where he
was Finance Director from 2010 to 2014.
Before that he was Finance Director at
Concateno plc, the European leader in
drugs-of-abuse testing (2007-2010) and
Mecom Group plc, the European media
group (2005-2007).
Piers Lea
Chief Strategy 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. He sits on the advisory
boards of ELIG (‘European Learning
Industry Group) and the LPI (‘Learning and
Performance Institute’).
33
plc Annual Report 2018
plc Annual Report 2018 34
CORPORATE GOVERNANCE REPORT (CONTINUED)
The workings of the Board
Board composition and roles
The role of the Board is to establish the vision and corporate
strategy for LTG in order to promote and deliver long-term
sustainable shareholder value. The Board comprises the
Non-executive Chairman, the Chief Executive, Chief Financial
Officer and Chief Strategy Officer, and the two Non-executive
Directors and is responsible to shareholders for the proper
management of the Group.
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 Chief
Financial Officer and the Ops Board of LTG.
Given the rapidly increasing size and complexity of the
Group, the Board, assisted by the Ops Board, continually
reviews the appropriateness of the management structure
and governance framework. Particularly with the acquisition
of PeopleFluent and greater proportion of revenues and staff
in the U.S. the Company has made a number of changes
to the management and governance structures, ensuring
that a number of senior roles are based outside the U.K. and
reporting lines reviewed. The full Board visited the Raleigh and
Nashville sites in October 2018. Following the departure of the
Company’s Deputy Chairman on 31 October 2018, the Board
has initiated a search for a fourth Non-executive Director to
complement the Board. The biographies of all the Directors
appear on page 32.
The Board is responsible for formulating, reviewing and
approving the Group’s strategy, budgets and corporate
actions. 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 Ops Board and Managing
Directors within the framework approved in the annual
financial plan and within a framework of Board-approved
authorisation levels.
The Board meets at least 10 times a year and met 12 times
during 2018 (2017: 12).
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.
Appointments
Vacancies on the Board are filled following rigorous evaluation
of suitable candidates possessing an appropriate balance
of skills, knowledge and experience. The use of recruitment
consultants is considered on a case-by-case basis. New
Directors receive formal guidance about the workings of
the Board and its Committees. In addition, shortly after their
appointment, they meet with the senior management of the
Group and receive detailed information and presentations on
Group strategy, products and services.
With effect from the 2019 AGM, all Directors are subject to
annual re-election by shareholders.
The service agreements for each of the Directors are available
for inspection at LTG’s registered office in London.
Directors’ & Officers’ insurance
The Group holds appropriate insurance to cover Directors
and Officers against the costs of defending themselves in
civil proceedings taken against them in their capacity as a
Director or Officer of the Company.
Conflicts of interest
Directors and Officers are encouraged to make the relevant
disclosures at each Board meeting on any conflicts of
interest they may have with the Group. During the period
ended 31 December 2018, no Director or Officer had a
material interest in any contract with the Group other than
their Service Contract and as set out in Note 28 on related
party transactions. LTG entered into a three-year contract
with RWS Group Limited in November 2016 following a tender
exercise supervised by an independent Non-executive
Director of the Board.
Director independence and training
The Chairman of the Board and his fellow Non-executive
Directors bring a range of experience and judgement to bear
on issues of strategy, performance, resources and standards
of conduct, which are vital to the success of the Group.
It is the Board’s opinion that the Non-executive Directors,
excluding the Chairman, are independent in character and
judgement and comply with provision B.1.1. of the Code.
To enable the Board to discharge its duties, all Directors
have full and timely access to all relevant information. They
also have access to management and to the advice of the
Company Secretary. Furthermore, all Directors are entitled to
seek independent professional advice concerning the affairs
of the Group at its expense, although no such advice was
sought during the year. The Board members have many years
of relevant experience and each is responsible for ensuring
their continuing professional development to maintain their
effective skills and knowledge.
To enable the Board to discharge its responsibilities effectively,
all Directors are able to allocate sufficient time to the Group.
The Committees of the Board have terms of reference for
the conduct of their respective responsibilities. A summary
of the terms of reference is detailed further in this report, in
addition to being noted on LTG’s website. Copies of the terms
of reference are also available upon request. The Board
considers that there is a strong, independent Non-executive
element on the Board.
Board evaluation
With effect from the end of 2018, LTG has run a formal Board
Evaluation review. The review involved all members of the
Executive and Non-executive Board, the Ops Board and
senior managers, including business unit MDs and senior
central department heads. The review comprised an online
questionnaire and then one-to-one interviews with each of the
review participants.
The key findings of the review will be considered by the Board
and appropriate actions taken. We will update shareholders
as part of the next Corporate Governance Report.
Board committees
The Board maintains two standing committees, being the
Audit & Risk and Remuneration Committees. Matters normally
reserved for a Nominations Committee are considered by the
full Board.
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 & Risk Committee
The Audit & Risk Committee is chaired by Leslie-Ann Reed and
currently comprises Leslie-Ann Reed and Aimie Chapple. The
Audit & Risk Committee met three times during 2018 (2017:
three). Further details on the Audit & Risk Committee are
provided in the Report of the Audit & Risk Committee.
Remuneration Committee
The Remuneration Committee has been chaired by Aimie
Chapple since October 2018 and also comprises Leslie-Ann
Reed. The Remuneration Committee met once during 2018
(2017: once). Further details on the Remuneration Committee
are provided in the Report of the Remuneration Committee.
Meetings of the Board and sub-committees during 2018 were
as follows:
Board meeting
Audit and Risk committee
Remuneration committee
Number of meetings held
in 2018
Andrew Brode
Harry Hill
Leslie-Ann Reed
Aimie Chapple
Jonathan Satchell
Neil Elton
Piers Lea
Dale Solomon
*Attendance by invitation
12
11/12
8/10
12/12
3/4
12/12
11/12
11/12
9/10
3
3/3*
-
3/3
1/1
-
3/3*
-
-
1
1/1
1/1
-
-
1/1*
-
-
-
35
plc Annual Report 2018
plc Annual Report 2018 36
REPORT OF THE AUDIT & RISK COMMITTEE
Composition
External audit
The Audit & Risk Committee comprises Leslie-Ann Reed (Chair)
and Aimie Chapple. Andrew Brode stepped down from the
Committee on 31 October 2018. The Committee meets at
least twice a year and these meetings are attended by the
Group’s external auditor and, through invitation, the Executive
Directors.
The Committee oversees LTG’s financial reporting process
on behalf of the Board. LTG’s management has the primary
responsibility for the financial statements and for maintaining
effective internal control over financial reporting. In fulfilling
its oversight responsibilities, the Committee reviewed and
discussed the audited consolidated financial statements in
the Annual Report with the external auditor and management,
including a discussion of the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant
judgments, the clarity of disclosures in the financial statements
and for assessing the effectiveness of internal control over
financial reporting.
The Board is confident that there is sufficient recent and
relevant financial experience on the Committee and that
as a whole, we have competence relevant to the sector
in which the Company operates. We have access to the
financial expertise of the Group and its auditor and can seek
professional advice at the Company’s expense if required. In
addition, we also carry out rigorous enquiries and challenge
the executive management and auditor as to internal control
and risk management systems, the processes followed for
the implementation and enactment of policies and best
practice, providing additional detail and explanation to the
Committee of each area of the audit report, and about how
developments in audit practice and international accounting
standards could potentially impact LTG and the effectiveness
of the planning processes for such developments.
Fair, balanced and understandable accounts
In fulfilling our responsibility of monitoring the integrity of
financial reports to shareholders, we consider and review the
accounting principles, policies and practices adopted in
the preparation of public financial information and examine
documentation relating to the Annual Report, Interim
Report, preliminary announcements and other related
reports. We have given due consideration as to whether
the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy and can confirm
that this is the case.
We approve the external auditor’s terms of engagement,
scope of work, the process for the interim review and the
annual audit. We also meet with the auditor to review the
written reports submitted and the findings of their work. We
have primary responsibility for making recommendations to
the Board on the appointment, re-appointment and removal
of the external auditor.
Outside of the formal Committee meetings, members also
meet with the external auditor and with individual members
of the Group’s executive management, principally to discuss
the risks and challenges faced by the business and, most
importantly, how these are being addressed.
The Committee, at least annually, assesses the
independence, tenure and quality of the external auditor.
Internal audit
The Board as a whole has considered whether the Group’s
internal controls processes would be significantly enhanced by
an internal audit function and has taken the view that given the
size of the Group, the internal controls in place and significant
executive involvement in the Group’s day-to-day business,
that an internal audit function is not required. However, the
Committee and the Board will keep this under review.
Report on the work of the committee
We review the independence and objectivity of the external
auditor prior to the proposal of a resolution to shareholders
at the Annual General Meeting concerning the appointment
and remuneration of the auditor. This process includes the
review of audit fee proposals, investigation and approval for
non-audit services’ fees, tenure and audit partner rotation
(based on best practice and professional standards within the
United Kingdom). The Group’s auditor, Crowe UK LLP, similarly
considers whether there are any relationships between
themselves and the Group that could have a bearing upon
their independence and have confirmed their independence
to us. Each year we obtain written confirmation from the
auditor that it is independent.
Following careful review, we reached a recommendation to
reappoint Crowe UK LLP as auditor following an assessment of
the quality of service provided, the expertise and resources
made available to the Group and the effectiveness of the
audit process.
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.
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 &
Risk Committee, has reviewed the systems and processes in
place in meetings with the Chief Financial Officer and external
auditors during 2018.
During the year the auditor undertook certain specific pieces
of non-audit work (including work in relation to tax compliance
and financial due diligence). In order to maintain Crowe
UK LLP’s independence and objectivity, they undertook
their standard independence procedures in relation to
those engagements. Further details of the non-audit fees
are included in Note 6 to the financial statements. We will
continue to assess the effectiveness and independence of
the external auditor.
Internal controls and risk management
The Group’s corporate objective is to maximise long-term
shareholder value. In doing so, the Directors recognise
that creating value is the reward for taking business risks.
The Board’s policy on risk management encompasses all
significant business risks to the Group, including financial,
operational and compliance risks, which could undermine
the achievement of business objectives. Regular monitoring
of risk and control processes, across headline risk areas and
other business-specific risk areas, provides the basis for regular
and exception reporting to management and the Board. The
risk assessment and reporting criteria is designed to provide
the Board with a consistent, group-wide perspective of the key
risks. The reports to the Board, which are submitted at least
every 12 months, include an assessment of the likelihood and
impact of risks materialising, as well as risk mitigation initiatives
and their effectiveness.
The Board has overall responsibility for the Group’s approach
to assessing risk and systems of internal control, and for
monitoring their effectiveness. Due to the limitations that are
inherent in any system of internal control such a system is
designed to manage rather than eliminate the risks of failure
to achieve business objectives and provides only reasonable
and not absolute assurance against material misstatement
or loss. The Board considers risk assessment and control to be
fundamental to achieving its corporate objectives within an
acceptable risk/reward profile and confirms that there is an
ongoing process for identifying, evaluating and managing the
significant risks faced by the Group and the effectiveness of
related controls.
The key features of the internal control system are described
here:
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.
37
plc Annual Report 2018
plc Annual Report 2018 38
REPORT OF THE REMUNERATION COMMITTEE
Summary statement
The members of the Remuneration Committee are Aimie
Chapple (Chair) and Leslie-Ann Reed, both Independent
Non-executive Directors. Andrew Brode and Harry Hill stepped
down from the Committee on 31 October 2018.
Director remuneration. The remuneration of the Non-executive
Directors is a matter for the Board, excluding the Non-
executive Directors. The remuneration of the Chairman is a
matter for the Remuneration Committee, although Andrew
Brode has waived all remuneration. Other Non-executive
Directors receive a base salary only.
The Remuneration Committee monitors the remuneration
policies of LTG to ensure that they are aligned with LTG’s
business objectives. Its terms of reference include the
recommendation and execution of policy on Executive
Service contracts
The service contracts and letters of appointment of the
Directors include the following terms:
Executive Directors
Jonathan Satchell
Neil Elton
Piers Lea
Non-executive Directors
Andrew Brode
Leslie-Ann Reed
Aimie Chapple
Date of Contract
Notice Period (months)
8 November 2013
3 November 2014
25 June 2014
8 November 2013
25 June 2014
3 September 2018
6
6
6
1
1
1
There are no additional financial provisions for termination. All
are rolling contracts. The Executive Directors are employed on
a full-time basis and the Non-executive Directors are required
to provide sufficient time to fulfil their duties including time to
prepare for and attend Board and Committee meetings and
to meet with shareholders and other stakeholders. With effect
from the 2019 AGM, all Directors will put themselves up for re-
election on an annual basis.
During the year, the Remuneration Committee has reviewed
the LTG Directors’ Remuneration Policy. The resulting revised
policy is set out below.
As part of this review the Committee has considered the
remuneration of the Executive Directors in the context of the
increased scale and complexity of the Group and against
peers in the market, particularly within the AIM 50.
As a result of this review it was noted that the remuneration
of the Executive Directors had fallen materially behind the
levels that would be expected for a business of LTG’s scale,
international reach and complexity. As a result of this review
the Remuneration Committee has made a number of changes
as set out in the Annual Report on Remuneration below.
The Committee has run an annual formal Board Effectiveness
Review to ensure that the Board continues to function as
a well-functioning, balanced team led by the Chairman.
Evaluation criteria included a review of the Group’s strategy,
its relationship with shareholders and other key stakeholders,
the performance of the Board and the standing committees,
executive remuneration and incentives, governance, and
performance and succession. The results of this review have
been discussed by the full Board. The Board seeks to nurture
and promote talent within the business supplementing it,
where appropriate, with external talent. The Board is in the
process of recruiting a fourth Non-executive Director to
improve the balance of the Board and the Company will
make an announcement in due course.
The Committee met once in 2018 (2017: 1).
Annual Report on Remuneration
This Annual Report on Remuneration sets out the information
about the remuneration of the Directors of the Company,
for the year ended 31 December 2018 and arrangements
for the year ended 31 December 2019. The Directors of
the Company are considered to be the Key Management
personnel of the Group.
Directors’ emoluments and benefits include: (audited)
Year ended 31
December 2018
Andrew Brode
Harry Hill
Jonathan Satchell
Neil Elton
Piers Lea
Dale Solomon
Leslie-Ann Reed
Aimie Chapple
Year ended 31
December 2017
Andrew Brode
Harry Hill
Jonathan Satchell
Neil Elton
Piers Lea
Dale Solomon
Leslie-Ann Reed
Aimie Chapple
Salary or fees
Bonuses
Pension
contribution
Compensation
for loss of office
Gain on exercise
of share options
Total
£’000
£’000
£’000
£’000
£’000
£’000
-
38
252
178
179
157
40
13
857
-
-
228
161
161
161
-
-
711
-
-
8
5
5
5
-
-
23
-
-
-
-
-
58
-
-
58
-
-
-
87
-
1,012
-
-
1,099
-
38
488
431
345
1,393
40
13
2,748
Salary or fees
Bonuses
Pension
contribution
Compensation
for loss of office
Gain on exercise
of share options
Total
£’000
£’000
£’000
£’000
£’000
£’000
-
40
240
170
167
170
30
8
825
-
-
132
93
93
93
-
-
411
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,153
-
-
7,153
-
40
379
268
265
7,419
30
8
8,409
-
-
7
5
5
3
-
-
20
2017
£’000
1,256
184
1,440
Key management remuneration
Short-term employee benefits
Share-based payments
Total key management remuneration
2018
£’000
1,649
32
1,681
39
plc Annual Report 2018
plc Annual Report 2018 40
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
Director on 31 October 2018 and Dale Solomon resigned
as Chief Operating Officer on 16 November 2018. Dale
Solomon received £58,000 in lieu of adoptive paternity leave
and other benefits.
As a result of the Remuneration Policy review undertaken during
the year, the Executive Bonus Scheme 2019 has been evolved
to allow for recognition of the achievement not only of EBIT
targets, but also organic revenue growth and personal targets.
Most of the LTG staff bonus plans have also been amended in
2019 to reward revenue growth and EBIT achievements.
Directors’ interests in the shares of the Company at 31
December 2018 and 31 December 2017 are as follows:
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
were £170,000 (2017: £128,000). These are excluded from the
table above.
The CEO’s salary in 2018 represented 4.3 times the median
salary of all employees in LTG (2017: 6.0 times).
Aimie Chapple was appointed as a Non-executive Director
on 3 September 2018. Harry Hill resigned as a Non-executive
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 2018 or 31
December 2017.
As a result of the Remuneration Policy review undertaken
during the year, Directors’ base salaries have been increased
as follows with effect from 1 January 2019:
Executive Directors
Jonathan Satchell
Neil Elton
Piers Lea
Non-executive Directors
Andrew Brode
Leslie-Ann Reed
Aimie Chapple
Base Salary in 2018
Base Salary in 2019
£’000
£’000
252
178
178
-
40
40
300
240
200
-
50
50
The details of the Executive Bonus Scheme 2018 are set out
below and include details of the maximum and actual bonus
levels achieved. Bonuses in the year were awarded based
on achievement of Adjusted EBIT (‘EBIT’) targets for the Group,
based on budget assumptions at the beginning of the year
(the ‘original target’). These targets are equivalent to annual
bonus targets set for other LTG staff who are incentivised
based on the results of the Group rather than a specific
business unit. Annual bonuses were awarded as a proportion
of base salary with an on-target EBIT achievement resulting in
a 30% bonus payment and a 30% overachievement of that
original target resulting in a capped payment equivalent to
150% of salary; bonus awards increase on a straight-line basis
up to the cap. No annual bonus would be payable if actual
EBIT was less than target EBIT. The EBIT targets are adjusted at
the reasonable discretion of the Remuneration Committee to
account for events such as acquisitions or disposals. In 2018,
the ‘original target’ was increased materially to account for the
budgeted post-acquisition contribution of PeopleFluent. The
specific targets are not given in this report as that information
is deemed commercially sensitive.
LTG Ordinary shares of
£0.00375 each
Options
Shares
Andrew Brode
Jonathan Satchell
Leslie-Ann Reed
Neil Elton
Piers Lea
2018
2017
2018
2017
2018
2017
Weighted Average Exercise
Price (pence)
Number
Number
-
68.400
-
31.656
-
31.972
-
-
-
-
26,315
-
-
-
-
116,920,080
115,881,671
75,139,995
103,139,995
6,168,730
4,857,074
30.946
3,026,315
3,095,744
439,562
206,666
-
-
-
8,714,030
16,023,383
30.946
3,052,630
3,095,744
207,382,397
240,108,789
Senior managers in LTG are granted share options in the
Company. Share options are generally granted over a
period of four years and only vest based on challenging
performance criteria. The exercise price is set at the prevailing
market price at the time the options are granted.
Neil Elton was granted 1,000,000 options in January 2015 and
2,000,000 share options in April 2017 subject to vesting criteria
based on a minimum share price being sustained for 30
consecutive days as set out below. All the options have vested.
Date
16 January 2015
16 January 2015
16 January 2015
5 April 2017
5 April 2017
Type
EMI
EMI
EMI
Unapproved
Unapproved
No
500,000
250,000
250,000
1,000,000
1,000,000
3,000,000
Minimum share price
vesting requirement
(pence)
Exercise Price (pence)
24.000
28.000
32.000
55.000
70.000
19.000
19.000
19.000
37.500
37.500
31.333
The balance of interest in share options for Jonathan Satchell
and Neil Elton is in relation to their participation in the
contributory LTG Sharesave scheme.
On 1 June 2018, Neil Elton exercised 95,744 share options
under the LTG 2015 Sharesave scheme.
On 8 June 2018, Dale Solomon exercised and sold 1,006,491
share options granted in November 2013.
See Note 25 for further details on share option plans.
Dividends paid to Directors during the year were as follows:
Maximum
Achieved
Adjusted EBIT
CEO
150%
Total as a % of Base Salary
150%
CFO
150%
150%
COO
150%
150%
CSO
150%
150%
CEO
89%
89%
CFO
89%
89%
COO
89%
89%
CSO
89%
89%
Total
See Note 29 for further details on dividends.
2018
£’000
837
2017
£’000
556
41
plc Annual Report 2018
Remuneration Policy
As part of the adoption of the QCA Guidelines, the Remuneration Committee has reviewed the LTG Directors’ Remuneration
Policy. The resulting policy is set out below.
plc Annual Report 2018 42
Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Base salary
Pension
Benefits
Annual bonus
The role of the base salary is to support the
recruitment and retention of Executive Directors of
the calibre required to deliver and develop strategy.
Base salary provides fixed remuneration for the role,
which reflects the size and scope of the Executive
Directors’ responsibilities and their experience.
To provide an appropriate level of retirement benefit
as part of a holistic benefit package.
The Committee sets base salary taking into
account the individual’s skills and experience
and their performance, salary levels at
equivalent peers on AIM, and pay and
conditions elsewhere in the Group.
Base salary is normally reviewed annually with
changes effective from 1 January but may be
reviewed more frequently if the Committee
determines this is appropriate.
Executive Directors are entitled to receive up
to a 3% matched company contribution to
their personal pension plan. This is in line with
all other LTG U.K. employees and minimum
legislated requirement.
While there is no maximum salary, increases will normally
be in line with the typical level of increase awarded to other
colleagues in the Group. However, increases may be above
this level in certain circumstances such as where a new
Executive Director has been appointed to the Board at a
lower than typical market salary to allow for growth in the role.
Larger increases may be awarded to move salary positioning
closer to typical market level as the Executive Director gains
experience.
3% of salary.
To provide a market-competitive level of benefits for
the Executive Directors.
In line with other LTG U.K. employees including
26 days annual holiday in addition to public
holidays.
n/a
The role of the annual bonus is to reward Executive
Directors for the delivery of our annual financial,
operational and strategic goals. The performance
measures have been selected as they are
considered to be key to delivering long-term
shareholder value creation.
The annual bonus is normally payable in cash
following completion of the audit of the Annual
Report and Accounts. Performance is assessed
over a financial year.
The Committee determines the level of bonus,
taking into account performance against
targets and the underlying performance of the
business.
Maximum annual bonus opportunity of 150% of base salary.
For details of award levels for prior years see the Annual Report
on Remuneration.
n/a
n/a
n/a
The annual bonus may be based on a mix of financial,
operational, strategic and individual performance
measures. At least 70% of the bonus will be based on
financial performance.
The Committee determines the exact metrics each year
depending on the key goals for the forthcoming year.
Normally around 30% of the bonus is paid for threshold
performance with the full bonus being paid for delivering
stretching levels of performance. These vesting levels may
vary each year depending on the stretch of targets set.
The Committee sets bonus targets each year to ensure
that they are appropriately stretching in the context of the
business plan.
LTIPs
The role of the LTIPs is to reward Executive Directors
for achieving LTG’s long-term strategy and
creating sustainable shareholder value, to align
the economic interests of Executive Directors and
shareholders, and to act as a retention tool.
Awards normally vest based on performance
over a period of not less than four years (unless
the Committee determines otherwise).
The Committee has the discretion to amend
the final vesting level if it does not consider that
it reflects the underlying performance of the
Company.
LTIP awards are normally awarded in the form
of options over shares but may be awarded in
other forms.
Vested options may normally be exercised until
the tenth anniversary of the date at grant.
It is the intention of the Committee to consult with shareholders about the Directors’ Remuneration policy over the coming year
and invite shareholders to vote on the policy at the 2020 AGM.
The Directors present their report on the Group, together with the audited Consolidated Financial Statements for the year ended
31 December 2018.
The maximum initial award is 3 million share options. Further
options may be granted once the initial vesting period has
elapsed.
The Committee sets targets at the time of each award
so that targets are stretching and represent value
creation for shareholders while remaining motivational for
management.
43
plc Annual Report 2018
DIRECTORS’ REPORT
For the year ended 31 December 2018
plc Annual Report 2018 44
Principal activities
The principal activity of the Group is the provision of talent and
learning solutions; content, services and digital platforms, to
the corporate market. The principal activity of the Company
is that of a parent holding company which manages the
Group’s strategic direction and underlying subsidiaries.
Capital structure
Details of the Company’s share capital, together with details of
the movements therein are set out in Note 24 to the Financial
Statements. The Company has one class of ordinary share
which carries no right to fixed income.
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
Ordinary shares held
% held
Research and development
The main areas of research and development for the
Group has been the continuing development of the
PeopleFluent, gomo and Watershed software platforms,
Rustici’s interoperability software and xAPI-enabled analytical
software tools, a new Learning Experience Platform (‘LXP’)
to be launched later in 2019, as well as various virtual and
augmented reality applications, as covered in the Strategic
Review on pages 17 to 30.
Post-balance sheet events
Details of post-balance sheet events can be found in Note 32
to the Consolidated Financial Statements.
Workforce policies and employment
engagement
We are committed to the investment in our staff at all levels
to ensure a culture of continuous improvement. In order to
attract and retain a high calibre of employees, we provide
various employee benefit packages including performance-
related bonuses and Sharesave plans in order to align
employee interests with the long-term strategic objectives of
the Group. We are committed to our equality and diversity
polices and seek regular feedback and engagement from
our workforce. Further information regarding our work policies
and engagement can be found on page 29.
Directors’ interests in shares and contracts
Directors’ interests in the shares of LTG at 31 December 2018
and 31 December 2017 are disclosed in the Report of the
Remuneration Committee on page 37. Directors’ interests in
contracts of significance to which LTG was a party during the
financial year are disclosed in Note 28.
Cautionary statement
The review of the business and its future development in
the Strategic Review has been prepared solely to provide
additional information to shareholders to assess the Group’s
strategy and the potential for this strategy 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 50.
At the time of LTG’s admission to AIM in November 2013, the
Board stated that they would pursue a progressive dividend
policy. On 2 November 2018, the Company paid an interim
dividend of 0.15 pence per share (2017: 0.09 pence per
share). The Directors propose to pay a final dividend of 0.35
pence per share for the year ended 31 December 2018,
equating to a total payout in respect of the year of 0.50
pence per share (2017: 0.30 pence per share), representing a
67% annual increase.
Subject to shareholder approval at the Annual General
Meeting, the final dividend will be paid on 28 June 2019 to all
shareholders on the register at 7 June 2019.
Business review and future developments
Details of the business activities and acquisitions made during
the year can be found in the Strategic Review on pages 17 to
30 and in Note 12 of the Consolidated Financial Statements
respectively.
Political donations
The Group made no political donations during the year (2017:
nil).
Financial instruments and risk management
Disclosures regarding financial instruments are provided within
the Strategic Review and Note 30 to the Financial Statements.
Andrew Brode
Jonathan Satchell
Merian Global Investors
Liontrust Asset Management
Canaccord Genuity Wealth
Management
Janus Henderson Investors
JPMorgan Asset Management
BlackRock
116,902,080
75,139,995
56,459,730
34,282,438
32,552,000
27,000,974
22,906,868
22,524,344
17.53
11.27
8.47
5.14
4.88
4 05
3.44
3.38
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.
Annual General Meeting
The Annual General Meeting (‘AGM’) will be held at 11am
on 5 June 2019 at DWF LLP, 20 Fenchurch Street, London,
EC3M 3AG. The notice of the AGM contains the full text of
the resolutions to be proposed.
• 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.
Independent auditors
In accordance with Section 489 of the Companies
Act 2006, a resolution proposing that Crowe UK 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
Signed by order of the Board
Neil Elton
Chief Financial Officer
18 March 2019
45
plc Annual Report 2018
plc Annual Report 2018 46
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
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.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law, the
Directors have elected to prepare the Consolidated Financial
Statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU and
applicable law and the Company Financial Statements
in accordance with United Kingdom Generally Accepted
Accounting practice including Financial Reporting Standard
102. 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 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.
Opinion
We have audited the financial statements of Learning
Technologies Group plc (the “Parent Company”) and its
subsidiaries (the “Group”) for the year ended 31 December
2018, which comprise:
• the Consolidated statement of comprehensive income for
the year ended 31 December 2018;
• the Consolidated and Company statements of financial
position as at 31 December 2018;
• the Consolidated statement of cash flows for the year then
ended;
• the Consolidated and Company statements of changes in
equity for the year then ended; and
• the notes to the financial statements, including a summary
of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the 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 in accordance with applicable law and
United Kingdom Accounting Standards, including Financial
Reporting Standard 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:
• the financial statements give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 31
December 2018 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.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (U.K.) (ISAs (U.K.)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We are
independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the U.K., including the FRC’s Ethical Standard,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (U.K.) require us to report to you when:
• The Directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is not appropriate; or
• The Directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group’s or the
Parent Company’s ability to continue to adopt the going
concern basis of accounting for a period of at least 12
months from the date when the financial statements are
authorised for issue.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept
of materiality. An item is considered material if it could
reasonably be expected to change the economic decisions
of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the
impact of misstatements identified.
Based on our professional judgement, we determined overall
materiality for the Group financial statements as a whole to be
£700,000, based on approximately 2.5% of adjusted EBIT, the
key performance measure used by the Group.
We use a different level of materiality (‘performance
materiality’) to determine the extent of our testing for the audit
of the financial statements. Performance materiality is set
based on the audit materiality as adjusted for the judgements
made as to the entity risk and our evaluation of the specific
risk of each audit area having regard to the internal control
environment.
Where considered appropriate performance materiality
may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
47
plc Annual Report 2018
plc Annual Report 2018 48
We agreed with the Audit Committee to report to it all
identified errors in excess of £15,000. Errors below that
threshold would also be reported to it if, in our opinion as
auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
The significant components of the U.K. operations are
accounted for from one central operating location in Brighton,
our audit was conducted from this main operating location
and all the Group companies accounted for from this location
were within the scope of our audit testing.
The Group also has significant components accounted for out
of Raleigh (USA) being the PeopleFluent business acquired in
the year. The accounting for NetDimensions (Holdings) Limited,
previously accounted for out of Hong Kong was also migrated
to Raleigh during the year. A member of the Crowe Global
international network was engaged to perform procedures
locally under our direction and review. Audit instructions were
issued to the component auditors, the instructions detailed
the significant risks to be addressed through the audit
procedures and indicated the information we required to be
reported back to the Group audit team. Part of the Group
audit team performed a site visit to the U.S. to meet with local
management and review component auditor working papers.
The Group audit team had adequate communication with all
component auditors throughout the planning, fieldwork and
concluding stages of local audits.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall
audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue recognition
The Group enters into a range of client contract
types. The revenue recognition policy varies
depending on the underlying contract and could
result in revenue being recognised at a point in time,
over time or on a percentage complete basis where
certain conditions are met.
The transition to IFRS 15 and the application of the
new accounting policies was considered to be a
significant audit risk.
Acquisition Accounting
During the year the Group made a significant
acquisition of PeopleFluent Holdings Corp for total
consideration of £107m.
Accounting for business combinations is complex
and requires the recognition of both consideration
paid and acquired assets and liabilities at the
acquisition date at fair values, which can involve
significant judgement and estimates. There is a
risk that inappropriate assumptions could result in
material errors in the acquisition accounting.
Our procedures included reviewing the Group’s assessment of the impact of IFRS 15 on the
revenue streams in the business and their modified accounting policies.
We agreed the performance obligations identified by management to a sample of
contracts to ensure the adopted accounting policy was appropriate. This was considered
at the transition date and was also included in our year-end fieldwork.
We designed procedures to test each different revenue stream and to consider whether
the revenue recognition policy applied to the revenue stream was appropriate. Our testing
in this area included examining contract terms, obtaining evidence of delivery of software
licence keys, recalculating deferred revenue and obtaining evidence to support the
percentage complete and the budgeted margin.
We reviewed the share purchase agreement to understand the terms of the transaction
and we validated the consideration paid.
We reviewed the calculation of the fair value of the intangible assets identified and
assessed the valuation assumptions for reasonableness. This included performing sensitivity
analysis on key inputs and benchmarking the valuation against external sources of
evidence.
We audited the acquisition balance sheet to ensure that assets and liabilities were
appropriately recognised at fair value.
Impairment assessment of Goodwill and other intangible assets
The Group has a significant amount of intangible
assets at 31 December 2018 and there is a risk that
they could be impaired.
We obtained management’s discounted cashflow model supporting the intangible asset
valuation. We challenged the key assumptions into the model, including the forecast
EBITDA, discount rates and growth rates. Sensitivity analysis was prepared on the model to
ensure no reasonable movement in the assumptions would cause an impairment.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
LEARNING TECHNOLOGIES GROUP PLC (CONTINUED)
Our audit procedures in relation to these matters were
designed in the context of our audit opinion as a whole. They
were not designed to enable us to express an opinion on
these matters individually and we express no such opinion.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in
the annual report, other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion based on the work undertaken in the course of
our audit
• the information given in the Strategic Review and the
directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
• the Strategic Review and directors’ report have been
prepared in accordance with applicable legal
requirements.
Matters on which we are required to report
by exception
In light of the knowledge and understanding of the Group
and the Parent Company and their environment obtained
in the course of the audit, we have not identified material
misstatements in the Strategic Review or the Directors’ Report.
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 financial statements 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.
Responsibilities of the Directors for the
financial statements
As explained more fully in the Directors’ responsibilities
statement set out on page 45, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and Parent Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (U.K.)
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
49
plc Annual Report 2018
plc Annual Report 2018 50
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
LEARNING TECHNOLOGIES GROUP PLC (CONTINUED)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2018
Use of our report
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.
Matthew Stallabrass
Senior Statutory Auditor
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
18 March 2019
Year ended 31 Dec 2018
Year ended 31 Dec 2017 (restated)
Note
5
13
25
6
6
12
14
6
6
6
6
6
9
10
10
10
10
Revenue
Operating expenses (excluding acquisition-related
deferred consideration and earn-outs)
Operating profit (before acquisition-related deferred
consideration and earn-outs)
Acquisition-related deferred consideration and earn-outs
Operating profit/(loss)
Adjusted EBIT
Amortisation of acquired intangibles
Acquired intangibles written down
Share-based payment costs
Integration costs
Acquisition-related deferred consideration and earn-outs
Operating profit/(loss)
Fair value movement on contingent consideration
Costs of acquisition
Share of losses on associates/joint ventures
Profit/(loss) on disposal of fixed assets
Finance expense:
Charge on contingent consideration
Unwinding onerous lease
Interest on borrowings
Net foreign exchange difference on borrowings
Interest receivable
Profit/(loss) before taxation
Income tax credit
Profit for the year
Profit/(loss) attributable to owners of the Parent
Profit/(loss) for the year attributable to non-controlling
interests
Earnings per share attributable to owners of the Parent:
Basic (pence)
Diluted (pence)
Adjusted earnings per share:
Basic (pence)
Diluted (pence)
Profit for the year
Other comprehensive (loss)/income:
Items that may be subsequently reclassified to profit or loss
Exchange differences on translating foreign operations
Total comprehensive (loss)/income for the year
attributable to owners of the Parent Company
Attributable to:
The owners of the Parent
Non-controlling interest
£’000
93,891
(86,171)
7,720
(3,761)
3,959
27,245
(15,193)
(681)
(1,254)
(2,397)
(3,761)
3,959
183
(2,621)
(132)
-
(54)
-
(1,512)
3,608
10
3,441
730
4,171
4,171
-
4,171
0.655
0.641
3.300
3.232
4,171
6,231
10,402
10,402
-
10,402
£’000
51,353
(47,605)
3,748
(1,853)
1,895
13,344
(7,756)
-
(675)
(1,165)
(1,853)
1,895
52
(920)
(201)
(36)
(41)
(11)
(605)
(151)
7
(11)
1,108
1,097
1,247
(150)
1,097
0.235
0.225
2.011
1.926
1,097
(3,564)
(2,467)
(2,276)
(191)
(2,467)
51
plc Annual Report 2018
plc Annual Report 2018 52
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2018
For the year ended 31 December 2018
Note
31 Dec 2018
31 Dec 2017 (restated)
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments accounted for under the equity method
Other receivables, deposits and prepayments
Amounts recoverable on contracts
Current assets
Trade receivables
Other receivables, deposits and prepayments
Amounts recoverable on contracts
Amount owing from related parties
Cash and bank balances
Restricted cash balances
Total assets
Current liabilities
Trade and other payables
Borrowings
Corporation tax
Amount owing to related parties
Non-current liabilities
Deferred tax liabilities
Other long-term liabilities
Borrowings
Provisions
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium account
Merger reserve
Reverse acquisition reserve
Share-based payment reserve
Foreign exchange translation reserve
Accumulated profits
Total equity attributable to the owners of the parent
11
13
19
14
16
17
15
16
17
28
18
20
22
28
19
21
22
23
24
27
27
27
27
27
£’000
2,144
242,458
2,858
-
161
421
248,042
34,314
3,897
3,397
7
26,794
336
68,745
316,787
72,470
6,602
1,631
-
80,703
26,299
9,008
31,657
301
67,265
147,968
168,819
2,501
147,560
31,983
(22,933)
1,608
3,941
4,159
168,819
The Notes on pages 54 to 92 form an integral part of these
Consolidated Financial Statements
The Financial Statements on pages 50 to 92 were approved
and authorised for issue by the Board of Directors on 18 March
2019 and signed on its behalf by
Neil Elton
Chief Financial Officer
18 March 2019
£’000
842
83,409
2,205
1,689
-
-
88,145
12,067
2,363
4,242
-
15,662
-
34,334
122,479
24,806
1,849
50
20
26,725
6,477
830
12,765
257
20,329
47,054
75,425
2,145
64,208
31,983
(22,933)
1,092
(2,290)
1,220
75,425
Share
capital
Share
premium
Merger
reserve
Note
Reverse
acquisition
reserve
Share-
based
payments
reserve
Translation
reserve
Retained
earnings
Non-
controlling
interest
Total equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
1,580
17,044
31,983
(22,933)
3,245
1,233
(1,442)
-
-
-
-
-
-
-
Balance at
1 January 2017
Restatement due
to IFRS 15
Profit for the period
Exchange differences
on translating foreign
operations
Total comprehensive
income for the period
Issue of shares
565
Costs of issuing shares
Share-based payment
charge credited to equity
Tax credit on share options
Transfer on exercise and
lapse of options
Presentational adjustment
regarding deferred tax on
share options
Acquisition of subsidiary
12
Acquisition of non-
controlling interest
Dividends paid
-
-
-
-
-
-
-
-
Balance at 31 December
2017 (restated)
Profit for the period
Exchange differences
on translating foreign
operations
Total comprehensive
profit for the period
Issue of shares
356
Costs of issuing shares
Share-based payment
charge credited to equity
Tax credit on share options
Transfer on exercise and
lapse of options
Dividends paid
-
-
-
-
-
-
-
-
-
48,286
(1,122)
-
-
-
-
-
-
-
-
-
-
85,521
(2,169)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
675
-
(1,462)
(1,366)
-
-
-
(2,153)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,710
(650)
(650)
1,247
(150)
1,097
(3,523)
-
(41)
(3,564)
(3,523)
1,247
(191)
(2,467)
-
-
-
1,331
1,462
1,366
-
-
-
-
-
-
48,851
(1,122)
675
1,331
-
-
-
859
859
(815)
(668)
(1,483)
(1,279)
2,065
-
191
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,254
-
(738)
-
516
-
4,171
6,231
-
6,231
4,171
-
-
-
-
-
-
-
-
-
-
425
738
(2,395)
(1,232)
(1,279)
47,832
75,425
4,171
6,231
10,402
85,877
(2,169)
1,254
425
-
(2,395)
82,992
168,819
-
-
-
-
-
-
-
-
-
-
-
-
Transactions with owners
565
47,164
2,145
64,208
31,983
(22,933)
1,092
(2,290)
1,220
Transactions with owners
356
83,352
Balance at
31 December 2018
2,501
147,560
31,983
(22,933)
1,608
3,941
4,159
53
plc Annual Report 2018
plc Annual Report 2018 54
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2018
For the year ended 31 December 2018
Year ended 31 Dec 2018
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/investment
Finance expense
Interest on borrowings
Net foreign exchange difference on borrowings
Fair value movement on contingent consideration
Acquisition-related deferred consideration and earn-outs
Payment of acquisition-related deferred consideration and earn-outs
Impairment of acquired intangibles
Interest income
Operating cash flows before working capital changes
(Increase)/decrease in trade and other receivables
(Increase)/decrease in amount recoverable on contracts
Increase in payables
Interest paid
Interest received
Income tax received/(paid)
Net cash flows from operating activities
Cash flows used in investing activities
Purchase of property, plant and equipment
Sales proceeds from disposal of property, plant and equipment
Development of intangible assets
Acquisition of subsidiaries, net of cash acquired
Net cash flows used in investing activities
Cash flows from financing activities
Dividends paid
Proceeds from borrowings
Issue of ordinary share capital net of share issue costs
Repayment of bank loans
Contingent consideration payments in the period
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange (losses)/gains on cash
Cash and cash equivalents at end of the year
18
£’000
3,441
1,254
16,300
1,000
132
54
1,512
-
(183)
3,761
(3,166)
681
(10)
24,776
(9,740)
424
5,064
20,524
(1,224)
10
422
19,732
(778)
-
(3,304)
(107,436)
(111,518)
(2,395)
47,110
83,708
(25,803)
(193)
102,427
10,641
15,662
491
26,794
The notes on pages 54 to 92 form an integrated part of these Consolidated Financial Statements.
Year ended 31 Dec 2017
(restated)
£’000
(11)
675
8,404
422
201
52
605
151
(52)
1,853
(2,211)
-
(7)
10,082
2,189
(1,391)
1,124
12,004
(474)
7
(743)
10,794
(449)
16
(1,384)
(45,704)
(47,521)
(1,279)
18,000
47,101
(16,193)
(59)
47,570
10,843
5,348
(529)
15,662
1. General information
Learning Technologies Group plc (‘the Company’) and its
subsidiaries (together, ‘the Group’) provide a range of talent
and learning solutions; content, services and digital platforms,
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 15 Fetter Lane,
London, EC4A 1BW. 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 are presented
in Pounds Sterling, the functional currency of Learning
Technologies Group plc and figures have been rounded to
the nearest thousand.
Going concern
At 31 December 2018 the Group had £26.8 million of cash
and strong cash generation. 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
The Group has adopted IFRS 9 Financial Instruments and IFRS
15 Revenue from Contracts with Customers from 1 January
2018.
IFRS 15 Revenue from Contracts with Customers
The Group has adopted IFRS 15 from 1 January 2018 which
resulted in changes in accounting policies and adjustments
to the amounts recognised in the financial statements. In
accordance with the transition provisions in IFRS 15, the Group
has adopted the new rules retrospectively and has restated
comparatives for the 2017 financial year. See more detail in
Note 4.
IFRS 9 Financial Instruments
IFRS 9 supersedes IAS 39 Financial Instruments: Recognition
and Measurement with new requirements for the classification
and measurement of financial assets and liabilities,
impairment of financial assets and hedge accounting.
IFRS 9 introduces a new forward-looking impairment model
based on expected credit losses to replace the incurred loss
model in IAS 39. This determines the recognition of impairment
provisions as well as interest revenue.
The Group adopted IFRS 9 from 1 January 2018 with
retrospective effect in accordance with the transitional
provisions.
The Group’s principal financial assets are cash and cash
equivalents and receivables.
The Group has assessed the impact of IFRS 9 on the
impairment of its financial assets, including the trade
receivables balance. The Group revised its impairment
methodology to the simplified approach of the expected
credit loss model and grouped the trade receivables based
on shared characteristics, including line of business, and
days past due. After identifying the impairment loss under
this revised method, management has concluded that the
change in the impairment is immaterial, so the prior year
financial statements have not been restated.
While cash and cash equivalents are also subject to the
impairment requirements of IFRS 9, the identified impairment
loss was immaterial.
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.
IFRS 16 Leases
IFRS 16 supersedes IAS 17 Leases and introduces a new
single lessee accounting model which eliminates the current
distinction between operating and finance leases for lessees.
55
plc Annual Report 2018
plc Annual Report 2018 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
On initial adoption of this standard, there is likely to be a
potentially significant impact on the accounting treatment for
the Group’s leases, particularly rented properties, which the
Group, as lessee, currently accounts for as operating leases.
On initial adoption of IFRS 16, the Group will be required to
capitalise its rented properties at the lease commencement
date in the statement of financial position by recognising
them as right-of-use assets and their corresponding lease
liabilities. The right-of use asset will be depreciated over the
term of each lease and a finance charge will be made by
reference to the lease liability and discount rate. The liability
is initially to be measured at the present value of future
minimum lease payments. The discount rate is the rate implicit
in the lease, if readily determinable. If not, the Company’s
incremental borrowing rate is used which the Company has
assessed to be 4.3%. Short-term leases and leases of low-
value assets can be excluded.
The Group will adopt the standard in the financial year
beginning on 1 January 2019.
As at 31 December 2018, the Group had entered into 15
property leases which had commenced prior to the year-end
(2017: 7 leases).
The tables below summarise the balance sheet and profit
and loss account treatment as at and for the years ended 31
December 2017 and 31 December 2018 for these leases:
Right-of-use asset
Lease liability:
Current liability
Non-current liability
Total lease liability
As at 31 December 2018
As at 31 December 2017
£’000
12,555
2,281
11,917
14,198
£’000
3,445
809
2,990
3,799
As at 31 December 2018
As at 31 December 2017
Rental lease expense in profit and loss
Replaced by:
Depreciation of right-of-use asset
Finance charges on lease liability
Total expense to profit and loss
Net reduction in expense
£’000
2,290
1,644
412
2,056
234
£’000
1,277
735
169
904
373
Other than IFRS 16, the Directors do not expect that the adoption of new standards will have a material impact on the financial
statements of the company in future periods.
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.
Business combinations other than the share for share
acquisition of Epic Group Limited by In-Deed Online plc in
2013 are accounted for under the acquisition method and
merger relief has been taken on recognising the shares issued
on acquisition, where applicable.
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. 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. Intra-group losses may
indicate an impairment which may require recognition in
the consolidated financial statements. Where necessary,
adjustments are made to the Financial Statements of
subsidiaries to ensure consistency of accounting policies with
those of the Group.
Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of joint ventures and
associates.
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 on a straight-line basis over their useful
lives which are individually assessed.
Branding
2-10 years
Customer contracts and relationships
2-8 years
c) Joint arrangements and associates
Intellectual Property
2-10 years
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 and they are, along with
the Group’s associates, accounted for using the equity method.
Interests in joint ventures and associates are recognised at
cost adjusted by the Group’s share of the post-acquisition
profits or losses and any impairments, where appropriate.
When the Group’s share of losses in a joint venture equals or
exceeds its interests in the joint ventures and associates, the
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 only if it
meets the criteria for capitalisation under IAS 38.
57
plc Annual Report 2018
plc Annual Report 2018 58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
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.
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.
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 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.
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.
(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.
(iii) Foreign operations
(ii) Financial liabilities
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.
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.
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.
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. Subsequent costs are
included in the asset’s carrying amount 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.
Depreciation is calculated under the straight-line method
to write off the depreciable amount of the assets over their
estimated useful lives. The principal annual rates used for this
purpose are:
Computer equipment
33.33%
Furniture and fittings
Office equipment
20%
20%
Leasehold improvements
Over the shorter of the
remaining useful life
and life of the lease
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.
h) 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.
The Group has adopted the simplified expected credit
loss model for its trade receivables and contract assets,
as required by IFRS 9 to assess impairment, for further
information see Note 30.
(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 the assets with their recoverable amounts.
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.
59
plc Annual Report 2018
plc Annual Report 2018 60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
i) 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 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 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.
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.
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.
l) Provisions, contingent liabilities
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 not recognised but is disclosed
in the Notes to the Financial Statements when there is a
possible obligation which arises from past events whose
outcome is uncertain or when it is not probable that there
will be an outflow of economic resources. When a change
in the probability of an outflow occurs so that the outflow is
probable, it will then be recognised as a provision.
m) Revenue from contracts with customers and other income
Group revenue represents the fair value of the consideration
received or receivable for the rendering of services and sale
of software licencing, net of value added tax and other similar
sales-based taxes, rebates and discounts after eliminating
intercompany sales.
j) Cash and cash equivalents
(i) Content & Services
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.
k) Employee benefits
(i) Short-term benefits
Wages, salaries, paid annual leave and sick leave,
Revenue within the Group’s Content & Services division
comprises content, consulting, platform development
and the provision of training which are provided under
fixed-price and time and materials contracts. Fixed-
price contracts are 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. This is because either the
Group is creating an asset with no alternative use to it
and the contract contains the right to payment for work
completed to date, or the customer is simultaneously
receiving and consuming the benefits of the Group’s
services as it performs. 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.
The cost-based method is used to determine the
percentage of completion because as management
have significant expertise in this approach, they are able
to assess the stage of completion and margin of a project
on an accurate and consistent basis.
Business development costs incurred as part of our bid
or tender process are expensed as incurred. Only if and
when a project is won and contracted are project costs
accounted for within long-term contracts through Cost
of Sale. There are no costs incurred during the period
between the contract being awarded and service
delivery commencing.
For fixed-price contracts, the customer pays the fixed
amount based on a payment schedule. If the services
rendered by the Group exceed the payment, an amount
recoverable on contracts asset is recognised. Conversely,
if the payments exceed the services rendered, a liability
is recognised. If the contract is time and materials-based
and includes an hourly fee, revenue is recognised in the
amount to which the Group has the right to invoice.
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.
(ii) Software & Platforms
Revenue from subscriptions such as SaaS, “right to
access” licences, hosting and support and maintenance
is amortised over the contractual period of the licence as
the customer simultaneously receives and consumes the
benefits of the Group’s services.
Perpetual licences and on-premise software licences
where all material obligations of the Group to the
customer have been met on the delivery of the licence
are recognised at the point in time when the software
has been delivered to the customer as these meet the
definition of “right to use” licences.
Some contracts include multiple deliverables, such as
professional service fees with the delivery of a licence.
However, the professional services do not significantly
customise the software and the promises in the contract
are not highly interdependent, so these are recognised as
separate performance obligations. Contracts may also
include an on-premise software licence with support and
maintenance services. The customer can benefit from both
services on their own or with other readily-available resources
and the software is functional upon transfer of the licence
key, so these are recognised as separate performance
obligations. Where multiple deliverables are concluded not
to be distinct, they are combined with another deliverable
until the distinct performance obligation definition is met.
Where a contract includes multiple performance obligations,
the transaction price will be allocated to each performance
obligation based on the stand-alone selling prices where
available. Where these are not directly observable, they are
estimated based on expected cost plus margin.
Incremental contract costs are capitalised and amortised on
a consistent basis with the pattern of transfer of the service to
which the asset relates.
Critical accounting estimates and judgements
For services revenue, the stage of completion is determined
based on the proportion of contract costs incurred compared
to total estimated contract costs. The outcome of a
development project can be determined with reasonable
certainty when a project budget is agreed which sets out
milestones and costs for all project deliverables. Staff and
contractors record their actual time and external costs spent
on each project which is regularly reviewed against budget.
In making its estimation 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.
During the year to 31 December 2018, management reviewed
the contracts in place and did not note any contracts
where there was specific increased estimation uncertainty.
Management have reviewed contracts that were ongoing at
the prior year end and there were no significant adjustments
to the budgeted margin.
61
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plc Annual Report 2018 62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
Where the stand-alone selling price of support and
maintenance services bundled in an on-premise licence
contract are not observable, management allocates the
transaction price to the distinct performance obligations
based on expected cost plus margin, the basis of this
calculation is derived from historic experience and data.
n) Operating segments
The Group operates as three reportable segments, the
Software & Platforms division, the Content & Services division
and the Other segment which includes rental income.
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.
o) 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 24 to the Consolidated
Financial Statements.
p) 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 material leases classified as finance leases.
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.
(i) Judgements
Revenue recognition
See Note 2 (m).
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 estimations.
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.
During the year to 31 December 2018, the Group
acquired PeopleFluent Holdings Corp. (‘PeopleFluent’),
see Note 12. On acquisition the Group recognised
intangible assets of £78,488,000, the most significant
of which related to the customer contracts and
relationships. Management used a model that present
valued the expected cashflows arising from the customer
relationships over a five-year period. The significant
assumptions used in this model were as follows:
Discount rate – 10-14%
Margins – various %
Attrition – 10-20%
If the discount rate was adjusted by one percentage point
then the impact on the value of the asset would be plus
or minus £2 million. If the margin was adjusted by five
percentage points then the impact on the value of the
asset would be plus or minus £13 million. If the customer
attrition factors were adjusted by five percentage points
then the impact on the value of the asset would be plus
£10 million or minus £13 million.
The Group also increased its holding in Watershed LLC
from 27.27% to 100% (see Note 12). On acquisition the
Group recognised intangible assets of £3,283,000,
the most significant of which related to the intellectual
property. Management used a replacement cost model
to establish the fair value. The significant assumptions
used in this model were the time needed to rebuild
the asset in the state it was acquired and the average
employee salaries and other costs incurred in the rebuild.
If the time needed to rebuild the asset was adjusted by
10% then the impact on the value of the asset would
be plus or minus £0.02 million. If the average employee
salaries were adjusted by 20% then the impact on the
value of the asset would be plus or minus £0.4 million.
Impairment reviews
IFRS requires management to undertake an annual test
for impairment of indefinite lived assets (goodwill) 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.
Goodwill impairment testing is an area involving
management estimates, 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 adjusted EBIT;
• Long-term growth rates; and
• The selection of discount rates to reflect the risks
involved.
The adjusted EBIT is calculated on the same basis as the
adjusted EBIT within the Statement of Comprehensive
Income. 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 13 for details of how these estimates and
judgements have been applied.
(ii) Estimates
Useful Economic Lives of Acquired Intangibles
On acquisition the useful economic lives of acquired
intangibles are assessed by management which is a key
estimate. The PeopleFluent acquisition during the year
gave rise to the following acquired intangible assets with
their associated estimated useful economic lives.
Customer Relationships
Intellectual Property
Brand
8 years
2-10 years
10 years
The useful economic life of the customer relationships
was based on the historical length of relationships with
top customers as well as observed attrition rates. The net
present value of economic benefits to be derived from
the asset beyond this period appeared to be immaterial.
In assessing the useful economic lives of the intellectual
property, management took factors into account such
as how often the software is changing and developing
and the historical change in the software code as well as
external factors such as how the development framework
is supported by third parties.
The brand’s useful economic life was based on how long
management expects to derive economic benefits from
the asset, and the net present value of economic benefits
beyond this life appear to be immaterial.
All useful economic lives were benchmarked against
other guideline companies.
63
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plc Annual Report 2018 64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
4. Changes in accounting policies
As noted above, the Group has adopted IFRS 9 Financial
Instruments and IFRS 15 Revenue from Contracts with
Customers from 1 January 2018.
The impact on the prior year financial statements is presented
in the table below. Management have assessed that the
impact of IFRS 9 was immaterial on the 2017 results so the
prior year comparatives have not been restated for this new
accounting policy.
Consolidated statement of financial position
Asset
1 Jan 2017
(originally
presented)
IFRS 15
1 Jan 2017
(restated)
31 Dec 2017
(originally
presented)
£’000
£’000
£’000
£’000
Non-current Assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments accounted for under the equity
method
Other receivables, deposits and prepayments
Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Corporation tax
Amounts owing to related parties
Non-current Liabilities
Deferred tax liabilities
Other long-term liabilities
Borrowings
Provisions
Total Liabilities
Net Assets
Equity
Share capital
Share premium account
Merger relief reserve
Reverse acquisition reserve
Share-based payment reserve
Foreign exchange translation reserve
Accumulated retained earnings/(losses)
Total Equity
708
39,950
1,717
1,890
1,293
45,558
14,214
59,772
9,215
3,252
546
45
-
-
335
-
-
335
-
335
703
-
-
-
708
39,950
2,052
1,890
1,293
45,893
14,214
60,107
9,918
3,252
546
45
842
83,409
1,933
1,689
-
87,873
34,334
122,207
23,756
1,849
50
20
IFRS 15
£’000
638
-
-
272
-
-
272
-
272
1,050
-
-
-
31 Dec 2017
(restated)
£’000
842
83,409
2,205
1,689
-
88,145
34,334
122,479
24,806
1,849
50
20
13,058
703
13,761
25,675
1,050
26,725
3,897
1,426
10,582
99
16,004
29,062
30,710
1,580
17,044
31,983
(22,933)
3,245
1,233
(1,442)
30,710
-
282
-
-
282
985
(650)
-
-
-
-
-
-
(650)
(650)
3,897
1,708
10,582
99
16,286
30,047
30,060
1,580
17,044
31,983
(22,933)
3,245
1,233
(2,092)
30,060
6,477
192
12,765
257
19,691
45,366
76,841
2,145
64,208
31,983
(22,933)
1,092
(2,290)
2,636
76,841
-
638
-
-
638
1,688
(1,416)
-
-
-
-
-
-
(1,416)
(1,416)
6,477
830
12,765
257
20,329
47,054
75,425
2,145
64,208
31,983
(22,933)
1,092
(2,290)
1,220
75,425
There was no change to contract assets on the transition to IFRS 15.
Consolidated statement
of comprehensive income
As originally presented
Year to 31 Dec 2017
Revenue
Operating expenses (excluding acquisition-related
deferred consideration and earn-outs)
Operating profit (before acquisition-related
deferred consideration and earn-outs)
Acquisition-related deferred consideration and earn-outs
Operating profit
Adjusted EBIT
Amortisation of acquired intangibles
Acquisition-related deferred consideration and earn-outs
Share based payment costs
Integration costs
Operating profit
Fair value movement on contingent consideration
Costs of acquisition
Share of losses of associates/joint ventures
Profit/(loss) on disposal of fixed assets
Finance expenses:
Charge on contingent consideration
Unwinding onerous lease
Interest on borrowings
Net foreign exchange differences on financing activities
Interest receivable
Profit / (loss) before taxation
Income tax credit/(expense)
Profit after taxation
Profit for the period/year attributable to the owners
of the Parent
(Loss) for the period/year attributable to non-controlling
interests
Earnings per share attributable to owners of the Parent:
Basic, (pence)
Diluted, (pence)
Other comprehensive income:
Exchange differences on translating foreign operations
Total comprehensive (loss) for the period
Attributable to:
The owners of the Parent
Non-controlling interests
£’000
52,056
(47,605)
4,451
(1,853)
2,598
14,047
(7,756)
(675)
(1,165)
(1,853)
2,598
52
(920)
(201)
(36)
(41)
(11)
(605)
(151)
7
692
1,171
1,863
2,013
(150)
0.379
0.363
(3,564)
(1,701)
(1,510)
(191)
IFRS 15
£’000
(703)
-
(703)
-
(703)
(703)
-
-
-
-
(703)
-
-
-
-
-
-
-
-
-
(703)
(63)
(766)
(766)
-
(0.144)
(0.138)
-
(766)
(766)
-
Restated
Year to 31 Dec 2017
£’000
51,353
(47,605)
3,748
(1,853)
1,895
13,344
(7,756)
(675)
(1,165)
(1,853)
1,895
52
(920)
(201)
(36)
(41)
(11)
(605)
(151)
7
(11)
1,108
1,097
1,247
(150)
0.235
0.225
(3,564)
(2,467)
(2,276)
(191)
65
plc Annual Report 2018
plc Annual Report 2018 66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
The impact on the Group’s retained earnings as at 1 January 2018 and 1 January 2017 is as follows:
Revenue by nature
The Group’s revenue by nature is analysed as follows:
Opening retained earnings
Adjustment to recognition of initial licence fees
Adjustment to recognition of bundled support and
maintenance fees
Deferred tax impact
Restated opening retained earnings
Note
(i)
(ii)
2018
£’000
2,636
(1,295)
(393)
272
1,220
2017
£’000
(1,442)
(985)
-
335
(2,092)
Income streams adjusted by the adoption of IFRS 15:
(ii) Accounting for bundled support and maintenance fees
(i) Accounting for initial licence fees
The Group’s initial licence fees do not meet the definition
of a distinct performance obligation, so therefore will
be combined with the term licence fee and amortised
over the full licence contract. This is a change in policy
as under IAS 18 this revenue was recognised in full at
contract inception.
The Group has concluded that the support and
maintenance service included within on-premise licence
contracts constitutes a separate performance obligation
which should be recognised over time. This is a change
in policy as under IAS 18 this revenue was included within
the on-premise licence revenue which is recognised on
delivery of the software licence to the customer.
5. 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), in order to allocate resources to the segment and
to assess its performance.
The Directors of the Company consider there to be three
reportable segments, being the Software & Platforms division,
the Content & Services division, and an Other segment which
includes rental income. A majority of sales were generated
by the operations in the United States in the year ended 31
December 2018 and the United Kingdom in the year ended
31 December 2017.
Income and expenses relating to the Group’s administrative
functions have been apportioned to the operating segments
identified.
Geographical information
The Group’s revenue from external customers and non-current
assets by geographical location are detailed below.
31 Dec 2018
Revenue
Non-current assets
31 Dec 2017
Revenue
Non-current assets
U.K.
Mainland
Europe
United States
Canada
Asia Pacific
Rest of the
world
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
24,859
28,412
27,928
31,244
7,263
-
4,704
-
52,912
197,969
15,372
34,507
3,766
68
1,367
-
2,253
18,735
1,574
20,189
2,838
-
408
-
93,891
245,184
51,353
85,940
Software & Platforms
Content & Services
Other
On-
premise
Software
Licences
Hosting
and SaaS
Support
and
Mainte-
nance
Total
Content
Platform
development
Consulting
& Other
Total
Rental
Income
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
31 Dec 2018
Recurring
12,572
41,328
4,088
57,988
-
1,071
4,963
6,034
Non-Recurring
1,166
4
676
1,846
19,262
5,765
2,938
27,965
13,738
41,332
4,764
59,834
19,262
6,836
7,901
33,999
Depreciation &
amortisation
EBIT
Amortisation
of acquired
intangibles
Share of losses of
associates
Profit / (Loss)
before tax
Additions to
intangible assets
Total Assets
31 Dec 2017
(1,746)
19,914
(11,873)
(132)
(274)
162,071
279,928
Recurring
9,067
10,173
Non-recurring
696
8
9,763
10,181
441
510
951
19,681
-
-
-
-
1,214
23,403
3,703
3,352
30,458
20,895
23,403
3,703
3,352
30,458
Depreciation &
amortisation
EBIT
Amortisation
of acquired
intangibles
Share of losses of
associates
Profit / (Loss)
before tax
Investments
accounted for
under the equity
method
Additions to
intangible assets
Total Assets
(821)
7,798
(6,314)
(201)
(4,310)
1,689
47,055
78,460
(249)
5,546
(1,442)
-
4,299
-
10,556
44,019
(361)
7,273
(3,320)
-
3,972
36,859
3,657
58
3,441
58
-
58
-
58
-
-
64,080
29,811
93,891
(2,107)
27,245
(15,193)
(132)
-
-
-
-
-
-
-
-
-
-
-
-
-
166,043
316,787
19,681
31,672
51,353
(1,070)
13,344
(7,756)
(201)
(11)
1,689
57,611
122,479
Information about major customers
In the year ended 31 December 2018, no customer accounted for more than 10% of reported revenues. For the year ended 31
December 2017, one customer accounted for 13.5% of reported revenues.
67
plc Annual Report 2018
plc Annual Report 2018 68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
6. Profit/(loss) before taxation
Profit/(loss) before taxation is arrived at after charging/(crediting):
8. Directors’ remuneration, interests and transactions
Directors’ remuneration, interests and transactions are disclosed in the Report of the Remuneration Committee.
31 Dec 2018
31 Dec 2017
Note
12
13
13
11
8
8
7
7
7
Costs of acquisition
Integration costs
Amortisation of acquired intangible assets
Amortisation of software development costs
Fees repayable to the company’s auditor and its associates
for the audit of the Group’s annual accounts
Other fees payable to auditors:
- Corporate finance services
- Taxation
Depreciation
Directors’ fees (including compensation for loss of office)
Directors’ pension contributions
Staff costs (including Directors):
- Salaries, allowances and bonuses
- Social security costs
- Defined contribution pension plan costs
Rental of offices
Finance charges on contingent consideration
Finance charges on unwinding provision
Finance charges on borrowings
Fair value movement on contingent consideration
Acquisition-related deferred consideration and earn-outs
Interest income
£’000
2,621
2,397
15,193
1,107
203
182
19
1,000
915
23
38,330
3,073
764
2,290
54
-
1,512
(183)
3,761
(10)
£’000
920
1,165
7,756
648
113
67
27
422
825
20
21,409
1,820
486
1,277
41
11
605
(52)
1,853
(7)
7. 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
Year ended 31 December 2018
Year ended 31 December 2017
No.
519
97
7
623
£’000
38,330
3,073
1,254
764
43,421
No.
328
77
6
411
£’000
21,409
1,820
675
486
24,390
9. 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 19)
- Origination and reversal of temporary differences
- Adjustments in respect to prior years
- Change in deferred tax rate
Total deferred tax
Income tax (credit)/expense
31 Dec 2018
31 Dec 2017 (restated)
£’000
1,179
(416)
1,682
2,445
(2,395)
(780)
-
(3,175)
(730)
£’000
1,498
(253)
421
1,666
(1,969)
-
(805)
(2,774)
(1,108)
The change in deferred tax rate of £805,000 credited to the
income statement relates wholly to the U.S. corporation tax
reform where the expected future tax rate has changed from
35% to 21%.
A reconciliation of income tax expense applicable to the
profit/(loss) before taxation at the statutory tax rate to the
income tax expense at the effective tax rate of the Group is
as follows:
Profit / (loss) before taxation
Tax calculated at the domestic tax rate of 19% (2017: 19.25%):
Tax effects of:
Income not subject to tax
Expenses not deductible for tax purposes
Joint venture/associate results reported net of tax
Tax deductions not recognised as an expense
Utilisation of previously unrecognised or acquired tax losses
Tax losses in the year for which no deferred tax is recognised
Difference between deferred rate and current tax rate
Adjustments in respect to prior years
Effect of different international tax rates
Income tax (credit)/expense
31 Dec 2018
31 Dec 2017 (restated)
£’000
3,441
654
(184)
1,325
25
(232)
(1,475)
125
-
(1,196)
228
(730)
£’000
(11)
(2)
(288)
521
39
(350)
(486)
496
(978)
(252)
192
(1,108)
The aggregate current and deferred tax directly credited to equity amounted to £425,000 (2017: £1,331,000).
69
plc Annual Report 2018
plc Annual Report 2018 70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
10. Earnings per share
11. Property, plant and equipment
31 Dec 2018
31 Dec 2017 (restated)
Cost
Basic profit/(loss) per share
Diluted profit/(loss) per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Pence
0.655
0.641
3.300
3.232
Pence
0.235
0.225
2.011
1.926
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 or deferred consideration payable in shares where the
contingent conditions have been met.
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 table below. Adjusted diluted earnings per
share has been calculated to also include the contingent
shares payable as deferred consideration on acquisitions
where the future conditions have not yet been met,
as shown below.
The calculation of earnings per share is based on
the following earnings and number of shares.
Profit after
tax
2018
Weighted
average
number of
shares
Pence per
share
Profit
after tax
(restated)
2017
Weighted
average
number of
shares
Pence per
share
£’000
‘000
Pence
£’000
‘000
Pence
Basic earnings per ordinary share attributable to the
owners of the Parent
4,171
637,326
0.655
1,247
530,444
0.235
Effect of adjustments:
Amortisation of acquired intangibles
Acquired intangibles written down
Share-based payment costs
Integration costs
Cost of acquisitions
Fair value movement on contingent consideration
Deferred consideration and earn-outs from acquisitions
15,193
681
1,254
2,397
2,621
(183)
3,761
Net foreign exchange differences on financing activities
(3,608)
Interest receivable
Finance expense
Income tax expense
Effect of adjustments
Adjusted profit before tax
Tax impact after adjustments
(10)
54
(730)
21,430
25,601
(4,572)
-
-
-
Adjusted basic earnings per ordinary share
21,029
637,326
7,756
675
1,165
920
(52)
1,853
151
(7)
52
(1,108)
11,405
12,652
(1,984)
-
-
-
10,668
530,444
3.362
-
(0.717)
3.300
Effect of dilutive potential ordinary shares:
Share options
Deferred consideration payable (conditions met)
Deferred consideration payable (contingent)
-
-
-
13,267
(0.068)
-
-
-
-
-
-
-
21,789
888
818
Adjusted diluted earnings per ordinary share
21,029
650,593
3.232
10,668
553,939
2.137
-
(0.361)
2.011
(0.079)
(0.003)
(0.003)
1.926
Diluted earnings per ordinary share attributable to
the owners of the Parent
4,171
650,593
0.641
1,247
553,939
0.225
Cost
At 1 January 2017
Additions on acquisitions
Additions
Foreign exchange differences
Disposals
At 31 December 2017
Additions on acquisitions
Additions
Foreign exchange differences
Disposals
At 31 December 2018
Accumulated depreciation
At 1 January 2017
Charge for the year
At 31 December 2017
Charge for the year
Disposals
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018
Computer
equipment
Fixtures and
fittings
£’000
£’000
Motor
vehicles
£’000
Leasehold
improvements
£’000
1,526
104
392
(19)
(6)
1,997
1,417
216
51
(129)
3,552
1,123
236
1,359
844
(58)
2,145
638
1,407
555
18
57
(13)
(6)
611
74
384
25
(116)
978
343
117
460
99
(81)
478
151
500
-
10
-
(1)
(1)
8
-
-
-
(8)
-
-
8
8
-
(8)
-
-
-
240
66
-
(5)
(40)
261
59
178
4
(136)
366
147
61
208
57
(136)
129
53
237
Total
£’000
2,321
198
449
(38)
(53)
2,877
1,550
778
80
(389)
4,896
1,613
422
2,035
1,000
(283)
2,752
842
2,144
12. Acquisitions
PeopleFluent Holdings Corp
On 24 April 2018, LTG announced that the Company
had entered into a conditional agreement to acquire
the entire issued and outstanding shares of capital stock
of PeopleFluent Holdings Corp. (‘PeopleFluent’) for cash
consideration of $143 million, (on a cash-free, debt-free
basis), plus transaction costs. The acquisition triggered
a contractual bonus to be paid to key employees of
approximately $0.7 million. This was dependent on the
continued employment for a period of six months post-
acquisition so has been recognised as a remuneration
expense in the Statement of Comprehensive Income.
PeopleFluent is a leading independent provider of cloud-
based integrated recruiting, talent management and
compensation management solutions.
On 24 April 2018, LTG also undertook a Placing of 86,734,694
new ordinary shares to part-fund the acquisition.
On 31 May 2018, LTG announced that all conditions
relating to the acquisition of PeopleFluent were satisfied
and so the transaction completed on the same date.
None of the goodwill recognised is expected to be
deductible for income tax purposes.
71
plc Annual Report 2018
plc Annual Report 2018 72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
The following table summarises the consideration paid for PeopleFluent, the fair value of assets acquired and liabilities
assumed at the acquisition date.
Cost
Consideration
Cash paid to PeopleFluent shareholders
Total consideration
Recognised amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Restricted cash, receivables and payables
Property, plant and equipment
Trade and other receivables
Trade and other payables
Deferred tax liabilities on acquisition
Intangible assets identified on acquisition
Total identifiable net assets
Goodwill
Total
Fair value
£’000
107,062
107,062
1,202
596
1,505
13,238
(46,099)
(20,407)
78,488
28,523
78,539
107,062
The goodwill arising is attributable to the acquired
workforce, anticipated future profit from expansion
opportunities and synergies of the business. The goodwill
arising from the acquisition has been allocated between
the PeopleFluent, Affirmity, VectorVMS and gomo CGUs.
Fair value adjustments have been recognised for
acquisition-related intangible assets and related deferred
tax as well as future liabilities which are in alignment with
accounting policies.
Acquisition-related intangible assets of £43.3 million relate
to the valuation of the customer relationships which are
amortised over a period of eight years, £1.7 million relates
to the value of the PeopleFluent brand which is amortised
over ten years, and £33.5 million relates to the value of the
acquired intellectual property and software development
which is amortised over periods between two and ten years.
Acquisition costs of £2.6 million have been charged to the
statement of comprehensive income in the year relating to
the acquisition of PeopleFluent.
A deferred tax liability of £20.4 million in respect of the
acquisition-related intangible assets was established on
acquisition (refer to Note 19).
PeopleFluent contributed £41.8 million of revenue for the
period between the date of acquisition and the balance
sheet date and £11.4 million of statutory profit before tax.
This excludes the effect on the Group profit before tax
of increased amortisation of acquired intangibles. If the
acquisition of PeopleFluent had been completed on the
first day of the financial year, Group revenues would have
been £33.1 million higher and Group profit attributable
to equity holders of the Parent would have been £2.8
million lower, including adjustments to include a full year of
amortisation on acquired intangibles.
Watershed Systems, Inc.
On 15 November 2018, Rustici Software LLC completed
the acquisition of the remaining 72.73% of the issued
share capital In Watershed Systems, Inc. (‘Watershed’) not
already held by the Group.
The Initial Consideration comprised a cash payment of
£1.9 million ($2.5 million). The SPA contains provisions for
additional deferred contingent consideration up to a
maximum aggregate amount $7,527,273 (approximately
£5.8 million) based on ambitious monthly recurring
revenue targets in each of the years ending 31 December
2019, 31 December 2020 and 31 December 2021. This
deferred contingent consideration is payable to the
sellers who have no ongoing obligations to the company.
Financial forecasts have been used to determine
the fair value of these payments included within total
consideration. In addition, the Company agreed to pay
completion bonuses of $400,000 to certain Watershed
staff and Earn Out Bonuses equal to 15.94% of the total
deferred consideration payable over the three years to
31 December 2021. These are both being recognised
as a remuneration expense within the Statement of
Comprehensive Income over the service period.
Watershed is the global market leader in corporate
learning analytics and has a proven ability to harness
data about learners to analyse and assess the impact of
learning on organisational performance.
None of the goodwill recognised is expected to be
deductible for income tax purposes.
The following table summarises the consideration paid for
Watershed, the fair value of assets acquired and liabilities
assumed at the acquisition date.
Cost
Fair value
Consideration
Cash paid to Watershed shareholders
Additional deferred contingent consideration
Fair value of previously held interest
Total consideration
Recognised amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Property, plant and equipment
Trade and other receivables
Trade and other payables
Deferred tax liabilities on acquisition
Intangible assets identified on acquisition
Total identifiable net assets
Goodwill
Total
£’000
1,932
2,296
1,557
5,785
356
45
1,371
(855)
(844)
3,283
3,356
2,429
5,785
The goodwill arising is attributable to the acquired workforce,
anticipated future profit from expansion opportunities and
synergies of the business. The goodwill arising from the
acquisition has been allocated to the Watershed CGU. Fair
value adjustments have been recognised for acquisition-
related intangible assets and related deferred tax as well as
future liabilities which are in alignment with accounting policies.
Acquisition-related intangible assets of £1.4 million relate
to the valuation of the customer relationships which are
amortised over a period of five years and £1.9 million which
relates to the value of the acquired intellectual property and
software development which is amortised over three years.
Acquisition costs of £0.05 million have been charged to the
statement of comprehensive income in the year relating to
the acquisition of Watershed.
A deferred tax liability of £0.8 million in respect of the
acquisition-related intangible assets was established on
acquisition (refer to Note 19).
Watershed contributed £0.2 million of revenue for the period
between the date of acquisition and the balance sheet
date and £0.1 million of loss before tax. If the acquisition
of Watershed had been completed on the first day of the
financial year, Group revenues would have been £1.4 million
higher and Group profit attributable to equity holders of the
Parent would have been £0.5 million lower.
Details regarding the strategic decisions to acquire
PeopleFluent and Watershed can be found in the Chairman’s
statement and Strategic review on pages 1 and 17 respectively.
73
plc Annual Report 2018
plc Annual Report 2018 74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
13. Intangible assets
Goodwill
Growth rate
Pre-tax discount rate
Cost
At 1 January 2017
Additions on acquisitions
Additions
Foreign exchange differences
At 31 December 2017
Additions on acquisition
Additions
Disposals/impairment
Foreign exchange differences
At 31 December 2018
Accumulated amortisation
At 1 January 2017
Amortisation charged in year
At 31 December 2017
Amortisation charged in year
Disposals/impairment
At 31 December 2018
Carrying amount
At 31 December 2017
At 31 December 2018
Goodwil
Customer
contracts &
relationships
Branding
Acquired IP
Internal
Software
Development
Total
£’000
£’000
£’000
£’000
£’000
£’000
26,608
21,915
-
(2,473)
46,050
80,968
-
-
5,240
132,258
-
-
-
-
-
46,050
132,258
16,192
31,811
-
(2,983)
45,020
44,635
-
-
3,084
92,739
4,669
7,144
11,813
11,956
-
23,769
33,207
68,970
809
1,069
-
(90)
1,788
1,723
-
(1,048)
114
2,577
304
286
590
447
(367)
670
1,198
1,907
-
1,432
-
13
1,445
35,413
-
-
1,574
38,432
-
464
464
2,790
-
3,254
981
35,178
2,241
-
1,384
(215)
3,410
-
3,304
(178)
153
6,689
927
510
1,437
1,107
-
2,544
1,973
4,143
45,850
56,227
1,384
(5,748)
97,713
162,739
3,304
(1,226)
10,165
272,695
5,900
8,404
14,304
16,300
(367)
30,237
83,409
242,458
Following the incorporation of the NetDimensions product
suite into the PeopleFluent suite, the NetDimensions brand
has been impaired and is shown as a disposal in the table
above.
Goodwill and acquisition-related intangible assets
recognised have arisen from acquisitions. Refer to Note
12 for further details of acquisitions undertaken during
the year. Internal software development reflects the
recognition of development work undertaken in-house.
The amortisation charge for the year of £16.3 million
includes £15.2 million relating to acquired intangibles.
Amortisation is included within operating expenses in the
Statement of Comprehensive Income.
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 nine 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 acquisition of PeopleFluent in 2018 gave rise to
four separate CGU’s, PeopleFluent, Affirmity, VectorVMS
and gomo; the latter being where a part of the acquired
PeopleFluent business was merged with LTG’s existing
gomo business. The acquisition of Watershed gave rise to
one new CGU. The carrying amount of goodwill has been
allocated as follows:
CGU
LEO
PRELOADED
Eukleia
Rustici
NetDimensions
PeopleFluent
Affirmity
VectorVMS
gomo
Watershed
2018
£’000
7,435
2,180
2,764
13,726
-*
43,875
19,496
38,552
1,746
2,484
2017
£’000
7,435
2,180
2,764
12,911
20,760
-
-
-
-
-
132,258
46,050
2018
2017
%
4%
4%
4%
9%
-
7%
4%
4%
7%
-
%
8%
9%
9%
9%
9%
-
-
-
-
-
2018
%
11.0%
12.5%
12.5%
12.5%
-
11.5%
11.0%
10.0%
14.0%
-
2017
%
11.0%
12.5%
12.5%
12.5%
12.5%
-
-
-
-
-
*The NetDimensions business was combined with that of PeopleFluent and they now operate as one CGU,
hence the goodwill has been combined in the table above.
Customer contracts, relationships, branding and
acquired IP
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 ten years.
Internal software development
Internal 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 two and ten years.
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 (being the companies cost of capital), growth rates
(based on past experience and pipeline in place) and
future EBIT margins (which are based on past experience).
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 4% and 9% for the first five years.
The terminal rate used for the value in use calculation
thereafter is 2.5%.
If the growth rate or the discount rate used increased or
decreased by 10%, with all other factors being equal,
there would be no impact on the goodwill impairment
assessment.
Formal impairment testing of the Watershed CGU was not
undertaken at year-end as completion was so near to the
year-end and there were no indicators of impairment.
75
plc Annual Report 2018
plc Annual Report 2018 76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
14. Investments accounted for using the equity method
15. Trade receivables
Joint ventures
31 Dec 2018
31 Dec 2017
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 2017 and 31 December 2018 is listed below.
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
38%
On 27 August 2018, the Group entered into a debt for
equity swap agreement whereby Epic Group Limited and
the other 50% investor agreed to convert debts due from
Leo Brasil Tecnologia Educacional Ltda (‘LEO Brazil’) to
equity in the proportion to amounts owed at that date.
Epic Group Limited had a total of $268,000 (equivalent
to approximately £200,000) converted to equity and,
following such conversion, its shareholding was reduced
from 50% to 38%. As all amounts receivable from the
investee had been written off by the Group, there was
no financial impact, either on the carrying value of the
investment or the results for the year.
LEO Brazil is a private company and there is no quoted
market price available for its shares.
The accounting reference date of LEO Brazil is coterminous
with that of the Company.
There are no contingent liabilities or commitments relating
to the Group’s interest in LEO Brazil.
Where the Group’s share of losses in LEO Brazil exceeds its
interests in the company, the Group does not recognise
further losses as it has no further obligation to make
payments on behalf of the company.
No further disclosures are provided on the grounds of
materiality.
Trade receivables
Allowance for impairment losses
Impairment losses:
At 1 January
Additions on acquisition
Additions
Amounts written-back
At 31 December
£’000
35,646
(1,332)
34,314
186
570
545
31
1,332
£’000
12,253
(186)
12,067
57
111
18
-
186
The Group’s normal trade credit term is 30 days. Other
credit terms are assessed and approved on a case-by-
case basis.
On the acquisition of PeopleFluent the Group acquired
£9.72 million of gross trade receivables with a provision for
doubtful debts of £0.57 million. The net fair value of £9.15
million is included in the acquired balance sheet disclosed
in Note 12.
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.
16. Other receivables, deposits and prepayments
31 Dec 2018
31 Dec 2017
The movements in joint venture investments is as follows:
Balance at beginning of year
Share of losses for the year
Disposal during the year
31 Dec 2018
31 Dec 2017
£’000
1,689
(132)
(1,557)
-
£’000
1,890
(201)
-
1,689
Current assets
Sundry receivables
Prepayments
Non-current assets
Sundry receivables
The Group acquired a 27.27% interest in Watershed on 28 January 2016, for a total consideration of $3 million (approximately
£2.1 million). As described in Note 12 above, the Group increased its holding to 100% in November 2018 and since this date
Watershed has been accounted for as a subsidiary rather than an associate.
Sundry receivables includes rent deposits and other sundry
receivables.
£’000
1,118
2,779
3,897
161
161
£’000
577
1,786
2,363
-
-
77
plc Annual Report 2018
plc Annual Report 2018 78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
17. Amount recoverable on contracts
19. Deferred tax assets/(liabilities)
Current assets
Amount recoverable on contracts
Non-current assets
Amounts recoverable on contracts
31 Dec 2018
31 Dec 2017
£’000
3,397
3,397
421
421
£’000
4,242
4,242
-
-
18. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:
Cash and bank balances
31 Dec 2018
31 Dec 2017
£’000
26,794
£’000
15,662
Deferred tax assets
Share options
Tax losses
Short-term
timing differences
At 1 January 2017
Acquisition of subsidiaries
Deferred tax charge directly to the income statement
Deferred tax charged directly to equity
Exercise of share options
At 31 December 2017
Acquisition of subsidiaries
Deferred tax charged/(credited) directly to the income statement
Deferred tax charged directly to equity
Exercise of share options
Exchange rate differences
At 31 December 2018
£’000
1,715
-
(143)
1,331
(1,499)
1,404
-
(15)
425
(1,084)
-
730
£’000
£’000
-
-
521
-
-
521
778
337
-
-
67
1,703
337
-
(57)
-
-
280
-
61
-
-
84
425
Deferred tax liabilities
Intangibles
Accelerated tax
depreciation
Short-term timing
differences
At 1 January 2017
Deferred tax on acquired intangibles and via acquisition
Deferred tax charge directly to the income statement
Exchange rate differences
At 31 December 2017
Deferred tax on acquired intangibles and via acquisition
Deferred tax charge directly to the income statement
Exchange rate differences
At 31 December 2018
£’000
(3,677)
(5,733)
2,443
694
(6,273)
(21,251)
3,250
(1,177)
(25,451)
£’000
(220)
-
16
-
(204)
(124)
(694)
174
(848)
£’000
-
-
-
-
-
(236)
236
-
-
Total
£’000
2,052
-
321
1,331
(1,499)
2,205
778
383
425
(1,084)
151
2,858
Total
£’000
(3,897)
(5,733)
2,459
694
(6,477)
(21,611)
2,792
(1,003)
(26,299)
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. Deferred tax assets of £266,000 (2017:
£664,000) relating to carried forward tax losses have not been
recognised as it is not probable that future taxable profits will
allow these deferred tax assets to be recovered.
79
plc Annual Report 2018
plc Annual Report 2018 80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
20. Trade and other payables
Trade payables
Deferred income
Tax and social security
Contingent consideration
Acquisition-related deferred consideration and earn-outs
Accruals
The contingent consideration at 31 December 2018
relates wholly to the acquisition of PRELOADED Limited and
is repayable in 2019, a financial instrument held at fair
value within the scope of IFRS 9. In 2017, the contingent
consideration also related to the acquisition of PRELOADED
Limited.
The acquisition-related deferred consideration and earn-outs
balance in 2018 relates partly to the acquisition of Rustici
Software LLC and partly to the acquisition of Watershed
Systems Inc. The balance in 2017 relates wholly to the
acquisition of Rustici Software LLC. This is treated as post-
combination remuneration and is accrued over the service
period.
21. Other long-term liabilities
Acquisition-related deferred consideration and earn-outs
Contingent consideration
Deferred income
Other long-term liabilities
31 Dec 2018
31 Dec 2017
(restated)
£’000
924
56,417
2,109
8
3,205
9,807
£’000
946
14,980
1,673
168
2,641
4,398
72,470
24,806
The deferred income balance relates mainly to the Group’s
right to access licences, support and maintenance and
hosting contracts which are recognised over the contract term
as the customer receives and consumes the benefits of the
service. All of the current liability deferred income balance
at 31 December 2017 was recognised as revenue in 2018
and the currently liability deferred income balance at 31
December 2018 is expected to be recognised as revenue in
2019.
22. Borrowings
On the acquisition of PeopleFluent Holdings Corp. (see Note
12) the existing debt facility with Silicon Valley Bank was repaid
and a new debt facility with Silicon Valley Bank was entered
into for a total of $63 million.
based on LIBOR for the currency of the loan plus a margin of
between 1.6% and 2.1%, based on the Group’s leverage.
The term loan is repayable with quarterly instalments of $2.1
million with the balance repayable on the expiry of the loan in
April 2023.
This is made up of a $42 million term loan and a $21 million
multicurrency revolving credit facility, both available to the
Group for five years. The facility attracts variable interest
The bank loan is secured by a fixed and floating charge over
the assets of the Group and is subject to various financial
covenants.
Current interest-bearing loans and borrowings
Non-current interest-bearing loans and borrowings
31 Dec 2018
31 Dec 2017
£’000
6,602
31,657
38,259
£’000
1,849
12,765
14,614
23. Provisions
Property Costs
At 1 January – brought forward
Paid in the year
Addition
31 Dec 2018
31 Dec 2018
31 Dec 2017
£’000
257
-
44
301
£’000
99
-
158
257
31 Dec 2018
31 Dec 2017
The provision relates to the Group’s share of dilapidation costs in respect of costs to be incurred at the end of property leases.
£’000
20
2,378
6,603
7
9,008
£’000
-
192
638
-
830
24. Share capital
Shares were issued during the year as follows:
At 1 January 2018
Placing of shares on payment of PeopleFluent
consideration
Cost of issuing shares
Shares issued on the exercise of options
Number of
shares
572,000,505
86,734,694
-
8,157,150
Share capital
Share premium
£’000
2,145
325
-
31
£’000
64,208
84,675
(2,169)
846
Merger
reserve
£’000
31,983
-
-
-
Total
£’000
98,336
85,000
(2,169)
877
At 31 December 2018
666,892,349
2,501
147,560
31,983
182,044
The contingent consideration relates wholly to the acquisition
of Watershed Systems, Inc and is a financial instrument held
at fair value within the scope of IFRS 9 repayable during 2020,
2021 and 2022.
The acquisition-related deferred consideration and earn-outs
balance in 2018 relates wholly to the acquisition of Watershed
Systems, Inc. This is treated as post-combination remuneration
and is accrued over the service period.
The deferred income balance relates mainly to the Group’s
right to access licences, support and maintenance and
hosting contracts which are recognised over the contract
term as the customer receives and consumes the benefits of
the service. The non-current deferred income balance at 31
December 2018 is expected to be recognised during 2020
and 2021.
81
plc Annual Report 2018
plc Annual Report 2018 82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
The par value of all shares is £0.00375. All shares in issue were
allotted, called up and fully paid.
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. At 31
December 2018 the EBT holds 404,340 ordinary shares in the
Company. These shares are held in treasury.
On 24 April 2018, the Company announced that it had
entered into a conditional agreement to acquire the entire
issued and outstanding shares of capital stock of PeopleFluent
Holdings Corp. (‘PeopleFluent’) for cash consideration of $143
million, (on a cash-free, debt-free basis), plus transaction
costs. On the same date, the Company also undertook a
Placing of 86,734,694 new ordinary shares at 98 pence per
share for a total consideration of £85 million to part-fund the
acquisition.
A total of 8,157,150 ordinary shares were issued during the
course of the year as a result of the exercise of employee
share options.
Unapproved share option plan:
At 1 January
Granted by Company
Forfeited
Exercised during the year
At 31 December
2018
2017
Number of options
Weighted average
exercise price
12,809,901
15,200,000
(4,800,000)
(1,150,000)
22,059,901
pence
39.295
93.679
69.079
36.326
70.441
Number of
options
19,412,353
9,400,000
-
(16,002,452)
12,809,901
Weighted average
exercise price
pence
9.671
43.588
-
5.880
39.295
25. 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.
2018
2017
Number of options
Weighted average
exercise price
Approved share option plan - Enterprise Management Incentive (‘EMI’):
At 1 January
Options granted by Company
Forfeited
Exercised during the year
At 31 December
12,144,513
-
(1,638,331)
(6,567,138)
3,939,044
pence
11.446
-
19.449
5.642
17.794
Number of
options
Weighted average
exercise price
pence
17,834,083
9.478
-
-
(5,689,570)
12,144,513
-
-
5.278
11.446
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.
Unapproved 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 unapproved options are settled by equity.
(b) Sharesave option scheme
The Company established the 2016, 2017 and 2018
Learning Technologies Group plc Sharesave Scheme
in April 2016, April 2017 and April 2018 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 29.6, 40.8 and 68.4 pence per share respectively
(the ‘Option Price’), being a discount of 20% on the share
price as of 26 April 2016, 20 April 2017 and 11 April 2018
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.
Sharesave Option Scheme:
At 1 January
Granted by Company
Forfeited
Exercised during the year
At 31 December
2018
2017
Number of options
Weighted average
exercise price
Number of options
Weighted average
exercise price
1,620,950
1,198,038
(81,525)
(439,990)
2,297,473
pence
33.436
68.400
43.862
20.146
53.844
3,908,777
984,231
(307,465)
(2,964,593)
1,620,950
pence
17.911
40.800
25.349
16.250
33.436
83
plc Annual Report 2018
plc Annual Report 2018 84
At 31 December 2018, options granted to subscribe for ordinary shares of the Company, and the valuation criteria, are as
follows:
Number of shares under option
Date of grant
Approved
Scheme
Unapproved
scheme
Sharesave
Scheme
Exercise Price
Jun 2013
Mar 2014
Nov 2014
Nov 2014
Jan 2015
Dec 2015
Dec 2015
Apr 2016
Aug 2016
Aug 2016
Aug 2016
Aug 2016
Mar 2017
Mar 2017
Mar 2017
Mar 2017
Apr 2017
Apr 2017
May 2017
May 2017
Jun 2017
Jun 2017
Jun 2017
Jun 2017
Dec 2017
Dec 2017
Dec 2017
Dec 2017
Jan 2018
Apr 2018
Apr 2018
Apr 2018
Apr 2018
Apr 2018
Jul 2018
Jul 2018
Jul 2018
Jul 2018
Aug 2018
Aug 2018
Aug 2018
Aug 2018
Aug 2018
343,945
200,000
1,125,000
250,000
1,000,000
430,000
590,099
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
609,901
-
800,000
700,000
700,000
450,000
200,000
200,000
200,000
200,000
2,000,000
-
-
-
-
-
-
-
244,386
-
-
-
-
-
-
-
-
-
-
868,206
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,184,881
1,000,000
1,000,000
400,000
400,000
400,000
400,000
300,000
300,000
300,000
300,000
200,000
50,000
50,000
50,000
50,000
-
150,000
275,000
275,000
300,000
50,000
2,250,000
2,450,000
2,650,000
2,400,000
Totals
3,939,044
22,059,901
2,297,473
Pence
2.718
15.500
17.625
17.625
19.000
20.250
25.250
29.600
28.500
28.500
28.500
28.500
42.500
42.500
42.500
42.500
37.500
40.800
37.500
37.500
42.500
42.500
42.500
42.500
60.114
60.114
60.114
60.114
60.114
61.000
61.000
61.000
61.000
68.400
102.000
102.000
102.000
102.000
103.490
103.490
103.490
103.490
103.490
Remaining
vesting
period
Fair value of
options
Life
Volatility
Pence
Years
Percent
-
-
-
Jan 2019
-
-
Dec 2019
-
-
Dec 2019
Dec 2020
Dec 2021
Jan 2019
Jan 2020
Jan 2021
Jan 2022
-
-
Jan 2020
Jan 2021
Jan 2019
Jan 2020
Jan 2021
Jan 2022
Jan 2020
Jan 2021
Jan 2022
Jan 2023
Dec 2019
Jan 2020
Jan 2021
Jan 2022
Jan 2023
-
Jan 2020
Jan 2021
Jan 2022
Jan 2023
Jan 2020
Jan 2021
Jan 2022
Jan 2023
Jan 2024
11.96
8.76
9.96
9.96
2.59 - 8.81
4.22 – 8.18
9.40
9.53
16.11
16.11
16.11
16.11
19.63
19.63
19.63
19.63
5.2 - 13.86
17.63
29.63
29.63
20.46
20.46
20.46
20.46
30.10
30.10
30.10
30.10
32.35
75.50
75.50
75.50
75.50
32.15
52.61
52.61
52.61
52.61
56.14
56.14
56.14
56.14
56.14
10
10
10
10
10
10
10
3
10
10
10
10
10
10
10
10
10
3
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
3
10
10
10
10
10
10
10
10
10
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
34%
34%
34%
34%
34%
34%
34%
34%
36%
36%
36%
36%
38%
38%
38%
38%
38%
40%
40%
40%
40%
40%
38%
38%
38%
38%
40%
40%
40%
40%
40%
An option-holder has no voting or dividend rights in the
Company before the exercise of a Share option.
The weighted average share price at grant date of options
granted during the year in the Unapproved Share Option
Scheme at grant date was £1.007 (2017: £0.5020) and the
estimated fair value of each share option granted was
£0.3479 (2017: £0.2304).
The weighted average share price at grant date of the
Sharesave Scheme was £0.8550 (2017: £0.5100) and the
estimated fair value of each share option was £0.3215 (2017:
£0.1763). It is assumed that 75% of members will remain in the
Group after three years.
The expense and equity reserve arising from share-based
payment transactions recognised in the year ended 31
December 2018 was £1,254,000 (year ended 31 December
2017: £675,000).
The weighted average share price at the date of exercise of
options under the EMI Share Option Scheme was £0.917.
The weighted average share price at the date of exercise of
options under the Unapproved Share Option Scheme was
£1.031.
The weighted average share price at the date of exercise of
options under the Sharesave Scheme was £1.068.
A 1.78% (2017: 1.78%) risk-free interest rate has been assumed
for all three schemes.
The number of options that are exercisable at 31 December
2018 is 5,898,945 (2017: 9,727,198).
This estimated fair value was calculated by applying a Black-
Scholes option pricing model. The expected volatility of the
Group’s share price is calculated based on an assumption of
historical volatility.
26. Subsidiaries of the Group
The subsidiaries of the Group, all of which are private companies limited by shares, as at 31 December 2018, are as follows:
Company
Country of Registration or
Incorporation
Registered Office
Principle Activity
Percentage of ordinary
shares held by Company
Epic Group Limited
England and Wales
gomo Learning Limited
England and Wales
Leo Learning Limited
England and Wales
Leo Learning Inc.
USA
PRELOADED Limited
England and Wales
Learning Technologies
Group (Trustee) Limited
England and Wales
Eukleia Training Limited
England and Wales
Rustici Software LLC
USA
NetDimensions Limited
Hong Kong
NetDimensions, Inc.
USA
52 Old Steine, Brighton, BN1
1NH, England
52 Old Steine, Brighton, BN1
1NH, England
52 Old Steine, Brighton, BN1
1NH, England
11 Broadway, Suite 466, New
York, New York, 10004, USA
52 Old Steine, Brighton, BN1
1NH, England
52 Old Steine, Brighton, BN1
1NH, England
52 Old Steine, Brighton, BN1
1NH, England
Holding company
Mobile e-learning
Bespoke e-learning
Bespoke e-learning
Educational Games
Employee Benefit Trust
Bespoke e-learning
210 Gothic CT # 100,
Franklin, TN 37067-8256, USA
e-learning
interoperability
17/F, Sui on Center, 188
Lockhart Road, Wan Chai,
Hong Kong
c/o The Corporation Trust
Company (Delaware), 1209
Orange Street, New Castle,
DE 19801, USA
e-learning software
licencing and services
e-learning software
licencing and services
NetDimensions (UK) Limited
England and Wales
52 Old Steine, Brighton, BN1
1NH, England
e-learning software
licencing and services
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
85
plc Annual Report 2018
plc Annual Report 2018 86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
Company
Country of Registration or
Incorporation
Registered Office
Principle Activity
Percentage of ordinary
shares held by Company
NetDimensions (China)
Limited
NetDimensions (Australia) Pty
Limited
Hong Kong
Australia
NetDimensions Asia Limited
Hong Kong/Philippines
NetDimensions Germany
GmbH
Germany
NetDimensions Holdings (UK)
Limited
England and Wales
NetDimensions (Holdings)
Limited
Cayman Islands
Line Communications
Holdings Limited
Line Communications Group
Limited
England and Wales
England and Wales
PeopleFluent Holdings Corp.
USA
PeopleFluent Inc.
USA
Strategia Communications
Inc.
Canada
Bedford HCIT Holdings Corp
USA
KZO Innovations Inc.
USA
PeopleClick Limited
England and Wales
PeopleFluent Limited
England and Wales
Learning Technologies
Acquistion Corp
Watershed Systems, Inc.
USA
USA
17/F, Sui on Center, 188
Lockhart Road, Wan Chai,
Hong Kong
19 Northcote Street,
Haberfield, NSW 2015,
Australia
17/F, Sui on Center, 188
Lockhart Road, Wan Chai,
Hong Kong
Arcisstr. 32, c/o Taxon
GmbH, 80799 Munchen,
Germany
52 Old Steine, Brighton, BN1
1NH, England
Maples Corporate Services
Limited, PO Box 309, Ugland
House, Grand Catman, KY1-
1104, Cayman Islands
52 Old Steine, Brighton, BN1
1NH, England
52 Old Steine, Brighton, BN1
1NH, England
Corporation Service
Company, 251 Little Falls
Drive, Wilmington, New
Castle, DE 19808
The Corporation Trust
Company, Corporation Trust
Centre, 1209 Orange Street,
Wilmington, New Castle DE
19801
554-1111 RUE St-Charles O,
Longueuil Québec J4K5G4,
Canada
The Corporation Trust
Company, Corporation Trust
Centre, 1209 Orange Street,
Wilmington, New Castle DE
19801
Corporation Service
Company, 251 Little Falls
Drive, Wilmington, New
Castle, DE 19808
52 Old Steine, Brighton, BN1
1NH, England
52 Old Steine, Brighton, BN1
1NH, England
Corporation Service
Company, 251 Little Falls
Drive, Wilmington, New
Castle, DE 19808
c/o National Registered
Agents Inc. 160 Greentree
Dr STE 101, Dover, Kent, DE,
19904
e-learning software
licencing and services
e-learning software
licencing and services
e-learning software
licencing and services
e-learning software
licencing and services
Holding company
Dormant
Dormant
Dormant
Holding company
Integrated talent
management and
learning solutions
Integrated talent
management and
learning solutions
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Holding company
100%
Video distribution
software
Integrated talent
management and
learning solutions
Integrated talent
management and
learning solutions
100%
100%
100%
Holding company
100%
SaaS Learning Analytics
Platform
100%
The accounting reference date of each of the subsidiaries is coterminous with that of the Company.
27. 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 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 merger reserve also
includes the merger relief on the issue of shares to acquire
Line Communications Holding Limited on 7 April 2014,
PRELOADED Limited on 12 May 2014, Eukleia Training Limited
on 31 July 2015 and Rustici Software LLC on 29 January 2016.
The reverse acquisition reserve was created in accordance
with IFRS 3 ‘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 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, it is the recognition of the fair value over the vesting
period. (see Note 25).
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.
28. Related party transactions
Amount owing (from)/to joint venture/associate:
Current
Trade balances with joint venture
Trade balances with associate
Total
31 Dec 2018
31 Dec 2017
£’000
£’000
(7)
-
(7)
10
10
20
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.
Transactions with joint venture
During the normal course of business, the Group purchased
graphics services from its joint venture, LEO Brazil, totalling
£19,000 and received licence fee income, totalling £3,000 in
the year ended 31 December 2018 (2017: 192,000 and £5,000
respectively).
Remuneration of Directors and other transactions
Transactions with associate
During the year there were no material transactions between
the Company and the Directors, other than their emoluments
(disclosed in Note 8). 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 £521,000 in the year ended 31 December
2018 (2017: £255,000). Andrew Brode is the Chairman of
RWS Group Limited. The amount due/accrued to RWS Group
Limited at 31 December 2018 was £124,000 (31 December
2017: £57,000). These balances are included in trade and
other payables (refer to Note 20).
In the period to 15 November 2018, the Group purchased
licences and services totalling £47,000 from its associate,
Watershed, during the normal course of business (2017:
£48,000).
Close family members
Two close family members of the Chief Executive were
employed in the Group during the year-ended 31 December
2018 at an arms-length basis, the payments made within the
period were £1,000 each (2017: £nil) and there are no balances
owing at the year-end. A close family member of the Chief
Operating Officer was employed in the Group during the
year ended 31 December 2018 at an arms-length basis, the
payments made within the period were £14,000 (2017: £18,000)
and there are no balances owing at the year-end. Employment
for both close family members ended during the year.
87
plc Annual Report 2018
plc Annual Report 2018 88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
29. Dividends paid
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:
Final dividend paid
Interim dividend paid
Total
31 Dec 2018
31 Dec 2017
£’000
1,396
999
2,395
£’000
766
513
1,279
On 2 November 2018, the Company paid an interim dividend
of 0.15 pence per share (2017: 0.09 pence per share). The
Directors propose to pay a final dividend of 0.35 pence per
share for the year ended 31 December 2018 (totalling £2.34
million based on the issued share capital of the Company at
the date of this report), equating to a total pay-out in respect
of the year of 0.50 pence per share (2017: 0.30 pence per
share). The final dividend paid in 2018 relates to the year
ending 31 December 2017.
30. 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, Canadian Dollar and Euro. 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.
The carrying amounts of the Group’s foreign currency
denominated financial assets and liabilities at the end of
year were as follows:
United
States
Dollar
Hong Kong
Dollar
Euro
Swiss
Francs
Canadian
Dollar
Australian
Dollar
Philippine
Piso
Swedish
Krona
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
33,564
39,615
11,712
15,858
274
37
146
193
7,048
10
4,984
94
170
-
108
-
1,695
3
163
-
409
-
349
5
12
2
9
6
-
-
29
-
43,172
39,667
17,500
16,156
31 Dec 2018
Financial assets
Financial liabilities
31 Dec 2017
Financial assets
Financial liabilities
Effects on profit after taxation/equity
31 December 2018
increase/ (decrease)
£’000
United States Dollar:
- Strengthened by 10%
- Weakened by 10%
Hong Kong Dollar:
- Strengthened by 10%
- Weakened by 10%
Euro:
- Strengthened by 10%
- Weakened by 10%
Swiss Franc:
- Strengthened by 10%
- Weakened by 10%
Canadian Dollar:
- Strengthened by 10%
- Weakened by 10%
Australian Dollar:
- Strengthened by 10%
- Weakened by 10%
Philippine Piso:
- Strengthened by 10%
- Weakened by 10%
Swedish Krona:
- Strengthened by 10%
- Weakened by 10%
(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
The Group’s external borrowings at the balance sheet
date comprise loan facilities on floating interest rates.
The Group considers the exposure to interest rate risk
acceptable.
The Group’s external borrowings at the balance sheet
date comprise loan facilities on floating interest rates.
The Group considers the exposure to interest rate risk
acceptable.
31 December 2017
increase/ (decrease)
£’000
(415)
415
(5)
5
489
(489)
11
(11)
16
(16)
34
(34)
-
-
3
(3)
(605)
605
24
(24)
704
(704)
17
(17)
169
(169)
41
(41)
1
(1)
-
-
If the interest rates had been 50 basis points higher and
all other variables were held constant, the Group’s profit
for the year ended 31 December 2018 and net assets at
that date would decrease by £104,000 (2017: £45,000).
This is attributable to the Group’s exposure to movements
in interest rate on its variable borrowings.
(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
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
financial assets (including cash and bank balances), the
Group minimises credit risk by dealing exclusively with high
credit rating counterparties.
units, products and geography. The loss allowance
calculated is detailed in Note 15.
Credit risk concentration profile
The Group applies the IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables and
contract assets.
To measure the expected credit losses, trade receivables
and contract assets have been grouped based on the
shared credit risk characteristics and the days past due. The
contract assets relate to unbilled work in progress and have
a lower risk profile than trade receivables as the Group has
the right to bill the customer for work completed to date.
The expected loss rates are based on the historic payment
profiles of sales and the credit losses experienced within
this period. The historical loss rates are adjusted to reflect
current and forward-looking information. Different loss rates
have been calculated and applied to different business
The Group did not have significant credit risk exposure to
any single counterparty or any group of counterparties
having similar characteristics (2017: No significant credit risk
exposure). 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
North America
Europe
Asia Pacific
Middle East and Africa
South and Central America
Allowance for impairment losses
Ageing analysis
31 Dec 2018
31 Dec 2017
£’000
7,079
22,601
4,527
583
635
221
(1,332)
34,314
£’000
6,467
2,775
494
2,517
-
-
(186)
12,067
The ageing analysis of the Group’s trade receivables is as follows:
31 Dec 2018
31 Dec 2017
Not past due
Past due:
Less than three months
Three to six months
Past six months
Gross amount
£’000
25,371
6,852
1,744
1,679
£’000
8,183
2,879
603
588
35,646
12,253
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
Ageing analysis
The table below summarises the maturity profile of the
Group’s financial liabilities, including interest payments,
where applicable based on contractual undiscounted
payments:
Year ended 31 December 2018
Trade payables
Borrowings
Contingent consideration
Year ended 31 December 2017
Trade payables
Amounts owing to related parties
Borrowings
Contingent consideration
Less than 1 year
1-2 years
2-3 years
>3 years
£’000
£’000
£’000
£’000
924
8,256
8
9,188
946
20
2,279
168
3,413
-
7,970
-
7,970
-
-
2,184
192
2,376
-
7,684
-
7,684
-
-
2,125
-
2,125
-
19,616
-
19,616
-
-
9,463
-
9,463
Total
£’000
924
43,526
8
44,458
946
20
16,051
360
17,377
(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 the year, the Group fully repaid the existing debt facility
with Silicon Valley Bank and replaced it with a new debt facility
with Silicon Valley Bank and Barclays Bank for a total of up to
$63m – see Note 22 – this is the only external debt finance of
the Group.
The Company made dividend distributions of 0.36 pence per
share during the year ended 31 December 2018 (2017: 0.23
pence per share).
Total equity increased from £76.8 million to £168.8 million
during the year and net funds decreased from net cash of £1
million to net debt of £11.5 million.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
(c) Classification of financial instruments
Financial assets
Loans and receivables financial assets:
Trade receivables
Amounts recoverable on contracts
Amount owing by related parties
Cash and bank balances
Financial liabilities
Fair value through the profit and loss:
Contingent consideration
At amortised cost:
Trade payables
Borrowings
Amount owing to related parties
31 Dec 2018
31 Dec 2017
£’000
£’000
34,314
3,979
7
26,794
65,094
12,067
4,242
-
15,662
31,971
31 Dec 2018
31 Dec 2017
£’000
£’000
2,386
2,386
924
38,259
-
39,183
360
360
946
14,614
20
15,580
(d) Reconciliation of liabilities arising from financing activities
Note
31 December
2017
Net financing
cashflows
Interest paid
Borrowings
Contingent
consideration
22
14,614
21,307
(1,224)
20, 21
360
(193)
-
Note
31 December
2016
Net financing
cashflows
Interest paid
Borrowings
22
13,834
Contingent
consideration
20, 21
430
1,807
(59)
(474)
-
Fair value
movement
/ interest
accrued
1,512
(129)
Fair value
movement
/ interest
accrued
594
(11)
Acquisition of
subsidiary
Foreign
exchange
movement
31 December
2018
-
2,050
38,259
2,296
52
2,386
Acquisition of
subsidiary
Foreign
exchange
movement
31 December
2017
-
-
(1,147)
14,614
-
360
The loan from Silicon Valley Bank was designated as a hedging instrument in a net investment hedge. As a result, the foreign
exchange gains and losses on the loan are taken to the other comprehensive income to be offset against the foreign
exchange gains and losses arising on the retranslation of the net assets of foreign operations.
(e) 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
actual and forecast results to value the amount which
will be payable according to the earnout metrics on
acquisitions. These liabilities are discounted to their
present value using the Group’s weighted average
cost of capital of 10%. Both the future cash flows
and discount rate used are unobservable inputs.
Management believes that reasonably possible
changes to the unobservable inputs would not result in a
significant change in the estimated fair value.
There have been no transfers between these categories in
the current or preceding year.
2018
Contingent consideration
2017
Contingent consideration
Level 1
£’000
-
-
Level 1
£’000
-
-
Level 2
£’000
-
-
Level 2
£’000
-
-
Level 3
£’000
2,386
2,386
Level 3
£’000
360
360
Total
£’000
2,386
2,386
Total
£’000
360
360
31. 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 2018
31 Dec 2017
Land and buildings
Land and buildings
£’000
2,989
8,342
1,393
12,724
£’000
1,075
1,841
330
3,246
The Group has 15 leases included above primarily located in the USA and U.K. for various office properties. The remaining terms
of these leases range from one to nine years of the balance sheet date.
32. Events since the reporting date
There have been no notifiable events between the 31 December 2018 and the date of this Annual Report.
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COMPANY
FINANCIAL
STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
(Registered number: 07176993)
As at 31 December 2018
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
Merger reserve
Share-based payments reserve
Retained profits
Note
31 Dec 2018
31 Dec 2017
£’000
£’000
3
4
8
9
7
7
7
7
164,404
164,404
49,993
3,136
53,129
6,960
6,960
46,169
210,573
31,656
178,917
2,501
147,520
9,714
1,606
17,576
178,917
91,160
91,160
13,243
2,001
15,244
2,397
2,397
12,847
104,007
12,957
91,050
2,145
64,168
9,714
1,090
13,933
91,050
Capital and reserves includes profit or loss for the year of the parent company, of £4.601 million (2017: £9.459 million).
The Notes on pages 96 to 99 form an integral part of these Financial Statements.
The Financial Statements on pages 94 to 99 were approved and authorised for issue by the Board of Directors on 18 March 2019
and were signed on its behalf by:
Neil Elton
Chief Financial Officer
18 March 2019
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COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2018
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2018
Share capital
Share premium Merger reserve
Note
Share-based
payments
reserve
Retained
profits
£’000
1,580
£’000
17,004
£’000
9,714
£’000
1,879
-
-
-
6
565
Share-based payment charge credited
to equity
11
At 1 January 2017
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Issue of shares
Costs of issuing shares
Payment of dividends
Transfer on exercise and lapse of
options
Transactions with owners
At 31 December 2017
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Issue of shares
Costs of issuing shares
Payment of dividends
565
2,145
47,164
64,168
-
-
-
6
356
Share-based payment charge credited
to equity
11
Transfer on exercise and lapse of
options
Transactions with owners
At 31 December 2018
356
2,501
83,352
147,520
-
-
-
48,286
(1,122)
-
-
-
-
-
-
85,521
(2,169)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,714
-
-
-
-
-
-
-
-
-
9,714
£’000
4,289
9,459
-
9,459
-
-
(1,279)
-
-
-
-
-
-
675
-
(1,464)
(789)
1,090
-
-
-
-
-
-
1,254
(738)
516
1,606
1,464
185
13,933
5,300
-
5,300
-
-
(2,395)
-
738
(1,657)
17,576
Total
£’000
34,466
9,459
-
9,459
48,851
(1,122)
(1,279)
675
-
47,125
91,050
5,300
-
5,300
85,877
(2,169)
(2,395)
1,254
-
82,567
178,917
1. General information
(b) Fixed asset investments
Fixed asset investments in Group undertakings are carried
at cost less any provision for impairment.
(c) Foreign currencies
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.
(d) 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.
(e) 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.
(f) Pensions
The policy for the Company’s defined contribution plan can
be found in Note 2 of the Consolidated Accounts.
(g) Share-based payment arrangements
The policy for the Company’s share-based payment
arrangements can be found in Note 2 of the Consolidated
Financial Statements.
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 15 Fetter Lane,
London EC4A 1BW. 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 Directors have assessed the Company’s ability to
continue in operational existence for the foreseeable
future in accordance with the FRC guidance on the going
concern basis of accounting and reporting on solvency
and liquidity risks (April 2016). 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.
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 2018 is £5,300,000 (year ended 31
December 2017: profit of £9,459,000).
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
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NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2018
3. Investment in subsidiaries
31 Dec 2018
31 Dec 2017
£’000
£’000
91,160
73,244
-
164,404
-
-
-
-
36,271
54,889
-
91,160
-
-
-
-
6. Share capital
Details of the Company’s authorised, called-up and fully paid share capital are set out in Note 24 to the Consolidated Financial
Statements.
The ordinary shares of the Company carry one vote per share and an equal right to any dividends declared.
7. 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, it is the recognition of the fair value over the vesting period.
The share premium account represents the amount received on the issue of ordinary shares by the Company, other than those
recognised in the merger reserve described below, in excess of their nominal value and is non-distributable.
The merger reserve represents the amount received on the issue of ordinary shares by the Company in excess of their nominal
value on acquisition of subsidiaries where merger relief under section 612 of the Companies Act 2006 applies. The merger reserve
consists of the merger relief on the issue of shares to acquire Line Communications Holding Limited on 7 April 2014, PRELOADED
Limited on 12 May 2014, Eukleia Training Limited on 31 July 2015 and Rustici Software LLC on 29 January 2016.
164,404
91,160
8. Creditors: amounts falling due within one year
Included in the above balance is a non-current intercompany loan of £1.9 million (2017: £nil) arising due to the transfer of funds
to Rustici to complete the acquisition of Watershed as detailed in Note 12 to the Consolidated Financial Statements.
Details of the Company’s acquisitions during the year ended 31 December 2018 are set out in Note 12 to the Consolidated
Financial Statements.
Details of the Company’s subsidiaries as at 31 December 2018 are set out in Note 26 to the Consolidated Financial Statements
Trade creditors
Contingent consideration
Other creditors and accruals
Borrowings
31 Dec 2018
31 Dec 2017
£’000
49,919
-
74
49,993
£’000
13,091
51
101
13,243
Details of the Company’s contingent consideration as at 31 December 2018 are set out in Notes 20 and 21 to the Consolidated
Financial Statements.
9. Creditors: amounts falling due after more than one year
At 1 January
Deferred tax credit on share options in issue
Release of deferred tax on exercise of share options
51
-
(51)
-
77
-
(26)
51
31 Dec 2018
31 Dec 2017
Contingent consideration
£’000
£’000
Deferred consideration on acquisitions charged to the Income Statement
Borrowings
The interest expense relating to the movement in present value of contingent consideration in the year ending 31 December
2018 amounted to £24,000 (2017: £41,000).
31 Dec 2018
31 Dec 2017
£’000
12
8
338
6,602
6,960
£’000
55
168
325
1,849
2,397
31 Dec 2018
31 Dec 2017
£’000
-
-
31,656
31,656
£’000
192
-
12,765
12,957
Cost
At 1 January
Additions
Disposals
At 31 December
Amortisation/impairment:
At 1 January
Provision for impairment
Disposals
At 31 December
Net Book Value
4. Debtors
Amounts due from subsidiary undertakings
Deferred tax asset (see Note 5)
Other debtors
5. Deferred tax assets
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10. Related party transactions
The only key management personnel of the Company are the Directors. Details of their remuneration are contained in Note 8 to
the Consolidated Financial Statements.
The following transactions with subsidiaries occurred in the year:
Opening amount due from related parties
Amounts (repaid) by related parties
Amounts advanced from related parties
Closing amount due from related parties
The amounts owing to/from related parties are unsecured, interest-free and repayable on demand.
31 Dec 2018
31 Dec 2017
£’000
13,091
(11,716)
48,544
49,919
£’000
13,167
(20,121)
20,045
13,091
11. Share-based payments
Details of the group share-based plans are contained in Note 25 to the Consolidated Financial Statements.
The Company operates an Approved share option plan. The Company’s share-based payment arrangements are summarised
below.
Approved share option plan - Enterprise Management Incentive (‘EMI’):
At 1 January
Exercises
At 31 December
2018
2017
Number of options
Weighted average
exercise price
Number of options
Weighted average
exercise price
2,000,000
(2,000,000)
-
pence
5.88
5.88
-
3,000,000
(1,000,000)
2,000,000
pence
5.88
5.88
5.88
An option-holder has no voting or dividend rights in the Company before the exercise of a share option.
2,000,000 options were exercised during the year (2017: 1,000,000 options), the weighted average share price at exercise was
£0.6900 (2017: £0.6025). No options were granted, forfeited or expired during the year (2017: nil).
A 1.78% (2017: 1.78%) risk-free interest rate has been assumed for all schemes.
The number of options that are exercisable at 31 December 2018 is nil (2017: 2,000,000).
Share-based payments which were expensed in the entity and taken to equity in the year ended 31 December 2018,
amounted to £nil (year ended 31 December 2017: £nil). The remaining difference between the share-based payments which
were expensed as per Note 25 and the entity, relate to the options over the Company’s share capital held by employees of
subsidiaries.
12. Dividends paid
Disclosure of dividends paid can be found in Note 29 to the Consolidated Financial Statements.
13. Subsequent events
Disclosures in relation to events after 31 December 2018 are shown in Note 32 to the Consolidated Financial Statements.
COMPANY INFORMATION
Directors
Andrew Brode, Non-executive Chairman
Neil Elton, Chief Financial Officer
Piers Lea, Chief Strategy Officer
Leslie-Ann Reed, Non-executive Director
Jonathan Satchell, Chief Executive
Aimie Chapple, Non-executive Director
Company Secretary
Neil Elton
Company number
07176993
Registered address
15 Fetter Lane
London
EC4A 1BW
Independent auditor
Crowe U.K. LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Nominated adviser and joint broker
Numis Securities Limited
10 Paternoster Square
London
EC4M 7LT
Joint broker
Goldman Sachs
Peterborough Court
133 Fleet Street
London
EC4A 2BB
Legal advisers
DWF LLP
Bridgewater Place
Water Lane
Leeds LS11 5DY
Registrar
Computershare Investor Services plc
The Pavilions
Bridgewater Road
Bristol BS13 8AE
Principal banker
Silicon Valley Bank
Alphabeta
14-18 Finsbury Square
London
EC2A 1BR
Communications consultancy
FTI Consulting LLP
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
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ltgplc.com
UK
London
Brighton
Sheffield
USA
Atlanta, GA
Bloomington, IN
Nashville, TN
New York, NY
Raleigh, NC
Waltham, MA
Dallas (Irving) TX
Austin, TX
Reston, VA
Canada
Montreal, QC
Brazil
Rio de Janeiro
São Paulo
Germany
Aschburg
Hong Kong
Wan Chai
Australia
Sydney