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ltgplc.com
UK
London
Brighton
Sheffield
Germany
Ascheberg
USA
Canada
Brazil
Hong Kong
Australia
Atlanta, GA
Bloomington, IN
Nashville, TN
New York, NY
Raleigh, NC
Waltham, MA
Dallas (Irving) TX
Austin, TX
Jacksonville, FL
Montreal, QC
Rio de Janeiro
São Paulo
Wan Chai
Sydney
Adelaide
Mexico
Mexico City
Colombia
Bogota
Learning Technologies Group plc
ANNUAL
REPORT
2019
For the year ended 31 December 2019
Introduction
plc Annual Report 2019
plc Annual Report 2019 Introduction
Closing the
gap between
current and
future workforce
capability
DRIVING LEARNING AND
TALENT FOR 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 the 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
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 2019
plc Annual Report 2019 Introduction
LTG AT THE HEART OF
LEARNING AND TALENT
INNOVATION
We focus on real problems that companies and government 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 government bodies is dynamic and will not sit still.
TABLE OF CONTENTS
Chairman’s Statement
.....................................................1
Case Studies
......................................................................3
Growth Strategy
...............................................................11
Strategic Report for the year ended
31 December 2019
.........................................................13
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 2019
........................................................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
.........................................................................51
Consolidated Statement of Financial Position
.......52
Consolidated Statement of Changes in
Equity
.............................................................................53
Consolidated Statement of Cash Flows
..................54
Notes to the Consolidated Financial
Statements for the year ended 31 December
2019
...............................................................................55
Company Statement of Financial Position
.............92
Company Statement of Changes in Equity
............93
Notes to the Company Financial Statements
for the year ended 31 December 2019
..................94
Company Information
..............................................98
LTG...
...focuses on industries where
talent and learning are critical
to performance
...helps customers scale learning
to support business performance
...supports the
talent retention and
development central to
businesses of the future
...collaborates with customers
within multinational companies
and government bodies with
wide and diverse audiences
and complex needs
...operates within the fast-
growing learning and talent
management markets
...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 2019 2
CHAIRMAN’S STATEMENT
The Board is delighted to report a year of excellent progress in
its ambition to build a group of market-leading businesses in
the learning and talent sectors that can meet the demanding
expectations of corporate and government customers.
During 2019 Learning Technologies Group (‘LTG’) has
successfully completed the integration of PeopleFluent
into the Group, further improving operating practices, and
providing a solid platform from which to scale the business.
LTG has continued to invest in its product development
roadmap and made encouraging progress in its cross-selling
initiatives. In April 2019 we announced the acquisition of Breezy
HR, a fast-growing talent acquisition software business.Breezy
HR has delivered exceptional growth during the year and has
enabled us to significantly increase the pace of development
of the Group’s Talent Acquisition suite of products allowing us
to service small, mid and enterprise tier clients with targeted
solutions.
The Group has continued to deliver increased revenues,
seeing organic revenue growth in both its Software & Platforms
and Content & Services divisions (excluding the acquired
PeopleFluent business). It has further improved its operating
margins and has continued to deliver good cash generation.
Revenues increased by 39% to £130.1 million (2018: £93.9
million) primarily driven by the full-year contribution of
PeopleFluent (acquired May 2018) and the acquisition of
Breezy HR in April 2019. LTG delivered like-for-like organic
revenue growth, on a constant currency basis, of 6% in our
Software & Platforms division (11% on a three-year CAGR basis;
excluding the acquired PeopleFluent business) and 4% in its
Content & Services division (5% on a three-year CAGR basis;
excluding the large one-off CSL contract).
The acquired PeopleFluent business delivered revenues of
$93 million (2018: $96 million on a full-year basis), ahead of
previously announced expectations of c$91.0 million, supported
by a significantly improved retention rate for its software
licences and a good sales performance by Affirmity. The Board
is confident that, as guided at the time of the acquisition in
2018, the acquired PeopleFluent business is now stabilised and
will return to growth as market conditions normalise.
Adjusted EBIT (refer to the Strategic Report section for definition)
increased by 58% to £41.0 million (2018: £26.0 million) and
adjusted EBIT margins have improved from 27.7% in 2018
to 31.5% in 2019. Adjusted diluted EPS increased by 47% to
4.736 pence (2018: 3.232 pence). In the six years since LTG
listed on the London Stock Exchange the Group has delivered
compound annual growth of 57% in adjusted diluted EPS.
The Group’s net cash position at 31 December 2019 of
£3.8 million (2018: £11.5 million net debt) was better than
anticipated due to substantial cash generation in the second
half of the year and places the Group on a sound footing
to weather a downturn and be well positioned to invest in
selective M&A opportunities as they arise.
Corporate Governance
LTG adopted the QCA Corporate Governance Code in
September 2018. The Group continues to review and improve
its investment in good governance initiatives and further
details are provided in the Corporate Governance section of
this report.
In December 2019, Claire Walsh, the Group’s Head of Legal
was appointed as Company Secretary to the plc Board. The
Board is actively searching for a fourth Non-executive Director
and I look forward to updating shareholders in due course.
Current trading and outlook
In 2019, the Group continued its track record of delivering
strong margins, benefiting from enhanced leadership
positions in our key markets. LTG has proven that it can
successfully integrate, improve and grow the businesses
we acquire, delivering excellent value for shareholders and
comprehensive, innovative and industry-leading capabilities
and services for our clients. These achievements would not be
possible 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.
On 10 March 2020, LTG announced the proposed acquisition
of the business and assets of Open LMS from Blackboard Inc
for cash consideration of $31.7 million (subject to customary
price adjustments), to be funded from the Group’s existing
cash and bank facilities. This acquisition will complement LTG’s
existing proprietary software solutions through the addition
of expertise in the market’s leading open-source Learning
Management System, Moodle, and will be immediately
earnings enhancing. The deal completed on 31 March 2020.
Over the past few weeks it has become evident that COVID-19
will have a marked impact on the global economy, business
and the welfare of workforces and their families. LTG has
experienced a good start to the current year and we have not
yet seen a material impact of COVID-19 on the performance
of the business. However, COVID-19 creates uncertainty for the
remainder of the financial year and may result in delays to the
sales pipeline, curtailment of content and services projects
and delays in customer payments. LTG is underpinned by a
strong balance sheet, a high proportion of recurring multi-
year revenues and excellent cash generation. More details on
the actions that we have taken are included in the Strategic
Report section of this report.
Dividend and Annual General Meeting
LTG continued its track record of excellent cash generation in
2019. Our liquidity position is very strong, with net cash ahead
of expectations and a robust balance sheet. To sustain this
position of strength, in light of uncertainty for the remainder
of the financial year resulting from the impact of COVID-19,
the Board is adopting a prudent approach to shareholder
distributions. The Board will therefore postpone the final
dividend (which would have been 0.5 pence per share) until
market conditions normalise.
The Annual General Meeting will be held on Friday 19 June
2020.
It is core to LTG’s business model to enable corporates
and governments to train and manage the performance
improvement of their workforces through digital learning and
talent management platforms, and we believe our clients will
continue to use our platforms during these difficult times. The
realisation by corporates of the necessity, appropriateness
and effectiveness of digital learning and talent management
solutions today will, in the Board’s view, only serve to
accelerate their adoption tomorrow.
The Board looks forward to updating shareholders on progress
during 2020.
Andrew Brode
Chairman
15 April 2020
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CASE STUDIES
Oil & gas
CASE STUDIES
Mining
Royal Dutch Shell
Anglo American
Using innovative Group-wide solutions to deliver learning to a global network of
direct and indirect workers, and improve ROI
Using high-impact, highly realistic VR to make mining safety scenarios feel as
real as possible, with a goal of decreasing risk-to-life incidents
The challenge
The solution
Royal Dutch Shell PLC, better known as Shell, is one of the
world’s biggest oil and gas companies. With over 80,000
employees globally, Shell has a large indirect workforce with
limited access to its internal network and learning platforms.
Shell’s introduction to LTG started in 2017 via Gomo, with a
small enterprise licence for e-learning content authoring
and hosting for around 5,000 learners. This has since grown
into 15 enterprise authors and unlimited hosting. In 2018,
via Gomo, Shell also started working with LEO Learning
on a number of larger digital learning projects, including
training for critical equipment inspection, payment modules
and onboarding. These learning programmes amount to
dozens of hours of training, created in the Gomo authoring
tool, and make use of animations and scenario videos for
greater learner engagement.
In 2018, Shell identified a need to:
• Develop a cost-effective training programme that could
be efficiently deployed in key markets globally by 2019.
• Increase profitability of overall and premium motor
oils sold through a network of workshops to generate a
positive ROI.
• Provide mechanics with engaging and relevant training
to grow trade share of recommendation (SoR).
Shell turned to Instilled, a Learning Experience Platform (LXP)
formed from LTG expertise and capability at Gomo, Rustici
Software and Watershed and now part of PeopleFluent’s
learning product portfolio. The platform integrates into
Shell’s existing digital systems and uses Single Sign-On (SSO)
to create a frictionless user experience. Pre-piloting first in
Egypt and the Philippines in 2018, rollout in Shell’s top four
markets began in September 2019.
The result
One LEO course on onboarding has saved Shell significant
training time, going from 16 hours face-to-face to nine hours
online. In addition to ongoing work with LEO and Gomo,
Shell added more content for learners serving its Lubricants,
Retail, Aviation, and Specialities businesses, and grew the
number of countries and languages supported in each
case. With Instilled:
• The active user rate among workshops activated on the
Shell Workshop Academy has reached more than 85%
since September 2019.
• Positive ROI has been generated from investment into
the global influencer training programme and platform
within 2019 (2.74:1), and by 2021, returns are expected to
deliver a three-year ROI of (7.1:1).
In addition, the LEO-designed gamified onboarding
experience Think, Talk, Act Customer (TTAC) has reduced
overall training time for the learner from 24 hours to
seven. In 2019, TTAC won two awards: Best Onboarding/
Employee Orientation Solution at DevLearn’s DemoFest
and a Brandon Hall award for Best Advance in Onboarding
Technology (Bronze).
The challenge
Through LEO Learning, LTG has been working with Anglo
American since 2017 to help the mining company achieve
its business goal of ‘zero harm’. Following a previous learning
project (scenario-based broadcast-quality video drama),
LEO and PRELOADED responded to an RFP on how to use
digital learning to enhance Operational Risk Management
(ORM) training. Anglo American wanted an intervention
that focuses on the most common, high-impact cause of
death at an underground mine: a fall of ground. Knowing
that genuine behaviour change is best conveyed through
realistic, relatable scenarios that mirror what life is like
underground, the training needed to bring the hazardous
environment to life.
The solution
The first phase of a long-term project was to identify the use
case for Virtual Reality (VR) in the training of frontline and
supervisory staff. This work was conducted over an intensive
five-week period, including desk-based research, two site
visits to a platinum mine in South Africa, and three weeks of
prototype development. The VR prototype brings learners
as close as possible to what a real-life mining accident
feels like. Using immersive technology, it gives learners an
opportunity to practice and assess key risk management
methodologies in the event of a serious incident.
The result
Anglo American’s ambition to use high-fidelity VR for critical
safety training is forward thinking in the mining industry.
With the prototype successfully delivered, the project is
moving into the curriculum planning and technical design
stages, with project completion expected in August 2020.
The aspiration is to connect VR to an existing learning
ecosystem that seamlessly collects data (gaze direction,
movement around space, reaction time, etc.) which, at its
most basic, will allow Anglo to test its people’s competence
in conducting risk assessments. Data capture will also allow
Anglo to correlate performance behaviours to business
change, as well as correlate the VR experience to real-time
capability development in the workforce which will help to
inform future VR development.
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CASE STUDIES
Energy/retail
CASE STUDIES
Construction
Valvoline
Caterpillar
Providing a scalable solution for the delivery and management of product
training across a global distribution network
Building an extended enterprise learning ecosystem with measurable career
development at its heart
The challenge
Valvoline, a leading worldwide supplier of premium
branded lubricants and automotive services, provides
customised training to support various learner groups –
from training customer-facing counter staff on how to sell
products, to informing technicians about how to use their
products. With an extensive network of dealerships, retailers,
service centres and franchises, many of which manage
their own Learning Management Systems (LMSs), Valvoline
wanted to improve the content management process
and streamline the administrative process for managing
course updates. In addition, it sought to increase visibility
into usage across third-party systems to understand how
partners were engaging with the product training. In short,
Valvoline wanted to put its content on any LMS and still
retain control of its IP.
The solution
The result
Since implementing Content Controller, Valvoline has:
• Delivered 330+ courses, launching 33k+ unique
registrations.
• Served 2,200+ learners across 12 client account LMSs.
• Seamlessly provided an average of 2.4 updated
versions of each course in production.
Rustici Software’s web-based app, Content Controller,
helps Valvoline manage its product training content from
one central location and distribute it across its extended
enterprise network – all while still retaining complete control
of the distribution and licences. Successful implementation
allows Valvoline to:
• Have complete control over which partners can access
training and to expire out-of-date courses as needed
(even though the content may have been deployed on
multiple systems belonging to their distributors).
• Deliver up-to-date product information and training
across multiple learning platforms in real time.
• Use data to track the effectiveness of its partner training
programmes and better correlate training efforts to
increased sales and improved customer experience
at each location.
• Identify what resources were being used most, measure
the effectiveness of the training and know where to
invest for future content development.
The challenge
For Caterpillar Inc., the world’s leading manufacturer of
construction and mining equipment, diesel and natural
gas engines, industrial gas turbines, and diesel-electric
locomotives, a 2017 organisational study revealed that:
• Standardising the customer experience across its
dealer network would help the company generate
billions of additional dollars of revenue.
• Dealers with a mature L&D organisation generated
better profits, even during unfavourable economic
conditions.
With more than 300,000 employees worldwide, Caterpillar
wanted an efficient way to design and deploy standardised
learning programmes that all dealers can follow, regardless
of their size and business environments.
The solution
Caterpillar’s Global Dealer Learning (GDL) department
shifted the training focus from experiential and incidental
to data-driven. To achieve this, it moved away from relying
solely on a Learning Management System (LMS) as the
delivery platform for dealer training to a flexible learning
ecosystem.
The brain of GDL’s learning ecosystem is Watershed’s
Learning Analytics Platform (LAP), which tracks and
measures learner behaviour. The platform is able to
collect and standardise data across all learning platforms,
regardless of the source, which aids in the continuous
improvement of the learner experience.
The result
• By architecting a robust learning ecosystem and
conducting multiple training sessions, GDL can deploy
its five-step Career Development Process (CDP) Wheel
programme to more than half of Caterpillar’s 172
Dealers, with a target of full adoption in 2020.
• Caterpillar also reduced the distribution cost to serve
customers by 10%, increased adoption of all learning
products 10% (approx.) and increased usage of
learning ecosystem tools and technology by 50%.
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CASE STUDIES
Energy
CASE STUDIES
Business intelligence/Commercial construction
An international energy services and solutions business
Dodge Data & Analytics
Bringing L&D in-house to rapidly rebrand a large library
of business-critical digital learning
Assisting a 100-year-old business in hiring world-class sales reps
quickly and efficiently
The challenge
As an international energy services and solutions business,
supplying electricity and gas to homes and businesses
across the U.K. and North America, the organisation has
complex training requirements for its 35,000+ learners as
well as global partners. These include soft skills and business-
critical training for field engineers and gas apprenticeships.
The organisation wanted an efficient, scalable solution to
help them record and collect subject matter expertise, and
create a steady pipeline of digital learning content with a
consistent, fresh look and feel.
The result
Feedback has been excellent with learners ‘star rating’ the
training content 4.7 out of 5. With the new Gomo-designed
courses, the company is:
• Creating 70% of its digital learning in-house and
outsourcing the remainder.
• Saving thousands of pounds by bringing learning
in-house.
• Improving course completion rates from a full year
to one quarter.
Additionally, in early 2020, the company signed on to use
Instilled, as a video-based solution to help them easily
record and organise subject matter expertise.
The challenge
The solution
Dodge Data & Analytics is North America’s leading provider
of analytics and software-based workflow integration
solutions for the construction industry. The company’s
construction project information is regarded as the most
comprehensive and verified in the industry, and is highly
sought after by building product manufacturers, architects,
engineers, contractors and service providers looking to
grow their businesses.
Dodge uses Breezy HR’s Applicant Tracking System (ATS) to:
• Easily look up candidates’ names and track who it
hires.
• Collaborate with internal stakeholders, such as hiring
managers, using scorecards to track comments
and progress.
• Send SMSs (as opposed to emails, which can often go
unread) to get a fast reply from in-demand candidates
with whom the company has an interest.
• Seamlessly integrate prospected candidates from
LinkedIn into the ATS using the integration plug-in.
• Simplify and streamline workflows and tracking for
referral fees when a Dodge employee refers a
potential candidate.
The solution
The company’s new Director of Learning & Development
for Academies had championed the use of Gomo in her
previous L&D role at a telecommunications company.
Piloting an initial ‘proof of concept’ project on a compliance
e-learning course with a Gomo-designed custom theme,
the company took the course rebrand in-house. Feedback
was overwhelmingly positive and a team of 15+ users were
quickly upskilled on using the authoring tool to redesign the
course catalogue. Because Gomo courses display well on
any device (mobile, tablet or desktop), the company can
distribute content through multiple channels, mainly their
existing Learning Management System (LMS) and intranet.
In less than five months, over 50 courses were redesigned
in Gomo, reducing its reliance on external vendors for all
its learning content.
Based in New York City, Dodge has a 100-year-old legacy
of continuous innovation to help the industry meet the
building challenges of the future. To keep up, leaders at
Dodge need to attract and hire top-of-the-line talent,
primarily in revenue-generating positions such as sales, in a
highly competitive job market.
The result
Breezy HR’s cloud-based software allows Dodge’s lean
recruitment team to focus on its goal of prioritising quality
talent over time-to-hire metrics. The company’s Head of
Talent Acquisition reports that Breezy HR saves the company
over 80% the amount of time compared to previous
applicant hiring and tracking systems.
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CASE STUDIES
IT/consulting
CASE STUDIES
Retail
Optimal Solutions and Technologies (OST Inc.)
A leading North American retailer
Using system health checks to drive efficiency within U.S. State Government
Equipping the Diversity & Inclusion (D&I) team with the data to improve analytics
and drive diversity strategies
The challenge
The result
According to Staffing Industry Analysts (SIA), first-year
savings with a VMS range between 10–15%. Through usage
analytics, VectorVMS identified opportunities for OST Inc. to:
• Simplify and accelerate candidate reviews – by limiting
the number of submissions allowed by a vendor on
a given requisition, OST Inc. shortened the candidate
review cycle by 10%, while increasing the quality of
candidates submitted.
• Enhance compliance – VectorVMS analytics revealed
that users were adding compliance documents
retroactively. With an updated requisition template,
OST Inc. can ensure that compliance items appear
automatically when a requisition is submitted.
• Streamline timesheet approvals – user behaviour
indicated that timesheet approvals were cumbersome.
To accelerate the process, VectorVMS improved the
base configuration and deployed a solution that
enables users to approve by email, eliminating several
steps and saving time.
• Reduce manual effort to create requisitions –
VectorVMS recommended updating and expanding
job templates to include skills and other information
that defines each position. As a result, OST Inc. was
able to reduce the amount of time required to create
requisitions.
Optimal Solutions and Technologies (OST Inc.) provides
third-party contingent labour workforce management
solutions to its clients. To be successful programme
managers, OST Inc. needed a Vendor Management
System (VMS) that would simplify how it sources and
manages contingent labour for clients. This system
would reduce the amount of manual intervention it had
been taking to create requisitions, source and onboard
candidates, track time and invoicing, and eventually
offboard and evaluate workers. Without a properly
optimised system, slowdowns occur, reducing efficiency
and ultimately costing OST Inc. and its end-clients money.
The solution
The VectorVMS platform features a robust tool that captures
user activity and enables it to offer data-driven insights
into system configuration, user adoption of features, and
programme optimisation. Data from the VMS’ analytics
tool served as the foundation for a dialogue that helped
OST Inc. meet the sophisticated and unique needs of
contingent labour management for U.S. State Government.
The challenge
A big box retailer with thousands of retail stores across
North America, the organisation is committed to building
a diverse and inclusive environment for its over 300,000
associates. As part of its D&I programme, it was tracking
workforce diversity demographics across the organisation.
However, because it wasn’t using benchmarks and only
tracking internal data, it was only telling half the story. To
take the programme to the next level, the organisation
needed richer insights that told a complete story on how
the diversity of store associates reflected the available
labour market.
The solution
Affirmity deployed its Diversity Insights benchmark and
reporting solution which provides the organisation with the
ability to:
• Efficiently analyse its workforce representation against
census and industry benchmarks.
• Customise reporting to its unique needs.
• Design and execute plans across the talent lifecycle at
both the store and role levels.
• Identify gaps in representation and highlight
opportunities in recruiting, promoting, and retaining for
a diverse organisation.
The result
The organisation now has the tools and benchmark
data to help it better align its business with the available
labour market. This allows the company to create a more
welcoming customer experience, enhance collaboration,
increase community involvement, and strengthen the
business. In broader terms:
• Using the same methodology, another client was
able to collapse its goal setting within business teams
from two months to less than an hour. For progress
monitoring, the time spent putting together metrics
and reports decreased by 90%.
• A study published in the Journal of Management2
found that having a racially diverse workforce can
improve retail sales performance. It concluded that for
each percentage point closer to matching the racial
diversity of the community and workforce, a retailer
can increase its sales by $67,000.
2. Richard, O.C., Stewart, M. M., et al (Apr 2015, Sep 2017). The Impact of Store-Unit–Community Racial Diversity Congruence on Store-Unit Sales Performance.
Journal of Management. Available online (https://journals.sagepub.com/doi/abs/10.1177/0149206315579511)
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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 remains undiminished. Despite the headwinds of recession
caused by the COVID-19 crisis 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, healthcare, finance, energy and aerospace) 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 comprehensive and differentiated
from the industry. Our base of 3,000 customers is fertile
ground. The demand for the number of services and
products being pulled from across the Group by our larger
customers shows the potential. Last year this grew 28% in our
top 10 customers. We will continue to 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.
Given our relative financial strength and commercial diversity
we will seek to combine sensible acquisitions with new areas
of research and development. As one of a few consolidators
in the market we see an opportunity in the coming year
to strengthen our capability and increase both scale and
geographic presence.
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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,
org charting, compensation and learning solutions for large and mid-size enterprises,
including Instilled (easy-to-use, structured corporate Learning Experience Platform)
and Breezy HR (dynamic recruitment software and applicant tracking system).
Learning creation and distribution - SaaS product for learning creation and
distribution, inclusive of authoring, delivery and analytics.
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.
I C S A N D MEASURE
M
E
N
T
T
Y
L
A
N
A
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
13
plc Annual Report 2019
STRATEGIC REPORT
For the year ended 31 December 2019
Chief Executive’s review
Market overview
Hiring and retaining good people is becoming an
increasingly competitive pursuit across global business. This is
predicted to become acute over the next decade with five
forces driving the need to reskill large parts of the workforce:
•
•
•
•
the complexity of business and work;
the pace of change;
unprecedented demographic shifts;
the need to compete through productivity;
• changing relationship to work.
As a result of these forces the effectiveness of the functions
within business that are tasked with developing the talent and
learning of employees and the ‘extended enterprise’ such
as HR and L&D departments are increasingly moving up the
Boardroom agenda.
The pace of change presents a challenge to corporates
and governments in choosing the best technologies driving
workforce development, determining the most appropriate use
of these technologies and addressing how this transformation
is achieved. This is the market that LTG is addressing.
The global corporate training market is estimated to be worth
approximately $376 billion and is growing at approximately
3% per annum. The market includes many product and
service offerings ranging from traditional formats such as
classroom training through 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.
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 comprehensive services, which meet their evolving
requirements for data-driven solutions, and have the scale
and breadth of experience to service large corporations and
government organisations.
The complementary talent market is estimated to be
worth more than $7 billion and growing at approximately
7% per annum. Talent management software refers to
the wide array of integrated applications that companies
use for recruitment, performance management, learning
& development, and compensation management of
employees. Talent management software plays an 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.
The emerging market requirement is for workforce
transformation; providing a data-driven mix between learning
and talent to allow for greater insights and enable predictive
decision-making for performance improvement.
Many organisations struggle to deliver the transformation
required because there are so many interrelated parts to
drive success; even the largest organisations rarely possess
the range of skills, technologies and processes necessary to
lead the whole change.
Strategic Goals
In November 2018 LTG set out its strategic financial objectives
to achieve run-rate revenues of £200 million and run-rate
EBIT of at least £55 million by the end of 2021 through a
combination of organic growth and strategic acquisitions
that complement the current business, to be financed
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
As set out above, the market opportunity for LTG is attractive,
driven by our clients’ desire to close the gap between
current and future workforce capability in an increasingly
competitive market.
LTG is building a unique set of capabilities that covers services,
products and a wide range of partnerships. The complexity
of the requirement for workforce transformation requires a
varied mix of skills and technologies matched to the culture
and strategic goals of the client organisation. This is a subtle
process requiring best-in-class solutions at each stage.
Each business in the LTG family brings a component of the
best-in-class expertise required to drive strategic results for
our customers. These include specialist solutions across
recruitment, learning, performance, learning analytics,
succession, compensation, vendor management, diversity
& inclusion, immersive virtual, augmented and mixed reality
experiences, as well as consulting on how to combine all
these in pursuit of business performance goals.
It remains our intention 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 global offering in highly-
regulated, high-consequence vertical markets, such as
life sciences, healthcare, energy, automotive, finance and
aviation and broadening and deepening our offering to
existing customers.
plc Annual Report 2019 14
LTG continues its aim 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 is creating a group of market-leading businesses
providing complementary services in the growing learning
and talent sectors to form an international business of size
and scale that is able to meet the demanding expectations
of corporate and government customers whether that be for
large global corporates or mid-sized organisations looking to
stand up solutions speedily.
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’ solutions combining digital and more traditional
forms, as well as through targeted investment in internally-
generated intellectual property and the extension of best
working practices to deliver organic growth.
The Group’s focus remains on the U.S. and European markets
where LTG already has a significant operational presence,
supplemented by other regional centres that provide the
Group with a differentiated service offering for companies
with globalisation strategies.
Increasing international footprint:
revenue split by geography
2018
2019
U.K.
U.S.
RoW
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 and talent technology.
The managed service market, where organisations source the
entirety of their requirement from external suppliers, is a part
of the market that has been growing steadily over the past
few years as organisations seek out the expertise and varied
and wide-ranging skillsets to transform their organisations. LTG is
well placed to partner with global organisations to help them
bring about this evolution.
Investment in innovation for long-term
growth
R&D
The Board continues to see R&D as a core enabler of future
growth and for the fourth year in a row LTG has been identified
by independent industry analyst Fosway as a strategic leader
in digital learning.
Most of LTG’s software solutions are well-established products
developed over many years and enjoy 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. The benefits of this increased focus on customer
requirements and increased efficiency and productivity in
delivering change has already had a demonstrable impact
in customer satisfaction and increased retention rates,
particularly with the PeopleFluent product suite.
Increasing recurring revenue
2018
2019
Recurring
Non-recurring
Rather than invest in speculative solutions LTG prefers to
partner with clients to build and innovate solutions, using data
to prove business impact results each step of the way.
As well as re-invigorating established software solutions LTG
has also developed new products to address changing
requirements in the marketplace. With more than 4,000
customers LTG has excellent market access which allows
for real-time insights that when combined with the Group’s
specialist expertise and R&D capacity allow for the fast
evolution of new and innovative products and services
underpinned by an understanding of demand requirements.
15
plc Annual Report 2019
plc Annual Report 2019 16
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2019
This suits large and medium-sized ‘traditional’ businesses who
are facing a substantial transformation in the coming years.
In early 2019 LTG’s designers and engineers brought together
powerful components of the Group technology to provide
a next-generation approach. The result was the launch
of Instilled, a ‘Learning Experience Platform’ (‘LXP’), that
places the user experience at its heart, enabling learners
to create, share and recommend content, empowering
them to create their own ‘learning journeys’. This has landed
well both with customers and analysts, with one leading U.S.
commentator writing:
“I wish I could work for Instilled. I’ve been doing this for 30
years and I think Instilled has such a huge opportunity and
can own a category. This happens very rarely.”
The system has already been taken by such organisations as
Shell, PNC Bank, Comcast and Johnson Controls.
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 solutions, or LEO’s strategic
learning programmes, combining ‘blended’ solutions
incorporating products and services from within the Group or
alongside strategic partners. Eukleia, now combined with LEO
so that it can bring the benefits of its compliance capability
to the broader market, has invested in new titles across the
governance, risk and compliance suite which it can provide
off-the-shelf or modify for specific customer requirements.
During the year LEO, PRELOADED, Instilled and Watershed,
partnered with Jaguar Land Rover, to bring a new learning
game to market called ‘Product Genius’. This game provides
an engaging way to help employees in the extended
enterprise retailer network stay on top of continually evolving
product and brand developments, encouraging learning
and participation through elements such as competitions
amongst peers.
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 2019 Software & Platforms accounted for £88.6 million
or 68% of Group revenues, up from £59.8 million (64%) in
2018 primarily as a result of the full-year contribution by
PeopleFluent and Watershed, a post-acquisition contribution
from Breezy HR and organic growth from the other Group
businesses. The Software & Platforms division contributes
89% of the Group’s recurring revenues. Adjusted EBIT margins
increased from 32% to 36%.
For the Software & Platforms division, 2019 has been a year
of consolidation and focus on R&D resulting in a number
of highlights.
70
60
50
40
30
m
£
20
10
0
Software & Platforms
Software & Platforms
59.8
20.9
7.8
2017
2017
EBIT
Revenue
88.6
59.8
19.9
2018
2018
EBIT Margin
40%
35%
30%
25%
20%
15%
10%
Having merged the NetDimensions Learning Management
System (‘LMS’) under the PeopleFluent brand and
management team in 2018, PeopleFluent now delivers
a ‘best-of-breed’ set of SaaS solutions encompassing
talent acquisition (recruitment and onboarding), talent
management (performance, succession, compensation
and organisational planning) and now market-leading
learning management.
In 2020 the PeopleFluent product suite is being
strengthened further with the Instilled LXP, providing a
world-class user-experience interface combined with the
market-leading Watershed Learning Analytics Platform
(‘LAP’) underpinning the function-rich PeopleFluent Learning
Management System (‘LMS’) to deliver a unique and powerful
solution to clients.
The PeopleFluent product suite is particularly suited to
complex global businesses where staff and contractors
require unique and sophisticated human capital solutions,
where multiple languages and other localisations
are required, and which operate in regulated ‘high-
consequence’ industries where security, auditability and
configurability are important requirements.
As stated at the time of the acquisition in 2018 not all of
PeopleFluent’s products had 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. With our focus on product
development, substantial R&D investment and an open and
regular dialogue with customers, LTG has been successful
in increasing retention rates from c73% prior to acquisition
to c83% in 2019, well ahead of our expectations. Although
new sales were slower to develop in the first half of the
year, notable successes in the second half have meant
that net new sales equalled lost renewals in 2019 (on an
annual contract value basis) and the Board is confident that
PeopleFluent will return to sales and revenue growth once the
market normalises after the COVID-19 outbreak.
Rustici Software has built on its reputation as the global
leader in e-learning standards-based solutions (Rustici’s
SCORM Engine sits at the heart of more than half of the
world’s leading learning systems) to develop more partnership
and proprietary API-based solutions. In 2019 Rustici added
support for the use of Zoomi Inc’s AI-powered learning tools to
be used in conjunction with SCORM Cloud, began building
reusable integrations between content publishing houses
such as GO1 (one of the world’s fastest growing course
aggregators) and learning platforms using the Rustici Engine
product and released an embeddable solution to allow
learning platforms to leverage Watershed-powered reporting
within their own application.
Rustici has continued its uninterrupted top line growth with
significant wins with publishers of learning content like the
SANS Institute (the largest source for information security
training in the world) and AICPA (the American Institute Of
Certified Public Accountants, the world’s largest member
association representing the accounting profession). Within
LTG, Rustici was able to provide efficiencies across the
Group with the creation of a new Hosting Operations team.
This team was able to take over the hosting needs of the
Watershed platform and significantly reduce the burden on its
development staff.
Gomo, LTG’s cloud-based authoring and distribution
platform which enables customers to create and deliver
e-learning content online, supporting team collaboration
and producing rich and responsive HTML5 content that will
work seamlessly on desktop, tablet and smartphone devices
continues to grow its enterprise customer base with a number
of major contracts in 2019 including WhatsApp, TDK and Royal
Mail. AICPA, a shared client with Rustici (see above), has now
published more than 3,000 courses to its 413,000 members in
143 countries using Gomo.
Watershed, headquartered in Nashville, is a 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 four years of product development and
client case studies, Watershed now has a robust platform
used as part of large-scale global deployments by many
large corporates including Visa, Caterpillar, Verizon, PwC,
and Fidelity. Watershed grew revenue by 27% during 2019,
marking its first year of profitability and, with many exciting
pilots underway, management is confident of continued
strong growth in 2020.
Affirmity returned to growth in 2019 in its platform and
services business focusing on U.S. affirmative action plans
and global diversity. The business is the leader in the U.S.
market accounting for a quarter of U.S. affirmative action
plans. By separating the business from the PeopleFluent
brand, giving it its own market face and investing
appropriately the business has reversed declining revenue,
generating year-on-year revenue growth of 12%.
With the increased focus on global diversity and gender
pay gap, Affirmity will continue to meet the expanding
opportunities and grow through new diversity software and
service offerings in 2020.
VectorVMS provides solutions that allow its clients to
successfully manage all non-employee labour through
the full sourcing and management lifecycle. VectorVMS
reversed the historic slow product feature enhancement by
launching a large range of new features demanded by its
customers. Most notably, it launched a mobile app for use
by contractors. The business continued to see a moderate
revenue decline in 2019 primarily as a result of licences that
were ceased prior to acquisition, however, the major product
enhancements in the year helped VectorVMS secure large
brand names like Strategic Staffing Solutions (S3), Energy
Resources Group and SDI International.
Content & Services
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’ expectations and as a result the
division achieves consistent and industry-leading margins.
Overview and performance
In 2019 the Content & Services division accounted for £41.4
million or 32% of Group revenues (2018: £34.0 million; 36%).
Organic revenue was up 8% in the division’s three content
businesses, LEO, PRELOADED and Eukleia, in line with previous
guidance. Overall, excluding the acquisitions of PeopleFluent
and the Civil Service Learning (‘CSL’) contract, and adjusting
revenues as if all businesses that were part of the Group in
2018 reported on a full-year basis, organic revenue on a
constant currency basis increased by 4% from £23.5 million
to £24.6 million. This reflects a small revenue decline of
c.£0.6 million in the services division of NetDimensions (now
PeopleFluent Learning), following our strategic decision to
stop further client customisation to the LMS SaaS platform, in
17
plc Annual Report 2019
plc Annual Report 2019 18
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2019
line with established good practice. Adjusted EBIT margins
increased from 20% to 23%.
Content & Services
m
£
40
35
30
25
20
15
10
5
0
34.0
30.5
5.5
2017
41.1
34.0
7.3
2018
24%
23%
22%
21%
20%
19%
18%
17%
16%
EBIT
Revenue
EBIT Margin
LEO Learning (‘LEO’) is the Group’s integrated innovative
digital learning specialist, providing world-class strategic
consultancy for transformation through learning, supported
by creative blended learning design and content. With a
continued drive to deliver measured results, LEO has worked
ever more closely with clients during 2019 on creating the
data-rich connected environments for learning that provide
an evidenced foundation for growth. In 2019 LEO expanded
its main office in Atlanta complementing its other main U.S.
office in New York, alongside its network of offices in London,
Brighton and Sheffield in the UK, and Rio de Janeiro and São
Paulo in Brazil.
Working across a broadening range of industries, LEO has
seen an increase in services and content in the area of
innovative learning journeys, social and networked learning,
behaviour change programmes and supporting the complex
technical integration of learning tools into more effective
learning ecosystems. LEO has recently announced a new
customer in Toyota Motors North America. Aimed at 45,000
people across the network this blended learning programme
will support the transformation of safety culture within the
business at all levels of the organisation.
In 2019 LEO integrated LTG’s specialist GRC team, Eukleia, into
its production and management structure bringing together a
naturally close set of skills and services as well as a successful
generic course catalogue.
LEO won several major awards during the year including
winning the DemoFest at DevLearn in Las Vegas for the fourth
year in a row with one of its projects for Shell.
Eukleia has also continued its work for eight out of the top
ten global banks and seven out of the top ten investment
banks with its specialist expertise in governance, risk and
compliance. While having a tough year in terms of the market
with a lack of new compliance legislation to drive growth,
the company is now deriving benefit from a re-engineered
catalogue of specialist titles ranging from Financial Crime to
Personal Conduct. At the end of 2019 it launched a series of
courses aimed specifically at the U.S. market. Now merged
with LEO, Eukleia is responding to the market requirement for
innovation in the way compliance learning is delivered. A
recent joint win with one the largest global banks on ‘Personal
Conflicts’ is testimony to the strength of the combination.
PRELOADED, the Group’s multi-award-winning games
studio, remains at the forefront of immersive learning
content, focusing on its ‘play with purpose’ mission. In 2019,
PRELOADED collaborated with BBC Studios on ‘BBC Earth
- Micro Kingdoms: Senses’, an educational Mixed Reality
experience for the Magic Leap One headset, launching
in 2020, as part of Magic Leap’s prestigious Independent
Creator Program. This work in the consumer learning market
is helping PRELOADED, together with other LTG companies,
lead the way in the corporate learning space with immersive
projects for companies like Bayer and Anglo American
where ‘mixed reality’ technologies are being used for clinical
diagnosis and critical safety training. PRELOADED, which
grew in 2019 by 41%, also won a coveted BAFTA award in
November 2019 for its work on ‘A Brief History of Amazing Stunts
by Astounding People’ for Los Angeles-based WITHIN.
Cross-Selling and Partnerships
In 2019 LTG launched a Group selling initiative to more
than 200 of its customer-facing staff utilising the Group’s
own Instilled platform and incentivised through a new
Group-wide cross-selling commission plan. This learning
initiative is beginning to yield results through an increase
in new opportunities across the business. The Group is also
leveraging off its PeopleFluent reseller network to deliver new
products such as Instilled to a global market.
One notable introduction led to a new customer rising to
a $3m account from a standing start in May 2019. Bringing
together LEO, PeopleFluent, Instilled, Rustici and Watershed,
LTG has produced a global content, system and analytics
solution for a major home systems supplier, reaching more
than 100,000 distributors and 70,000 contractors.
Shell continues to be a major customer for Instilled, Gomo,
Rustici and LEO with on-going work winning awards for both
content and new technology in 2019.
LTG offers 31 discrete product and service offerings. On
average LTG’s clients took 1.3 (2018: 1.2) of these services in
2019 compared with an average of 4.1 (2018: 3.2) across LTG’s
top ten clients, who together represent approximately 12%
(2018: 15%) of Group revenues.
Many of these cross-selling opportunities are bi-lateral
between LTG’s business units but more are now multilateral.
Group Services
The Board believes that by building a comprehensive offering
of scale that 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.
COVID-19 Update
We have not yet seen a material impact from the ongoing
COVID-19 outbreak on business performance. We anticipate
that our recurring revenues will continue, but that some
content and services projects may be impacted and new
business wins delayed. We anticipate that some customers
may seek to delay payments.
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 Q4 2019 LTG appointed a Chief People Officer and a new
Head of Legal to strengthen the LTG leadership team.
Acquisitions
A core part of LTG’s strategy is the execution of strategic M&A
that enhances the Group’s offering. During 2019 the Group
completed the following acquisition:
Breezy HR
On 17 April 2019 LTG completed the acquisition of Breezy HR,
a fast-growing talent acquisition software business, providing
small to medium sized businesses with feature-rich, intuitive
and user-friendly recruitment software to optimise their
recruitment processes and maximise productivity. Breezy HR
is headquartered in Jacksonville, Florida and has become
a business within PeopleFluent, part of LTG’s Software &
Platforms division.
Breezy HR was acquired for £9.7 million in cash, funded by
the Group’s existing cash and bank facilities. Transaction
costs charged to the income statement totalled £0.2 million.
Goodwill on acquisition has been calculated at £6.3 million
and acquisition-related intangibles of £3.7 million are
represented by IP and customer relationships.
The SPA contains provisions for additional deferred contingent
consideration, payable to the sellers of Breezy HR who
remain employed by the Group, up to maximum of $17.0
million payable on ambitious revenue growth targets (the
maximum being $15.0 million in FY2021) over the period
2019-2021. In addition to this, there is a contingent earn-
out bonus equal to approximately 6% of the total deferred
contingent consideration. The total consideration and fair
value adjustments to the assets and liabilities are set out on in
Note 12.
In light of the potential impact of COVID-19, management
has taken proactive measures to prioritise the strong liquidity
and cash position of the Group and to follow WHO and
government guidance to protect the safety of workers,
customers and partners. These measures include:
• with effect from 16 March we implemented a work-from-
home policy for all our staff including restrictions on travel
• we initiated a number of measures to encourage
continued interaction between colleagues including
regular one-on-one and team calls, online social events
and a weekly ‘all-hands’ call with the Chief Executive
• we have made a number of resources available to
staff including online welfare programmes and support
through the HR service desk
• we have made available to corporates, free of charge,
LTG’s new LXP ‘Instilled’, for a period of three months to
enable them to connect their remote workforces. To date
c.30 corporates have signed-up to this initiative
•
to sustain LTG’s position of financial strength:
•
the Board is adopting a prudent approach to
shareholder distributions and has postponed the
proposed final dividend of 0.5 pence per share until
market conditions normalise
• Directors have agreed to postpone their 2019 cash
bonuses until market conditions normalise
• all salary increases have been postponed until 2021
• with effect from 1 May 2020 all employees have
been given the option of moving to a 4-day week
or remaining on a 5-day week but with pay for
their fifth day deferred until market conditions
normalise. Certain protections have been put in
place including minimum salary levels below which
employees will not see a deferral in their salary
• a freeze on all new recruits and the termination of
the majority of the contractors; U.K. workers have
been furloughed where appropriate
• contingent deferred consideration for Breezy HR
vendors following the exceptional performance of
the business in 2019 funded through shares in lieu of
a cash payment of $4.0m
19
plc Annual Report 2019
plc Annual Report 2019 20
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2019
•
reduction in other opex items including marketing
and facilities costs as well as termination of non-
critical capital expenditure
The estimated combined cash savings in 2020 resulting
from these actions is in excess of £20.0 million. The Board
has further cash preservation measures that it is willing to
implement if appropriate, recognising that maintaining
our dedicated and talented workforce is a key priority
in anticipation of the upturn. We have run a number of
sensitised business models and the Board is confident
that the Group’s strong balance sheet, large proportion of
recurring revenues, and diverse blue-chip customer base
(both in terms of vertical markets and geographical reach)
put it in a strong position to trade through this uncertain
period and beyond.
LTG’s gross cash at 31 March 2020 was £25.0 million (following
completion of the Open LMS acquisition). The Group has
supportive banks and a non-committed finance facility in
place of $28.0 million.
Jonathan Satchell
Chief Executive
15 April 2020
Chief Financial Officer’s Review
Financial results
In the year ended 31 December 2019, the Group generated
revenue of £130.1 million (2018: £93.9 million), delivering a 39%
year-on-year increase. Like-for-like revenues on a constant
currency basis (excluding the post-acquisition contribution
of Breezy HR, the acquired PeopleFluent businesses, and
excluding the exceptional contribution from the Civil Service
Learning (‘CSL’) contract) increased by 5%. On the same basis
above, the Software & Platforms division grew by 6%, and the
Content & Services division grew by 4%. In total, the Software &
Platforms division accounted for 68% of Group revenue whilst
the Content & Services division accounted for 32% of Group
revenue. Further details on the divisional performance are
provided in the Chief Executive’s Review.
Significant revenue growth
Revenue (£m)
CAGR
59%
28.3
2016
51.4
2017
93.9
2018
With effect from 1 January 2019 LTG has adopted the new
accounting standard IFRS 16 - Leases. In addition Adjusted
EBIT has been restated to include the impact of share-
based payments. Further details of these adjustments
are provided below.
Adjusted EBIT increased by 58% to £41.0 million (2018: £26.0
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 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.
Adjusted EBIT margins increased substantially during the year
to 32% (2018: 28%) due to the inclusion of a full year’s results
for PeopleFluent, the successful integration of Breezy HR,
a favourable adjustment of £0.9 million in 2019 relating to
IFRS16, and operational synergies achieved ahead of plan.
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 help underpin margins.
As announced at the time of the Group’s 2019 Interim results
management will continue to re-invest in incremental sales
initiatives to help drive organic revenue growth with the aim
of delivering Adjusted EBIT margins in the high twenties or low
thirties over the medium to long term.
The share-based payment charge increased from £1.3
million in 2018 to £3.1 million in 2019 primarily as a result of
the increase in senior management awards following the
acquisition of PeopleFluent. The Group also launched its first
Employee Stock Purchase Plan (‘ESPP’) in the United States
following the success of the U.K. ShareSave plan launched
in 2014. It is anticipated that the annual share-based
payment charge will increase further in 2020, reflecting a full
annualised charge on a run-rate basis. The total number of
outstanding share options at the end of 2019 was 35.3 million
(2018: 28.3 million). Further details are provided in Note 25.
The amortisation charge for acquisition-related intangible
assets increased to £20.9 million (2018: £15.2 million) due
to a full-year charge related to the acquired PeopleFluent
businesses, and the Breezy HR acquisition in April 2019.
Further details are set out in Note 13. The amortisation
charge for internally generated development costs was £2.4
million (2018: £1.1 million) and relates to the development
of the various PeopleFluent talent and learning platforms;
Breezy HR’s talent acquisition platform; ‘Gomo’, the Group’s
award-winning multi-device authoring and hosting platform;
Instilled, the newly launched LXP; 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. Whilst capitalised
investment in R&D is expected to remain relatively constant
on a pro-forma basis into 2020 it is anticipated that the
amortisation charge for internally generated development
costs related to the post-acquisition PeopleFluent business will
increase compared with the prior year.
Acquisition-related deferred consideration and earn-out
charges of £3.5 million (2018: £3.8 million) relate primarily
to the first year of Breezy HR’s three-year contingent earn-
out agreement awarded based on achieving substantial
incremental revenue growth. As anticipated Breezy HR’s
revenue grew approximately 60% during the year; further
details are provided in Note 12. Acquisition-related deferred
consideration and earn-out charges also include £0.1 million
relating to the Watershed acquisition as does the finance
charge on contingent consideration of £0.2 million (2018:
£0.1 million). Integration costs related to the acquisition of
Breezy HR were de minimis and have been included above
Adjusted EBIT (2018: £2.4 million).
Significant increase in adjusted EBIT
Adjusted EBIT (£m)
CAGR
80%
7.0
2016
13.3
2017
27.2
2018
Statutory profit before tax was £14.3 million compared with
£3.4 million in the prior year and unadjusted operating profit
was £16.6 million compared to an unadjusted operating
profit of £4.0 million in 2018. Statutory profit before tax is stated
after costs of acquisitions in 2019 of £0.2 million related to the
acquisition of Breezy HR (2018: £2.6 million), interest charges
on the debt facility of £1.5 million (2018: £1.5 million), finance
charges due to IFRS 16 of £0.5 million (2018: £nil) and a net
foreign exchange gain of £nil million (2018: exceptional gain
of £3.6 million resulting from the conversion of £72.0 million
of placing proceeds into USD prior to completion of the
PeopleFluent acquisition). Adjusted profit before tax (see Note
10) increased by 60% to £42.2 million in 2019 (2018: £25.6
million).
The income tax charge of £3.4 million in 2019 (2018: credit
of £0.7 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 47% to 4.736 pence (2018: 3.232 pence). On a
statutory basis, basic earnings per share (‘EPS’) increased from
0.655 pence in 2018 to 1.628 pence in 2019. Further details
are provided in Note 10.
Strong growth in diluted EPS
Adjusted dEPS (Pence)
CAGR
57%
1.184
2016
4.736
3.232
3.232
1.926
2017
2018
21
plc Annual Report 2019
plc Annual Report 2019 22
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2019
The Group has a strong balance sheet with shareholders’
equity at 31 December 2019 of £174.0 million, equivalent to
26.0 pence per share (2018: shareholders’ equity of £168.8
million, equivalent to 25.3 pence per share).
The gross cash position at 31 December 2019 was £42.0
million (2018: £26.8 million). The Group’s net cash at 31
December 2019 was £3.8 million (2018: net debt of £11.5
million). Net debt/cash is defined by gross cash less
borrowings.
Net cash generated from operating activities was £37.0
million (2018: £19.7 million) equivalent to an adjusted
operating cash flow conversion rate of 84% (2018: 83%).
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, payments
of lease liabilities 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. Payments of lease liabilities would
have been included within operating cash flows before the
adoption of IFRS 16 on 1 January 2019 but are now included
in cash flows from financing activities so the 2019 adjusted
operating cash conversion ratio has been adjusted to include
these payments.
Debtor days decreased to 81 days (2018: 97 days) reflecting
the Group’s effective credit control post-acquisition of
PeopleFluent, whilst combined debtor, WIP and deferred
income days stayed fairly constant at minus 56 days (2018:
minus 57 days), reflecting the large proportion of Group
revenues generated from recurring software licences where
payments are received annually in advance.
Net corporation tax payments increased to £4.5 million (2018:
£0.4 million receipts) primarily as a result of the acquisition of
PeopleFluent in 2018. Cash outflows from investing activities
were £15.1 million (2018: £111.5 million) and comprised the
acquisition of Breezy HR for £8.8 million net of cash acquired
(2018: £107.4 million net of cash acquired), plus capitalised
investment in internally generated IP and property, plant and
equipment of £6.4 million (2018: £4.1 million).
Cash outflows from financing activities were £6.0 million
(2018: inflows of £102.4 million). Under the newly adopted
IFRS 16 accounting standard payment of lease liabilities of
£3.3 million are disclosed as a financing activity. In 2018
lease payments of £2.1 million were included within net
cash flows from operating activities. Cash outflows from
financing activities also include proceeds from the exercise
of employee share options of £0.7 million (2018: £0.9 million
from employee share options and £82.8 million from a
share placing) and dividend payments of £4.0 million (2018:
£2.4 million). The balance of the cash flows from financing
activities is made up of net loan receipts of £0.6 million
(2018: net receipts £21.3 million). There were no payments of
contingent deferred consideration in 2019 (2018: £0.2 million).
Impact of adoption of new accounting
policies and alignment of acquisitions with
Group policies
With effect from 1 January 2019 the Group has adopted
the new accounting standard: IFRS 16 – Leases. As a result
the Group has recognised lease liabilities in relation to
leases which had previously been classified as ‘operating
leases’ under the principles of IAS 17 Leases. These liabilities
are measured at the present value of the remaining lease
payments, discounted using the lessee’s incremental
borrowing rate as of 1 January 2019.
Further, with effect from 1 January 2019 the Board has
resolved to report Adjusted EBIT inclusive, rather than
exclusive, of the share-based payment charge. This is to align
the Group with guidance from the FRC’s Corporate Reporting
Thematic Review and to recognise that share-based
payment charges are a valid cost of the business and relieve
the Group of an alternative cash expense.
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 accounting policy with regards share-
based payments had been adopted in the prior year.
The modified retrospective approach has been applied to
the prior period changes in respect of IFRS 16 so the financial
comparatives used for prior periods have not been restated.
There was a net charge to retained earnings as at 1 January
2019 of £2.5 million and a net credit to retained earnings
in 2019 of £0.4 million as a result of these changes. Further
details are provided in Note 4.
The table below shows the effects of these adjustments on Adjusted EBIT:
Adjusted EBIT pre accounting policy changes
Adjusted EBIT margin %
Share-Based Payment charge adjustment
IFRS 16 adjustment
Revised Adjusted EBIT
Revised Adjusted EBIT margin %
2018
£’000
27,245
29.0%
(1,254)
-
25,991
27.7%
2019
£’000
43,255
33.2%
(3,111)
878
41,022
31.5%
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
15 April 2020
23
plc Annual Report 2019
plc Annual Report 2019 24
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
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i
l
e
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i
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0
8
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g
H
i
%
0
8
-
%
0
2
m
u
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e
M
i
%
0
2
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w
o
L
8
5
1
2
4
3
9
6
7
10
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
9. Business systems and process integrity
10. Regulatory changes
5. Project overruns
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. Management seeks to keep up to date with macro-economic
factors which could affect the Group and decides strategically how to
respond to them. The current economic downturn caused by the global
coronavirus pandemic may impact LTG’s sales pipeline as it may cause
customers to delay or cancel projects, and some customers may delay
payments. The Group seeks to mitigate the risk of a general economic
downturn risk by diversifying exposure across geographical markets and
industry segments, increasing the range of services through its existing
business units and through acquisition of complementary businesses.
More than 70% of LTG’s revenues are generated from recurring software
licences and services. LTG’s product and service offering is well suited
to remote working, allowing staff and managers to learn at a time and
location to suit them. Specifically in relation to COVID-19, the Group’s
staff are set up to work remotely with support from the Group’s own
products as well as third-party video conferencing, and the Group has
implemented a work-from-home policy with effect from 16 March 2020.
COVID-19 could lead to business interruption and disruption, and have
an impact on financial performance. LTG has taken swift and proactive
steps to protect its strong liquidity position by, for example, postponing
the final dividend and cash bonus payment to Directors, freezing
salaries in 2020, implementing a deferred salary scheme with effect
from 1 May 2020, and offering shares in lieu of a cash consideration
payment (with extended earn out) for Breezy HR. The Board is actively
reviewing other mitigating measures.
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 is required to comply with the covenants under its debt
financing facility. If the covenants were breached, the lender could
take action against the Group. This could include the lender using its
security taken over the Group’s assets to repay the outstanding debt,
thus adversely impacting shareholders. The Group regularly monitors its
ongoing compliance with the terms of its debt financing facility.
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.
5. Project overruns
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
The Group offers a wide variety of products and services with different
risk profiles and in different countries, to a diverse customer base, many
of which themselves operate in regulated sectors and/or will seek to
contract under their own terms and conditions. The Group continues
to expand through acquisition including the transfer of customer
contracts from the acquired business. The Group’s contracting process
has therefore become increasingly complex. LTG mitigates its client
contractual risks through the operation of its centralised legal function
which reviews client contracts and maintains a delegated list of
authorities who are able to enter into client contracts on behalf of the
Group. LTG is also reviewing its approach to risk and mitigations and is
creating a new contract playbook to ensure the consistent and efficient
application of standards across 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 uses multiple legacy systems across its various business units.
The speed of growth means that there is a risk of ineffective use of IT
systems and business processes, and of systems being compromised
through malware or other attack, or becoming out of date, or of misuse
of software terms of use. LTG operates a central IT function which is
responsible for monitoring all IT systems operated across the Group.
This function keeps the adequacy of existing systems under review and
identifies and tests any replacement products, where required, as well
as compliance with terms of use. The IT function is involved in the due
diligence and integration aspects of all acquisitions. Business processes
are kept under review. The IT function carries out internal and external
audits which include testing the Group’s disaster recovery and business
continuity plans.
10. Regulatory changes including the General Data
Protection Regulation (GDPR), the California Consumer
Privacy Act (CCPA), the impact of the UK’s departure from
the European Union and the Streamlined Energy and
Carbon Reporting legislation
The Group’s executive team and legal team identify and monitor
legislative and regulatory changes that will impact the business. The
executive team develops and delivers strategies to ensure ongoing
compliance with new legislation. The Group has strategies in place
to monitor compliance with new European and U.S. data privacy
legislation, changes resulting from ‘Brexit’, and new carbon reporting
regulation.
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
The Company continues to monitor the impact of COVID-19.
25
plc Annual Report 2019
plc Annual Report 2019 26
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2019
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.
LTG has established a CSR Committee which meets
regularly to oversee and co-ordinate Environmental,
Social and Governance (‘ESG’) initiatives and implement
the recommendations of the Board. The CSR Committee
includes, amongst others, the Group’s Director of Operations,
Chief People Officer and Head of Legal.
The Committee communicates best practice and
achievements across the Group through the implementation
of policies and training and regular staff communications
including a dedicated intranet portal.
LTG seeks to work to the Ten Principles of the United Nations
Global Compact (‘UNGC’) which encompass principles
regarding human and labour rights, anti-corruption and the
environment.
LTG follows these values and principles in all locations where it
carries out business and seeks to combine appropriate Group
initiatives whilst enabling and championing local initiatives
that support and celebrate the contribution of its employees
to CSR projects in their communities.
LTG’s CSR initiatives can be summarised in four key areas:
1. Environmental sustainability
2.
Taking care of our people
3.
Investing in our communities
4. Meeting the expectations of stakeholders
Environmental sustainability
LTG’s policy with regards 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 breached any environmental
regulations.
LTG in the learning and talent management
market
LTG is a global leader in the learning and talent
management market. Traditionally this market has been
dominated by carbon intensive practices in the training and
development of corporate and government employees
and their extended enterprises. This includes the extensive
use of offsite and residential training facilities, travel,
accommodation and subsistence, and the production of
hard copy training materials.
Over the past few years the market has seen a shift to
a ‘blended’ approach that allows for an increased use
of remote e-learning and talent management solutions
enabled by the rapid development of technologies such
as powerful smartphones and tablets, Wi-Fi, 4G and 5G,
and SaaS software solutions including learning and talent
management systems and authoring and analytics tools.
LTG is at the forefront of this Clean-Tech revolution helping
to reduce the environmental impact of learning and talent
management practices.
A focus on internal corporate practices
Although LTG’s position in the market means that it is a
leading catalyst in the shift to a lower carbon-economy
the Company is aware of its responsibilities to ensure that
it minimises its impact on the environment through its own
business practices in how we develop, market, sell and deliver
our products and services to customers. LTG has reviewed the
key priority areas where it believes it impacts the environment.
These are:
• Office facilities
• Data centre facilities
• Corporate travel
•
Staff travel
The Group is in the process of implementing a group-
wide environmental management system that will assist in
monitoring our attainment of our ESG goals and we look
forward to updating shareholders later in the year.
Office facilities
LTG is a high-growth business with offices in the U.K., Europe,
North America and Hong Kong. As part of its integration
programme LTG looks for opportunities to rationalise
its network of office locations and where appropriate
accommodate remote working practices and centralisation
of practices around ‘core’ office hubs. For example, following
the acquisition of PeopleFluent in 2018, LTG combined its
Eukleia, PeopleFluent and Head Office functions into one
office in London, closed offices in New Orleans and Reston in
the US, and reduced its rental space in Hong Kong.
LTG makes recycling facilities available in all of its office
locations and encourages staff to minimise the use of paper.
Other initiatives have included ceasing use of disposal cups
in office refreshment areas.
The Group is undertaking a review of the energy consumption
and utility contracting practices across its estate and will
update shareholders later in the year.
Data centre facilities
LTG operates a number of software platforms for clients
across its learning and talent management businesses.
These platforms are operated on servers that consume
electricity and therefore LTG considers its use of servers a
key consideration when reviewing its ESG policies. Over the
past three years the Group has undertaken a programme of
rationalising its estate of data centres and where appropriate
has closed down its own-hosted servers and transferred these
to outsourced providers, where they benefit from economies
of scale and greater flexibility of deployment. LTG operates
rigorous review processes in order to ensure that the business
does contract for excess data centre capacity.
The Group is undertaking a review of the energy consumption
and utility contracting practices across its data centre estate
and will update shareholders later in the year.
Corporate travel
LTG is a global company with operations across North
America, Europe and APAC and it services customers based
around the world. The Group encourages regular interactions
and communications between its staff, its clients, suppliers
and other stakeholders and in the majority of instances this is
achieved through a variety of communication media made
available to all staff including email, video conferencing,
phone and social media. Where appropriate staff will travel
to meet with stakeholders. The Group has in place a process
for the pre-approval by line managers of any travel and as
a result of introducing these practices it has dramatically
reduced the number of flights taken in its acquired
businesses.
Staff travel
The majority of LTG’s staff outside of North America use public
transport to travel to and from the workplace and in most
locations LTG offers only bike spaces for staff. The Group offers
season ticket travel loans. Where the availability of public
transport is limited we encourage staff to car share and we
allow for flexible working from LTG’s various office sites or from
home where appropriate.
LTG does not make company cars available to its staff, or offer
a car allowance as part of our employee benefits package.
The Group is undertaking a review of the environmental
impact of its travel policies and will update shareholders
later in the year.
Taking care of our people
LTG is dependent upon the qualities and skills of its
employees, and the commitment of its staff plays a major
role in the Group’s business success.
Support programmes
LTG is in the process of developing an employee Wellness
Programme called ‘Let’s Talk’. Many of the programmes are
already in place with the aim to launch the remainder in
2020. Areas covered include:
• Mental health
•
Physical health
• Health and safety
•
•
•
Personal development
Social connections
Social contributions
We have some core policies and approaches already in
place including Employee Assistance Programmes in the
U.S. and U.K. providing staff with support in a range of areas,
including well-being support, financial advice and legal
advice through confidential helplines.
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. In response to COVID-19, the Group created a
dedicated support page on its intranet for staff use which is
being kept updated.
The Group also undertakes regular staff surveys and feeds
back the findings and actions to staff.
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.
The Group launched its sixth successive annual Sharesave
scheme in the U.K. that allows all staff to participate
in the Group’s equity journey and launched its first U.S.
Employee Stock Purchase Plan (ESPP) so that staff in the U.S.
and Canada could also participate. There has been an
impressive take-up of these plans since their launch.
In addition, the Group operates a share option scheme for
senior managers that rewards achievement of demanding
performance targets. Options usually vest over a period of
four years.
LTG also launched a number of other staff awards to
recognise outstanding achievements in product and service
innovation and cross-selling initiatives.
27
plc Annual Report 2019
plc Annual Report 2019 28
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2019
Training and Talent Management
The Group invests in training and developing its staff through
internally arranged knowledge sharing events, through
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.
In September 2019 we launched a new approach to talent
management through the ‘Aspire’ programme leveraging
LTG’s own PeopleFluent Talent Management Platform which will
be used to administer our annual appraisal process, including
the evaluation of staff goals and behaviours, helping to set
development activities for 2020.
A staggered roll-out will make sure all staff achieve the same
level of familiarity with our new approach, regardless of their
previous exposure.
Health and Safety
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.
We believe that a more proactive, innovative and wide-
ranging approach has distinct benefits. It’s seen by
employees as a way to build trust and improve productivity
and efficiency, which in turn increases staff engagement,
boosts staff retention and helps employees to stay happy,
healthy and productive.
An example of the priority we place on staff wellbeing
was our swift response to the COVID-19 outbreak, closing
European and U.S. offices on 13 March 2020 and banning all
international travel.
The QHSE team co-ordinates activities across the Group
and draws on the expertise of other departments including
Legal and Facilities. As well as ensuring that we comply with
the relevant health and safety legislation, the QHSE team
takes a more proactive approach to health and safety
management, which includes gathering feedback from
employees. The Group operates a service desk that allows
employees to:
•
•
•
report health and safety accidents and near misses
request a risk assessment
log environmental incidents and hazards
• give suggestions about service and facility improvements
Diversity and inclusion
LTG believes that the diversity of our workforce is a key point
of strength, making the Group a more vibrant and dynamic
place to work. We welcome all employees regardless of their
age, gender, faith, disability, ethnic or racial origin, sexual
orientation or gender identity.
We take great care to ensure that our employment policies
are non-discriminatory and that all appointments (whether
external hires or internal promotions) are made solely on the
basis of merit.
We believe that all our people have a fundamental right to
respect and dignity in the workplace and do not tolerate
harassment or discrimination in any form, whether intentional
or unintentional.
We will continually review how we can best promote and
advance a culture in which all staff feel comfortable being
themselves in the workplace. Every year our employees
propose new ideas for strengthening that culture of inclusion
and we welcome their observations, insights and ideas
which can be provided either to line managers or to our
HR service desk.
Investing in our communities
LTG undertakes a number of local charitable initiatives each
year, with the Group often matching contributions raised
by staff. In 2019, local charitable initiatives included raising
funds for MacMillan Cancer Support, Shooting Star Children’s
Hospices, the U.K. Poppy Appeal, Crisis UK, the Boys and Girls
Clubs of America, Cancer Research UK, the American Heart
Association and Dress for Success.
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 systems that
enable access to learning content through early generation
smartphones.
In 2019 the Group supported charitable activities by staff
which raised a total of £3,000 (2018: £8,000) making total
charitable contributions totalling £25,000 during the year
(2018: £57,000).
Meeting the expectations of stakeholders
We recognise the importance of trust in meeting or
exceeding the expectations of our customers and
stakeholders. Our compliance with all applicable laws and
regulations is of paramount importance, not just to ourselves,
but also to our partner organisations, clients, and other
stakeholders. Non-compliance with applicable laws in the
value-chain can lead to severe losses to organisations due
to reputational damages or fines. Our clients are looking for
suppliers that take the highest levels of ethics and business
conduct into account, to give them assurance of their
compliance with all relevant laws and regulations and the
measures that they have implemented to warrant this.
In order to live up to these standards, and to be seen as
an organisation that other organisations would like to be
associated with, LTG implemented the following measures
with which we expect all of our employees, directors and
contractors to comply:
Code of Conduct
In 2019, we launched a new Code of Business Conduct. We
have rolled out a business ethics training programme to all
staff in support of the new Code.
As part of LTG’s compliance obligations, LTG’s Legal
Department, HR Department and Senior Management Team
have established a company policy framework applicable
to all staff, supported by a knowledge centre on the Group’s
intranet.
We have specific staff policies on:
• Anti-corruption, anti-bribery, anti-slavery and business
ethics
• Health & Safety
• Data Protection
Federal Contractor Status
Where businesses contract with federal agencies in the U.S.
they may be determined to be ‘Federal Contractors’. This
status brings with it specific governance requirements. Where
our U.S. business has federal contractor status, we comply
with these additional obligations which include ensuring
that our recruitment practices support the hiring of a diverse
workforce.
Data security standards
As a number of our Group companies provide clients with
Software as a Service (‘SaaS’) and hosted solutions, LTG
understands the importance of data privacy and security
measures in relation to its services. LTG is committed to
providing appropriate security measures, and to continuously
improving the security provisions we are able to provide to
clients. Each of our Group companies has implemented
comprehensive security programmes, appropriate to the
levels of risk involved in processing data as part of our services,
which include the implementation and maintenance of:
(i) information security policies and standards;
(ii) physical security measures;
(iii) organisational security measures;
(iv) network security measures;
(v) logical access controls;
(vi) virus and malware protection;
(vii) mandatory data protection and data security t
rami training for all employees;
(viii) disaster management and business continuity plans;
(ix) regular security testing and risk assessments.
The responsibility for the implementation of these security
programmes is shared between the LTG legal team, the LTG IT
team, the LTG QHSE team and the security and hosting teams
at each of our Group companies. We provide comprehensive
internal security testing at regular intervals in accordance with
the legislative and regulatory requirements upon each of the
Group companies. In addition to this, we have implemented
external audits of our security measures at a number of our
Group companies to ensure that we are going above and
beyond our legal obligations in relation to security.
In 2019 Rustici and PeopleFluent underwent and successfully
passed ISO 27001 audits, LEO successfully renewed its
Cyber Essentials Plus certification (as described below),
and PeopleFluent undertook and passed its SSAE 18 SOC
2 audit. LEO and Eukleia hold ISO 9001 certification. The
management team are contemplating rolling out additional
external security audits across the Group, and look to
continuously improve the ways in which LTG identifies and
addresses potential security risks.
Cyber Essentials
Cyber Essentials is a U.K. Government-backed, industry-
supported scheme to help organisations protect themselves
against common online threats. Certification must be
renewed annually. A number of LTG’s clients require that
we achieve Cyber Essentials Plus certification to show that
we adhere to a certain set of cybersecurity requirements.
Organisations that require Cyber Essentials Plus for ongoing
work and/or new work tend to be governmental bodies or
organisations that tender governmental contracts. However,
it is not reserved for governmental bodies and some private
businesses will request certification as it gives confidence that
we are handling their data diligently.
Cyber Essentials Plus covers:
•
•
Firewalls - boundary firewalls; desktop computers; laptop
computers; routers; servers
Secure configuration - email, web, and application
servers; desktop computers; laptop computers; tablets;
mobile phones; firewalls; routers
• User access control - email, web and application servers;
desktop computers; laptop computers; tablets; mobile
phones
• Malware protection - desktop computers; laptop
computers; tablets; mobile phones
29
plc Annual Report 2019
plc Annual Report 2019 30
STRATEGIC REPORT (CONTINUED)
For the year ended 31 December 2019
•
Patch management - web, email and application
servers; desktop computers; laptop computers; tablets;
mobile phones; firewalls; routers
GDPR
Following the completion of our ‘General Data Protection
Regulation’ (‘GDPR’) compliance programme, we keep our
processes under regular review, including with regard to the
transfer of data within our Group companies following the
U.K.’s imminent departure from the European Union.
CCPA
We have rolled out compliance initiatives for the California
Consumer Privacy Act (CCPA) across our Group companies
and continue to keep these under regular review.
Privacy Shield
Privacy Shield is a framework for adherence to European
Union data protection laws for companies that deal with the
personal data of E.U. citizens that is transferred to the United
States. Our PeopleFluent, Affirmity and VectorVMS businesses
have obtained Privacy Shield certification.
Section 172 (1) Statement
The Directors of the Group must act in accordance with a set
of general duties. These duties are detailed in section 172(1)
of the U.K. Companies Act 2006, which is summarised as
follows:
‘A Director of a Company must act in the way he/she
considers, in good faith, would be most likely to promote
the success of the Company for the benefit of its members
as a whole, and in doing so have regard (amongst other
matters) to:
1.
The likely consequences of any decision in the long term
2.
The interests of the Company’s employees
3.
4.
5.
6.
The need to foster the Company’s business relationships
with suppliers, customers and others
The impact of the Company’s operations on the
community and the environment
The desirability of the Company maintaining a reputation
for high standards of business conduct, and
The need to act fairly as between members of the
Company.’
The Directors of Learning Technologies Group plc consider
that they have fulfilled their duties in accordance with section
172(1) of the U.K. Companies Act 2006 and have acted in
a way in which is most likely to promote the success of the
Group for the benefit of its stakeholders as a whole in the
following ways:
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. For further
details see page 31.
Employees
LTG is dependent upon the qualities and skills of its
employees, and the commitment of its staff plays a major
role in the Group’s business success. For further details on
how the Group is managing and developing the talent of
its people, as well as communicating decisions within the
Group, see the “Taking care of our people” section on pages
26 to 27.
The safety of staff is also of utmost importance to the Board,
resulting in the decision to implement a work-from-home
policy for all staff from 16 March in light of the COVID-19
outbreak, with further restrictions on all travel. See page 18
for details of other proactive measures taken by the Board in
response to this crisis.
Customers and Suppliers
LTG has refined its ISO 9001 management processes over
the last two decades and all projects are reviewed regularly
for performance against customer expectation. Extensive
work is undertaken in reviewing customer feedback and
any complaints are reported to the Board. See page 23 for
further details.
LTG services customers around the world, and encourages
regular interactions and communications between its
staff, its clients, suppliers and other stakeholders and in the
majority of instances this is achieved through a variety of
communication media made available to all staff including
email, video conferencing, phone and social media.
On 17 April 2019 LTG acquired Breezy HR, which was
deemed by the Board to be a beneficial acquisition for
both shareholders and the PeopleFluent organisation, under
which Breezy HR is now operating. Breezy HR complements
LTG’s existing portfolio of companies, and also allows for the
expansion into the small and medium-sized business market,
providing feature-rich, intuitive and user-friendly recruitment
software to small and medium-sized businesses. See page 18
for further details.
Culture and Values
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, LTG has in place a number of
policies and corporate training that encompasses Anti-
bribery and Corruption, Ethics and Anti-Slavery.
The Strategic Report for the year ended 31 December 2019
has been signed on behalf of the Board of Directors by:
Jonathan Satchell
Chief Executive
15 April 2020
Community and Environment
At LTG, the Board has overall responsibility for Corporate
Social Responsibility (“CSR”) with development and initiatives
being led by the Chief Executive. LTG has established a CSR
Committee which meets regularly to oversee and co-ordinate
Environmental, Social and Governance (‘ESG’) initiatives and
implement the recommendations of the Board. The CSR
Committee includes, amongst others, the Group’s Director of
Operations, Chief People Officer and Head of Legal.
The Committee communicates best practice and
achievements across the Group through the implementation
of policies and training and regular staff communications
including a dedicated intranet portal.
The Group is also in the process of implementing a group-
wide environmental management system that will assist in
monitoring our attainment of our ESG goals.
LTG also undertakes a number of local charitable initiatives
each year, with the Group often matching contributions
raised by staff.
For further details on LTG’s community and environmental
interactions, see pages 25 and 27.
Decision-making, Risk Management and Governance and
Performance Oversight
The Board met 13 times during 2019 and all board members
were present for at least part of the meeting by invitation.
There were also three Audit & Risk Committee meetings and
a Remuneration Committee meeting. Please see page 34 for
further details.
The meetings are structured so that the Board can make
an educated and informed decision, with a monthly board
pack including financial results both at a consolidated Group
level and individual business unit level circulated a few days
prior to each of the Board meetings. This board pack also
contains commentary on key events from the Director of
Operations and each of the Managing Directors, giving the
Board a rounded view of the entire Group, both financial and
otherwise.
As of December 2019, Claire Walsh was appointed Company
Secretary and joined the executive team, helping to provide
advice on legal requirements to the Board.
31
plc Annual Report 2019
plc Annual Report 2019 32
CORPORATE GOVERNANCE REPORT
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 organic growth as well as
strategic acquisitions that complement the current business.
Further details are provided in the Strategic Report on pages
13 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 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 25-29.
Director
Role at 31
December 2018
Date of
(re-) appointment
Retired
Board Committee
Board of Directors
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 Bloomsbury
Publishing plc; Induction Healthcare Group plc
and Centaur Media plc for which she also serves
as Chair of the Audit Committee.
Aimie Chapple
Independent Non-executive Director /
Remuneration Committee Chair / Audit & Risk
Committee
Aimie Chapple was a Senior Partner at Accenture,
working with clients in the U.K., U.S. and around
the world for over 25 years. In 2019, Aimie was
appointed Divisional Chief Executive Officer Capita
Customer Management with teams in the U.K.,
Germany, Switzerland, Ireland, Poland, India and
South Africa. She also continues to be active in
the wellness area, and works as a coach with a
number of tech and wellness entrepreneurs and
start-up organisations.
Andrew Brode
Non-executive Chairman
05/06/2019
Leslie-Ann Reed
Non-executive Director
Aimie Chapple
Non-executive Director
Jonathan Satchell
Chief Executive
Neil Elton
Piers Lea
Chief Financial Officer
Chief Strategy Officer
05/06/2019
05/06/2019
05/06/2019
05/06/2019
05/06/2019
Board Committee abbreviations are as follows:
A = Audit Committee; R = Remuneration Committee
A
A
R
R
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 the global, fast-
growing, full service digital learning
company that LTG has become.
Neil Elton
Chief Financial Officer
Piers Lea
Chief Strategy Officer
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 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’).
Claire Walsh
Company Secretary
Claire Walsh was admitted as
a Solicitor in 2006 and is Head
of Legal at LTG. Claire was
appointed as Company Secretary
on 1 December 2019. Her prior
experience includes advising on
corporate, technology and data
protection matters as a Partner at
City law firm Cannings Connolly, and
serving as Deputy General Counsel
and director at Liquidity Services,
Inc. (NASDAQ: LQDT).
33
plc Annual Report 2019
plc Annual Report 2019 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 Executive Board of LTG.
Given the rapidly increasing size and complexity of the
Group the Board, assisted by the Executive Board, continually
review 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 Group continues to review and
improve its investment in good governance initiatives and
in December 2019, Claire Walsh, the Group’s Head of Legal
was appointed as Company Secretary to the plc Board. The
Board is actively searching for a fourth Non-executive Director.
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 Executive 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 13 times
during 2019 (2018: 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 2019, 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 2019 following a tender exercise
supervised by the independent Non-executive Directors 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 are 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
In early 2019 LTG ran 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 were considered by the Board
and appropriate actions taken with the results communicated
to the business.
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 2019
(2018: three). The Company Secretary is invited to the Audit
& Risk Committee meetings. Further details on the Audit &
Risk Committee are provided in the Report of the Audit & Risk
Committee.
Remuneration Committee
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 Remuneration Committee is chaired by Aimie Chapple
and currently comprises Aimie Chapple and Leslie-Ann Reed.
The Remuneration Committee met once during 2019 (2018:
once). Further details on the Remuneration Committee are
provided in the Report of the Remuneration Committee.
The minutes of all sub-committees are circulated for review
and consideration by all relevant Directors, supplemented
Meetings of the Board and sub-committees during 2019 were
as follows:
Board meeting
Audit and Risk committee
Remuneration committee
Number of meetings held
in 2019
Andrew Brode
Leslie-Ann Reed
Aimie Chapple
Jonathan Satchell
Neil Elton
Piers Lea
Claire Walsh
13
13/13
13/13
13/13
13/13
13/13
13/13
1/1
*Attendance to at least part of meeting by invitation
3
1/1*
3/3
3/3
-
3/3*
-
-
1
-
1/1
1/1
-
-
-
-
35
plc Annual Report 2019
plc Annual Report 2019 36
REPORT OF THE AUDIT & RISK COMMITTEE
Composition
External Audit
The Audit & Risk Committee comprises Leslie-Ann Reed
(Chair) and Aimie Chapple. 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 and the Company Secretary.
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 judgements; 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.
In relation to the 2019 Annual Report the Committee gave
particular attention to revenue recognition, impairment
testing of acquired intangibles and, particularly given recent
events related to COVID-19, the going concern basis for the
preparation of the accounts, including reviewing sensitised
forecasts.
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 U.K.
LLP, similarly consider 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 U.K. 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.
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 U.K. 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 twelve 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
below:
Control environment – LTG is committed to high standards
of business conduct and seeks to maintain these standards
across all of its operations. There are also policies in place for
the reporting and resolution of suspected fraudulent activities.
LTG has an appropriate organisational structure for planning,
executing, controlling and monitoring business operations in
order to achieve its objectives.
Risk identification – management is responsible for the
identification and evaluation of key risks applicable to their
areas of business. These risks are assessed on a continual
basis and may be associated with a variety of internal and
external sources, including infringement of IP, sales channels,
investment risk, staff retention, disruption in information
systems, natural catastrophe and regulatory requirements.
Information systems – Group businesses participate in
periodic operational/strategic reviews and annual plans. The
Board actively monitors performance against plan. Forecasts
and operational results are consolidated and presented to
the Board on a regular basis. Through these mechanisms,
performance is continually monitored, risks identified in a
timely manner, their financial implications assessed, control
procedures re-evaluated and corrective actions agreed and
implemented.
Main control procedures – LTG has implemented control
procedures designed to ensure complete and accurate
accounting for financial transactions and to limit the
exposure to loss of assets and fraud. Measures taken include
segregation of duties and reviews by management.
Monitoring and corrective action – there are clear and
consistent procedures in place for monitoring the system of
internal financial controls.
This process 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 2019.
37
plc Annual Report 2019
plc Annual Report 2019 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.
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
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.
Service contracts
The service contracts and letters of appointment of the
Directors include the following terms:
There are no additional financial provisions for termination. All
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
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 put themselves up for
re-election on an annual basis.
In early 2019 the Remuneration Committee reviewed the LTG
Directors’ Remuneration Policy and as a result of which made
a number of changes which were set out in the 2018 Annual
Report. In that report we stated that it was the intention of the
Committee to consult with shareholders about the Directors’
Remuneration Policy over the coming year and to invite
shareholders to vote on the policy at the 2020 AGM.
During February and March 2020 the Committee contacted
LTG’s 20 largest independent shareholders which included
all shareholders with a holding of more than 1% in the
Company, inviting them to submit comments and queries
to the Chair of the Remuneration Committee. No changes
to the Directors’ Remuneration Policy were requested as
a result of the consultation. As a result, the Remuneration
Committee has determined to leave the policy unchanged.
All shareholders will be invited to vote on the policy at the
2020 AGM. The policy is set out below.
In 2019 the Remuneration Committee undertook a detailed
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 continues its search for 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 1 time in 2019 (2018: 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 2019 and arrangements
for the year ended 31 December 2020. 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 2019
Andrew Brode
Jonathan Satchell
Neil Elton
Piers Lea
Leslie-Ann Reed
Aimie Chapple
Year ended 31
December 2018
Andrew Brode
Harry Hill
Jonathan Satchell
Neil Elton
Piers Lea
Dale Solomon
Leslie-Ann Reed
Aimie Chapple
Salary or fees
Bonuses
(postponed)
Pension
contribution
Compensation
for loss of office
Gain on exercise
of share options
Total
£’000
£’000
£’000
£’000
£’000
£’000
-
300
239
200
50
50
839
-
216
192
160
-
-
568
-
9
7
6
-
2
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
525
438
366
50
52
1,431
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
-
-
-
-
-
58
-
-
58
-
-
-
87
-
1,012
-
-
1,099
-
38
488
431
345
1,393
40
13
2,748
-
-
228
161
161
161
-
-
711
2019
£’000
1,431
265
1,696
-
-
8
5
5
5
-
-
23
2018
£’000
1,649
32
1,681
Key management remuneration
Short-term employee benefits
Share-based payments
Total key management remuneration
39
plc Annual Report 2019
plc Annual Report 2019 40
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
Directors’ emoluments and benefits are stated for the Directors
of Learning Technologies Group plc only. The amounts shown
were recognised as an expense during the year.
Total social security costs related to Directors during the year
was £176,000 (2018: £170,000); these are excluded from the
table above.
The CEO’s salary in 2019 represented 4.9 times the median
salary of all employees in LTG (2018: 4.3 times).
Aimie Chapple was appointed as a Non-executive Director
on 3 September 2018. Harry Hill resigned as a Non-executive
Director on 31 October 2018 and Dale Solomon resigned as
Chief Operating Officer on 16 November 2018.
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 2019 or 31
December 2018.
As set out in the Strategic Report section of this report, in
light of the potential impact of COVID-19, management has
taken a number of proactive measures to prioritise the strong
liquidity of the Group. As part of this the Executive Directors
have agreed to postpone their 2019 bonuses until market
conditions normalise.
Furthermore, and in line with all other employees in the Group,
Directors’ base salaries remain unchanged with effect from 1
January 2020:
Executive Directors
Jonathan Satchell
Neil Elton
Piers Lea
Non-executive Directors
Andrew Brode
Leslie-Ann Reed
Aimie Chapple
Base Salary in 2019
Base Salary in 2020
£’000
£’000
300
240
200
-
50
50
300
240
200
-
50
50
The details of the Executive Bonus Scheme 2019 are set
out below and include details of the maximum and actual
bonus levels achieved. Bonuses in the year were awarded
based on a combination of achievement of Adjusted EBIT
(‘EBIT’) and organic revenue growth 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. In addition, the Executive Directors were set
personal targets which accounted for up to 25% of their on-
target EBIT and revenue bonus achievement. An on-target
achievement for each of EBIT, organic revenue growth and
personal targets would result in 80% of Base Salary being
awarded as a bonus. Any additional bonus is awarded
wholly based on further incremental organic revenue growth,
subject to on-target EBIT margins being maintained on the
higher revenue achieved. The maximum bonus payable is
capped at 150% of base salary. No EBIT or revenue bonus
would be payable if actual EBIT was less than target EBIT. The
personal target bonus would be payable irrespective of EBIT
or revenue performance. The EBIT targets are adjusted at
the reasonable discretion of the Remuneration Committee
to account for events such as acquisitions or disposals. In
2019 the ‘original target’ was increased to account for the
budgeted post-acquisition contribution of Breezy HR. The
specific targets are not given in this report as that information
is deemed commercially sensitive.
Total as a % of
Base Salary
CEO
150%
Maximum
CFO
150%
CSO
150%
CEO
72%
Achieved
CFO
80%
CSO
80%
The Remuneration Committee has determined to operate the 2020 Executive Bonus Scheme on a similar basis to 2019.
Directors’ interests in the shares of the Company at 31 December 2019 and 31 December 2018 are as follows:
LTG Ordinary shares of
£0.00375 each
Options
Shares
Andrew Brode
Jonathan Satchell
Leslie-Ann Reed
Neil Elton
Piers Lea
2019
2018
2019
2018
2019
2018
Weighted Average Exercise
Price (pence)
Number
Number
-
-
-
-
116,920,080
116,920,080
68.400
68.400
26,315
26,315
75,139,995
75,139,995
-
-
-
-
6,458,180
6,168,730
42.471
31.656
4,026,315
3,026,315
439,562
439,562
-
-
-
-
8,714,030
8,714,030
42.639
31.972
4,052,630
3,052,630
207,671,847
207,382,397
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, 2,000,000 share options in April 2017 and 1,000,000 in July 2019
subject to vesting criteria based on a minimum share price being sustained for 30 consecutive days as set out below. 3,500,000
of the options have vested.
Date
16 January 2015
16 January 2015
16 January 2015
5 April 2017
5 April 2017
23 July 2019
23 July 2019
Type
EMI
EMI
EMI
Unapproved
Unapproved
Unapproved
Unapproved
No
500,000
250,000
250,000
1,000,000
1,000,000
500,000
500,000
4,000,000
Minimum share price
vesting requirement
(pence)
Exercise Price (pence)
24.000
28.000
32.000
55.000
70.000
150.000
180.000
42.300
19.000
19.000
19.000
37.500
37.500
75.200
75.200
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.
See Note 25 for further details on share option plans. Dividends paid to Directors during the year were as follows.
Total
See Note 29 for further details on dividends.
2019
£’000
1,245
2018
£’000
837
41
plc Annual Report 2019
plc Annual Report 2019 42
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
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.
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Element
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 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 then 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
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.
The maximum initial award is 3 million share options.
Further options may be granted once the initial vesting
period has elapsed.
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 50% of the maximum 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.
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 2019
DIRECTORS’ REPORT
For the year ended 31 December 2019
The Directors present their report on the Group, together with
the audited Consolidated Financial Statements for the year
ended 31 December 2019.
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
Financial instruments and risk
management
Disclosures regarding financial instruments are provided within
the Strategic Report and Note 30 to the Financial Statements.
Capital Structure
Details of the Company’s share capital, together with details
of the movements therein are set out in Note 24 to the
Financial Statements. The Company has one class of ordinary
share which carries no right to fixed income.
Cautionary statement
The review of the business and its future development in
the Strategic Report has been prepared solely to provide
additional information to shareholders to assess the Group’s
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 51.
At the time of LTG’s admission to AIM in November 2013, the
Board stated that they would pursue a progressive dividend
policy. On 8 November 2019, the Company paid an interim
dividend of 0.25 pence per share (2018: 0.15 pence per
share). The Directors propose to pay a final dividend of 0.50
pence per share for the year ended 31 December 2019,
equating to a total payout in respect of the year of 0.75
pence per share (2018: 0.50 pence per share), representing a
50% annual increase.
However, given the potential impact of COVID-19, the Board is
adopting a prudent approach to shareholder distributions, and
will postpone the final dividend until market conditions stabilise.
Business review and future developments
Details of the business activities and acquisitions made
during the year can be found in the Strategic Report on
pages 13 to 30 and in Note 12 to the Consolidated Financial
Statements respectively.
Political donations
The Group made no political donations during the year
(2018: nil).
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, the new Learning Experience Platform (‘LXP’)
Instilled launched in 2019, the newly acquired Breezy HR
talent acquisition platform, as well as various virtual and
augmented reality applications, as covered in the Strategic
Report on pages 13 to 30.
Post balance sheet events
Details of post balance sheet events can be found in Note 31
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
policies and seek regular feedback and engagement from
our workforce. Further information regarding our work policies
and engagement can be found on pages 26 and 27.
Directors’ interests in shares and
contracts
Directors’ interests in the shares of LTG at 31 December 2019
and 31 December 2018 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.
plc Annual Report 2019 44
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
Andrew Brode
Jonathan Satchell
Kabouter Management
Merian Global Investors
Liontrust Asset Management
BlackRock
Janus Henderson Investors
Liontrust Sustainable Investments
116,902,080
75,139,995
47,662,499
45,468,498
42,544,938
34,728,062
33,455,263
24,579,371
17.41
11.19
7.10
6.77
6.34
5.17
4.98
3.66
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
19 June 2020. The notice of the AGM which will be sent to
shareholders in advance of the meeting will contain the full
text of the resolutions to be proposed and the venue for the
meeting.
•
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 U.K. 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
Claire Walsh
Company Secretary
15 April 2020
45
plc Annual Report 2019
plc Annual Report 2019 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
2019, which comprise:
•
•
•
•
•
the Consolidated statement of comprehensive income
for the year ended 31 December 2019;
the Consolidated and Company statements of financial
position as at 31 December 2019;
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 Consolidated financial statements
is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The
financial reporting framework that has been applied in the
preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 102 The Financial
Reporting Standard applicable in the U.K. 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 Parent Company’s affairs
as at 31 December 2019 and of the Group’s profit for the
period then ended;
the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union;
the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice
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 (UK) (ISAs (UK)) 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 UK,
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 twelve 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 £750,000 (2018: £700,000), based on
approximately 2% 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.
We agreed with the Audit Committee to report to it all identified
errors in excess of £35,000 (2018: £15,000). Errors below that
threshold would also be reported to it if, in our opinion as
auditor, disclosure was required on qualitative grounds.
47
plc Annual Report 2019
plc Annual Report 2019 48
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
LEARNING TECHNOLOGIES GROUP PLC (CONTINUED)
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 and
NetDimensions (Holdings) Limited. 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, detailing
the significant risks to be addressed through the audit
procedures and indicating 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
Revenue recognition
How the scope of our audit addressed the key audit matter
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.
Compliance with IFRS 15 was considered to be a significant audit risk.
We designed procedures to test each different revenue stream and to consider whether the revenue recognition policy applied to the revenue stream was
consistent and 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 of completeness and the budgeted margin.
We also considered whether the accounting policies are appropriate and in line with the IFRS.
We considered the key controls present in the process of revenue recognition, and ensured existence of mitigating controls where areas of weakness were
identified.
Carrying value of goodwill and other intangible assets
The Group has a significant amount of intangible assets at 31 December 2019 and there is a risk that these may be impaired. As described in note
13, impairment is assessed based on discounted cash flow projections. Estimating and discounting the cash flows requires significant judgement. The
assumptions requiring the most significant judgement vary by asset or cash generating unit (‘CGU’).
We obtained management’s discounted cash flow models supporting the intangible asset valuation. We challenged the key assumptions into the model,
including the forecast EBITDA, discount rates and growth rates.
We compared cash flow forecasts used in the impairment review to historical performance, and challenged where forecasts indicated performance that
deviated significantly from historical performance, in the absence of significant changes in the business or market environment.
Discount rates and terminal growth rates were benchmarked to externally derived data and our knowledge of sector performance, to evaluate the
reasonableness of these assumptions.
Sensitivity analysis was performed on the key assumptions such as forecast period, growth and discount rates to identify assumptions that the goodwill or
intangible asset valuation was highly sensitive to.
Acquisition Accounting
During the year, the Group acquired Breezy HR for initial cash consideration of $12.7m.
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.
We reviewed the share purchase agreement to understand the terms of the transaction and we agreed the consideration paid.
We audited the acquisition balance sheet to ensure that assets and liabilities were appropriately recognised at fair value.
A third party valuation specialist calculated the fair value of the intangible assets identified at the acquisition date.
We challenged the assumptions used in the calculation including having the report reviewed by our in house valuation team. This included performing
sensitivity analysis on key inputs and benchmarking the valuation against external sources of evidence.
Going concern and COVID-19
As at December 2019 the Group had cash and cash equivalents of £42m and borrowing facilities in place until April 2023 as disclosed in note 22.
We obtained LTG’s assessment of the going concern basis formed after a detailed re-forecasting exercise and performed the following procedures:
We considered the risk that the COVID-19 pandemic and the resulting economic consequences would adversely impact the Group and its ability to
continue as a going concern.
•
•
•
•
Discussion of key assumptions and the impact of COVID-19 to date with Management;
Reviewing the mathematical accuracy of the model;
Considering continued compliance with banking covenants and considering the stress required to the model to indicate a breach;
Reviewing the financial steps taken by Management to conserve cash; and
Considering the appropriateness of the disclosure made in respect of going concern and ensuring it is consistent with our knowledge of the business and the
re-forecasting exercise.
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.
49
plc Annual Report 2019
plc Annual Report 2019 50
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
LEARNING TECHNOLOGIES GROUP PLC (CONTINUED)
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 report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
•
the directors’ report and strategic 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 report 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 (UK) 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.
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
15 April 2020
51
plc Annual Report 2019
plc Annual Report 2019 52
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2019
For the year ended 31 December 2019
Year ended 31 Dec 2019
Year ended 31 Dec 2018
(Restated)
Note
31 Dec 2019
Note
5
13
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 and share based
payments)
Operating profit (before acquisition-related deferred
consideration and earn-outs and share based payment
charge)
Acquisition-related deferred consideration and earn-outs
Share based payment charge
Operating profit
Adjusted EBIT
Amortisation of acquired intangibles
Acquired intangibles written down
Integration costs
Acquisition-related deferred consideration and earn-outs
Operating profit
Fair value movement on contingent consideration
Costs of acquisition
Share of losses on associates/joint ventures
Loss on disposal of fixed assets
Finance expense:
Charge on contingent consideration
Interest on borrowings
IFRS 16 finance expense
Net foreign exchange differences
Interest receivable
Profit before taxation
Income tax (expense)/credit
Profit for the year
Profit attributable to owners of the Parent
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 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
£’000
130,103
(106,842)
23,261
(3,509)
(3,111)
16,641
41,022
(20,872)
-
-
(3,509)
16,641
-
(249)
-
(2)
(248)
(1,487)
-
(468)
111
14,298
(3,426)
10,872
10,872
1.628
1.584
4.865
4.736
10,872
(4,293)
6,579
£’000
93,891
(84,917)
8,974
(3,761)
(1,254)
3,959
25,991
(15,193)
(681)
(2,397)
(3,761)
3,959
183
(2,621)
(132)
-
(54)
(1,512)
3,608
-
10
3,441
730
4,171
4,171
0.655
0.641
3.300
3.232
4,171
6,231
10,402
Non-current assets
Property, plant and equipment
Right of use assets
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
Lease liabilities
Trade and other payables
Borrowings
Corporation tax
ESPP scheme liability
Non-current liabilities
Lease 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
11
13
19
14
16
17
15
16
17
28
18
22
20
22
25
22
19
21
22
23
24
27
27
27
27
27
£’000
1,687
9,864
228,468
4,761
-
120
713
245,613
28,911
2,478
4,699
18
42,032
330
78,468
324,081
2,880
62,791
6,344
2,386
203
74,604
9,077
25,257
8,443
31,858
853
75,488
150,092
173,989
2,509
148,216
31,983
(22,933)
4,413
(352)
10,153
173,989
31 Dec 2018
£’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 55 to 91 form an integral part of these
Consolidated Financial Statements. The Financial Statements
on pages 51 to 91 were approved and authorised for issue
by the Board of Directors on 15 April 2020 and signed on its
behalf by
Neil Elton
Chief Financial Officer
15 April 2020
53
plc Annual Report 2019
plc Annual Report 2019 54
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
For the year ended 31 December 2019
Share
capital
Share
premium
Merger
reserve
Note
Reverse
acquisition
reserve
Share-
based
payments
reserve
Translation
reserve
Retained
earnings
Total
equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
2,145
64,208
31,983
(22,933)
1,092
(2,290)
1,220
75,425
Balance at
1 January 2018
Profit for the period
Exchange differences
on translating foreign
operations
Total comprehensive loss
for the period
-
-
-
-
-
-
Issue of shares
356
85,521
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
-
-
-
-
-
(2,169)
-
-
-
-
Transactions with owners
356
83,352
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,254
-
(738)
-
516
-
4,171
4,171
6,231
-
6,231
6,231
4,171
10,402
-
-
-
-
-
-
-
-
-
-
425
738
85,877
(2,169)
1,254
425
-
(2,395)
(2,395)
(1,232)
82,992
Ballance at
31 December 2018
1 January 2019
restatement for IFRS 16
4
Profit for the period
Exchange differences
on translating foreign
operations
Total comprehensive
profit for the period
Issue of shares
Share-based payment
charge credited to equity
Tax credit on share options
Transfer on exercise and
lapse of options
Dividends paid
Transactions with owners
2,501
147,560
31,983
(22,933)
1,608
3,941
4,159
168,819
(2,529)
(2,529)
-
-
-
8
-
-
-
-
8
-
-
-
656
-
-
-
-
656
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,111
-
(306)
-
2,805
(4,293)
-
(4,293)
(4,293)
10,872
6,579
-
-
664
3,111
1,352
1,352
306
-
-
-
-
-
-
-
Cash flows from operating activities
Profit before taxation
Adjustments for:
Loss on disposal of PPE
Share-based payment charge
Amortisation of intangible assets
Depreciation of plant and equipment
Share of loss of joint venture/investment
Finance expense (including IFRS 16 charge)
Interest 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/(decrease) 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
Acquisition of subsidiaries, net of cash acquired
Net cash flows 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
Payment of lease liabilities (IFRS 16)
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Year ended 31 Dec 2019
Year ended 31 Dec 2018
Note
£’000
14,298
2
3,111
23,305
3,672
-
716
1,487
-
3,509
(2,321)
-
(111)
47,668
7,392
(1,593)
(10,633)
42,834
(1,449)
111
(4,518)
36,978
(687)
(5,690)
(8,764)
(15,141)
(4,007)
16,057
664
(15,468)
-
(3,275)
(6,029)
15,808
26,794
(570)
42,032
£’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
At 31 December 2019
2,509
148,216
31,983
(22,933)
4,413
(352)
10,153
173,989
The notes on pages 55 to 91 form an integrated part of these Consolidated Financial Statements.
(4,007)
(4,007)
Exchange gains/(losses) on cash
(2,349)
1,120
Cash and cash equivalents at end of the year
18
-
10,872
10,872
Development of intangible assets
55
plc Annual Report 2019
plc Annual Report 2019 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 instruments 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 2019 the Group had £42.0 million of gross
cash and strong cash generation. Furthermore, as at 31
March 2020, following the completion of the acquisition
of Open LMS, the Group had £25.0m of gross cash. Given
the current COVID-19 pandemic and resulting market
uncertainty, in addition to the 2020 annual budgeting
exercise undertaken at the end of 2019, management
has prepared a detailed reforecast during April 2020 that
extends beyond 2020 into 2021.
This reforecast has modelled for varying degrees of
reductions in content & services project revenues, delay
in new sales wins, extended customer payment days and
various cost reductions, most of which are set out in the
Strategic Report. Management has reviewed the impact
this reforecast has on gross cash, net debt and bank
covenants under the existing facilities agreement. Based
on this reforecast and relevant stress tests the Group is
forecast to remain highly profitable and have sufficient
gross cash to continue as a going concern without
recourse to additional financing.
As a result of this detailed review, the Group’s strong
balance sheet, high levels of multi-year recurring
revenues, a diversified business model across a number
of geographies and vertical markets, with clients
predominantly comprising blue-chip corporates and
government bodies, 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 16 Leases from 1 January
2019.
IFRS 16 Leases
On adoption of IFRS 16, the Group recognised lease
liabilities in relation to leases which had previously been
classified as ‘operating leases’ under the principles of IAS
17 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using
the lessee’s incremental borrowing rate as of 1 January
2019.
The incremental borrowing rate used was based on the 3
month LIBOR rates in the respective asset territories (98%
of which were based in either the U.S. or U.K.) plus a 1.6%
margin commensurate with the margin payable under the
Group’s current debt finance facility as at 1 January 2019.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
i) The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
ii) Reliance on previous assessments on whether leases are
onerous;
iii) The accounting for operating leases with a remaining
lease term of less than 12 months as at 1 January 2019 as
short-term leases;
iv) The exclusion of initial direct costs for the measurement
of the right-of-use asset at the date of initial application;
v) The use of hindsight in determining the lease term where
the contract contains options to extend or terminate the
lease.
A modified retrospective approach has been used
meaning comparatives have not been restated but an
adjustment has been made to opening equity.
The Group has taken the accounting policy choice to
measure the right of use assets as if IFRS 16 had applied
since the inception of the lease.
The Directors do not expect that the adoption of any
new standards currently in issue but not in force 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.
(c) Joint arrangements and associates
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 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
57
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
purchased. These are amortised on a straight-line basis
over their useful lives which are individually assessed.
2-10 years
Branding
Customer contracts and relationships 2-8 years
2-10 years
Intellectual Property
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.
Capitalised development expenditure is measured at cost
less accumulated amortisation and impairment losses, if
any. Development expenditure initially recognised as an
expense is not recognised as assets in subsequent periods.
Capitalised development expenditure is amortised on a
straight-line method over a period of between three and
five years when the products or services are ready for sale
or use. In the event that it is no longer probable that the
expected future economic benefits will be recovered, the
development expenditure is written down to its recoverable
amount. The amortisation charge is recognised within
operating expenses.
(e) Functional and foreign currencies
(i) Functional and presentation currency
The individual Financial Statements of each entity in
the Group are presented in the currency of the primary
economic environment in which the entity operates, which
is the functional currency.
The Consolidated Financial Statements are presented in
Pounds Sterling, which is the Group’s presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are converted into the
respective functional currencies on initial recognition,
using the exchange rates approximating those ruling at
the transaction dates. Monetary assets and liabilities at
the end of the reporting period are translated at the rates
ruling as of that date. Non-monetary assets and liabilities
are translated using exchange rates that existed when the
values were determined. All exchange differences are
recognised in profit or loss.
(iii) Foreign operations
Assets and liabilities of foreign operations are translated
to Pounds Sterling at the rates of exchange ruling at the
end of the reporting period. Revenues and expenses
of foreign operations are translated at the average rate
of exchange. All exchange differences arising from
translation are taken directly to other comprehensive
income and accumulated in equity under the foreign
exchange translation reserve. On the disposal of a foreign
operation, the cumulative amount recognised in other
comprehensive income relating to that particular foreign
operation is reclassified from equity to profit or loss.
Goodwill and fair value adjustments arising from the
acquisition of foreign operations are treated as assets
and liabilities of the foreign operations and are recorded
in the functional currency of the foreign operations and
translated at the closing rate at the end of the reporting
period. Exchange differences are recognised in other
comprehensive income.
(f) Financial instruments
Financial instruments are recognised in the statements of
financial position when the Group has become a party to
the contractual provisions of the instruments.
Financial 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
financial assets at fair value through profit or loss, unless
criteria are met for classifying and measuring the asset
at either amortised cost or fair value through other
comprehensive income.
Management determines the classification of its financial
assets at initial recognition.
•
Loans and receivables financial assets
Trade receivables and other receivables are held
within a business model whose objective is to
collect contractual cash flows which are solely
payments of principals and interest and therefore
classified as subsequently measured at amortised
cost using the effective interest method, less any
impairment loss. Interest income is recognised
by applying the effective interest rate, except for
short-term receivables when the recognition of
interest would be immaterial. The Group’s loans and
receivables financial assets comprise ‘trade and other
receivables’ and cash and cash equivalents included
in the Consolidated Statement of Financial Position.
ii) Financial liabilities
Financial liabilities are recognised when, and only when,
the Group becomes a party to the contractual provisions
of the financial instrument.
All financial liabilities are recognised initially at fair
value plus directly attributable transaction costs and
subsequently measured at amortised cost using the
effective interest method other than those categorised as
fair value through profit or loss.
Fair value through the profit or loss category comprises
financial liabilities that are either held for trading or
are designated to eliminate or significantly reduce a
measurement or recognition inconsistency that would
otherwise arise. Derivatives are also classified as fair
value through profit or loss 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
Furniture and fittings
Office equipment
Leasehold improvements
33%
20%
20%
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 based on the deterioration of
credit risk since initial recognition. An allowance for credit
losses is recognised based on potential shortfalls in future
cash flows discounted to present value multiplied by the
likelihood of the shortfalls occurring.
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.
59
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plc Annual Report 2019 60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
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.
(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.
(j) Cash and cash equivalents
(i) Content & Services
(ii) Software & Platforms
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,
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.
Revenue within the Group’s Content & Services division
comprises of 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 material 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 over
time 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.
Revenue from subscriptions such as SaaS, “right to
access” licences, hosting and support and maintenance
is recognised evenly 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
61
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plc Annual Report 2019 62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
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 2019 management reviewed
the contracts in place and did not note any contracts
where there was specific increased estimation uncertainty.
Management has reviewed contracts that were ongoing at
the prior year end and there were no significant adjustments
to the budgeted margin.
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 25 to
the Consolidated Financial Statements.
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 2019, the Group acquired
Breezy HR Inc. (‘Breezy HR’), see Note 12. On acquisition
the Group recognised intangible assets of £3.7m, the most
significant of which related to the intellectual property
held by Breezy HR. 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 £0.2 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.
(ii) Estimates
• Growth in adjusted EBIT;
Useful Economic Lives of Acquired Intangibles
On acquisition, the useful economic lives of acquired
intangibles, which are key estimates, are assessed by
management. The Breezy HR acquisition during the year
gave rise to the following acquired intangible assets with
their associated estimated useful economic lives.
Customer Relationships
Intellectual Property
5 years
4 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.
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:
•
•
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.
Deferred Tax
Income tax expense, deferred tax assets and liabilities
and liabilities for unrecognised tax benefits reflect
management’s best estimate of current and future taxes
to be paid. The Group is subject to income taxes in the U.K.
and several other foreign jurisdictions.
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. In evaluating
the Group’s ability to recover deferred tax assets in the
jurisdiction from which they arise, management considers
all available positive and negative evidence, includings
historic and projected future performance, and external
market factors.
See Note 19 for details of how these estimates and
judgements have been applied.
4. Changes in accounting policies
As noted above, the Group has adopted IFRS 16 Leases from
1 January 2019.
On transition to IFRS 16 the weighted average incremental
borrowing rate applied to the lease liabilities recognised
under IFRS 16 was 3.5%. The incremental borrowing rate used
was based on the three-month LIBOR rates in the respective
asset territories (98% of which were based in either the U.S.
or U.K.) plus a 1.6% margin commensurate with the margin
payable under the Group’s current debt finance facility as at
1 January 2019.
63
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plc Annual Report 2019 64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
See Note 2 (a) for details on the practical expedients and accounting policy choices taken.
The change in accounting policy affected the following items in the balance sheet as at 1 January 2019 and 31 December
2019:
The operating lease commitments disclosed at 31 December 2018 per the Annual Report 2018 were £12,724,000, which was
an error due to a missing property lease not included within this figure. The balance has been corrected in the reconciliation
above. No further financial statement line items have been affected by this error.
Right-of-use asset
Lease liability:
Current liability
Non-current liability
Total lease liability
Rental lease expense under IAS 17
Replaced by:
Depreciation of right-of-use asset
Adjustment for sublease
Finance charges on lease liability
Total expense to profit and loss
Net reduction in expense
As at 31 December 2019
As at 1 January 2019
£’000
9,864
2,880
9,077
11,957
£’000
11,938
2,831
11,634
14,465
Year ended 31 December 2019
£’000
3,378
(2,489)
(11)
(468)
(2,968)
410
The net impact on retained earnings on 1 January 2019 was a decrease of £2.5 million.
The following is a reconciliation of total operating lease commitments at 31 December 2018 (as disclosed in the financial
statements to 31 December 2018, restated) to the lease liabilities recognised at 1 January 2019:
Total operating lease commitments disclosed at 31 December 2018 (restated)
Recognition exemptions:
Leases with remaining lease terms of less than 12 months
Operating lease liabilities before discounting
Discounted using incremental borrowing rate at 1 January 2019 (3.5%)
Total lease liabilities recognised under IFRS 16 at 1 January 2019
Year ended 31 December 2019
£’000
15,366
(33)
15,333
14,465
14,465
Additional profit or loss and cash flow information
Income from subleasing office premises
Total cash outflow in respect of leases in the year
Expense related to short-term leases not accounted for under IFRS 16
Year ended 31 December 2019
£’000
210
(3,275)
(77)
Additions to right of use assets during 2019 totalled £429,000. See Notes 11, 22 and 30 for further details on IFRS 16.
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 2019 and in the year ended 31 December 2018.
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 2019
Revenue
Non-current assets
31 Dec 2018
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
25,808
31,029
24,859
28,412
8,738
-
7,263
-
84,454
194,658
52,912
197,969
5,165
29
3,766
68
2,459
15,136
2,253
18,735
3,479
-
2,838
-
130,103
240,852
93,891
245,184
65
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plc Annual Report 2019 66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
The Group’s revenue by nature is analysed as follows:
6. Profit/(loss) before taxation
Profit before taxation is arrived at after charging/(crediting):
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 2019
Costs of acquisition
Integration costs
Amortisation of acquired intangible assets
Recurring
13,861
67,014
4,666
85,541
-
1,623
9,298
10,921
101
96,563
Amortisation of software development costs
Non-Recurring
1,633
759
697
3,089
18,345
6,903
5,203
30,451
-
33,540
15,494
67,773
5,363
88,630
18,345
8,526
14,501
41,372
101
130,103
3,888
101
14,298
- Salaries, allowances and bonuses
Depreciation &
amortisation
EBIT
Amortisation
of acquired
intangibles
Share of losses of
associates
Profit / (Loss)
before tax
Additions to
intangible assets
Total Assets
31 Dec 2018
(4,162)
31,577
(15,771)
-
10,309
15,729
223,987
Depreciation &
amortisation
EBIT
Amortisation
of acquired
intangibles
Share of losses of
associates
Profit / (Loss)
before tax
Additions to
intangible assets
Total Assets
(1,746)
19,111
(11,873)
(132)
(274)
162,071
279,928
Recurring
12,572
41,328
4,088
57,988
-
1,071
Non-recurring
1,166
4
676
1,846
19,262
5,765
4,963
2,938
6,034
27,965
13,738
41,332
4,764
59,834
19,262
6,836
7,901
33,999
(1,943)
-
(6,105)
9,344
101
41,022
(5,101)
-
-
-
(20,872)
-
-
100,094
-
-
15,729
324,081
58
64,080
-
-
-
29,811
93,891
(2,107)
(361)
6,822
58
25,991
(3,320)
-
-
-
(15,193)
(132)
3,657
58
3,441
3,972
36,859
-
-
166,043
316,787
Information about major customers
In the year ended 31 December 2019 and the year ended 31 December 2018, no customer accounted for more than 10 per
cent of reported revenues.
31 Dec 2019
31 Dec 2018
Note
12
13
13
11
8
8
7
7
7
£’000
249
-
20,872
2,433
204
81
32
3,672
839
24
49,168
4,104
1,083
-
77
468
248
1,487
-
3,509
(111)
£’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)
31 Dec 2019
31 Dec 2018
£’000
17,932
5,690
32%
2,436
-
14,678
£’000
12,670
3,304
26%
1,107
178
10,651
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):
- Social security costs
- Defined contribution pension plan costs
Rental of offices
Rent of offices – short-term leases exempt from IFRS 16
Finance charges on IFRS 16
Finance charges on contingent consideration
Finance charges on borrowings
Fair value movement on contingent consideration
Acquisition-related deferred consideration and earn-outs
Interest income
Total research & development costs
Of which capitalised development costs
Capitalisation ratio
Amortisation of capitalised development costs
(Profit) or loss on disposal
Research & development costs recognised in P&L
67
plc Annual Report 2019
plc Annual Report 2019 68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
Year ended 31 December 2019
Year ended 31 December 2018
A reconciliation of income tax expense applicable to the profit before taxation at the statutory tax rate to the income tax
expense at the effective tax rate of the Group is as follows:
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
No.
626
100
6
732
£’000
49,168
4,104
3,111
1,083
57,466
No.
519
97
7
623
£’000
38,330
3,073
1,254
764
43,421
8. Directors’ remuneration, interests and transactions
Directors’ remuneration, interests and transactions are disclosed in the Report of the Remuneration Committee.
9. Income tax
Current tax expense:
- U.K. 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 expense/(credit)
31 Dec 2019
31 Dec 2018
£’000
511
706
4,156
5,373
(1,369)
(662)
84
(1,947)
3,426
£’000
1,179
(416)
1,682
2,445
(2,395)
(780)
-
(3,175)
(730)
Adjustments in respect to prior years primarily relates to the 2018 tax charge for Learning Technologies Group (Hong Kong)
Limited (formally known as NetDimensions Limited) of £611,000. The remaining difference relates to other minor variances
between prior period provisions and final tax returns, and changes in the market value of LTG shares when calculating the
share-based payment deferred tax assets.
Profit before taxation
Tax calculated at the domestic tax rate of 19% (2018: 19.00%):
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 and current tax rate
Adjustments in respect to prior years
Difference in foreign exchange rates
Effect of different international tax rates
Changes in deferred tax rate
Income tax (credit)/expense
31 Dec 2019
31 Dec 2018
£’000
14,298
2,717
(1,036)
188
-
(246)
-
1
1,030
44
(70)
882
(84)
3,426
£’000
3,441
654
(184)
1,325
25
(232)
(1,475)
125
-
(1,196)
-
228
-
(730)
The aggregate current and deferred tax directly credited to equity amounted to £1,352,000 (2018: £425,000).
10. Earnings per share
Basic profit per share
Diluted profit per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
31 Dec 2019
31 Dec 2018
Pence
1.628
1.584
4.865
4.736
Pence
0.655
0.641
3.300
3.232
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.
69
plc Annual Report 2019
plc Annual Report 2019 70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
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 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.
11. Property, plant and equipment
Right of use assets
Cost
Computer
equipment
Fixtures and
fittings
Motor
vehicles
Leasehold
improvements
Computer
equipment
Property
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Profit after
tax
£’000
Weighted
average
number of
shares
2019
‘000
Pence per
share
Profit
after tax
(restated)
Pence
£’000
Weighted
average
number of
shares
2018
‘000
Pence per
share
Pence
Basic earnings per ordinary share attributable to the
owners of the Parent
10,872
668,045
1.628
4,171
637,326
0.655
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
Net foreign exchange differences on financing activities
Interest receivable
Finance expense
Income tax expense
Effect of adjustments
Adjusted profit before tax
Tax impact after adjustments
20,872
-
3,111
-
249
-
3,509
-
(111)
248
3,426
31,304
42,176
(9,674)
-
-
-
Adjusted basic earnings per ordinary share
32,502
668,045
15,193
681
1,254
2,397
2,621
(183)
3,761
(3,608)
(10)
54
(730)
21,430
25,601
(4,572)
-
-
-
21,029
637,326
3.362
-
(0.717)
3.300
4.686
-
(1.449)
4.865
Effect of dilutive potential ordinary shares:
Share options
Deferred consideration payable (conditions met)
Deferred consideration payable (contingent)
-
-
-
18,233
(0.129)
-
-
-
-
-
-
-
13,267
(0.068)
-
-
-
-
Adjusted diluted earnings per ordinary share
32,502
686,278
4.736
21,029
650,593
3.232
Diluted earnings per ordinary share attributable to the
owners of the Parent
10,872
686,278
1.584
4,171
650,593
0.641
Cost
At 1 January
2018
Additions on
acquisitions
Additions
Foreign
exchange
differences
Disposals
At 31
December
2018
Additions on
transition to
IFRS 16
Additions on
acquisitions
Additions
Foreign
exchange
differences
Disposals
At 31
December
2019
1,997
1,417
216
51
(129)
3,552
-
18
506
(9)
(1,477)
2,590
Accumulated depreciation
At 1 January
2018
Charge for the
year
Disposals
At 31
December
2018
Charge for the
year
Disposals
At 31
December
2019
Net book value
At 31
December
2018
At 31
December
2019
1,359
844
(58)
2,145
898
(1,385)
1,658
1,407
932
611
74
384
25
(116)
978
-
11
55
(18)
(180)
846
460
99
(116)
478
180
(284)
374
500
472
8
-
-
-
(8)
-
-
-
-
-
-
-
8
-
(8)
-
-
-
-
-
-
261
59
178
4
(136)
366
-
-
126
18
(220)
290
208
57
(136)
129
93
(215)
7
237
283
-
-
-
-
-
-
-
-
-
-
-
-
2,877
1,550
778
80
(389)
4,896
83
11,855
11,938
-
-
-
-
266
163
94
295
850
85
(123)
(2,000)
83
12,255
16,064
2,035
1,000
(283)
2,752
3,672
(1,911)
4,513
-
2,441
(27)
2,414
-
2,144
9,841
11,551
-
60
-
60
-
23
71
plc Annual Report 2019
plc Annual Report 2019 72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
13. Intangible assets
12. Acquisitions
Breezy HR, Inc.
On 17 April 2019, LTG announced the acquisition of Breezy
HR (‘Breezy HR’) for initial cash consideration of $12.7 million
funded by the Group’s existing cash and bank facilities. The
acquisition supported LTG’s strategic goal to achieve run-rate
EBIT of at least £55 million by the end of 2021.
Breezy HR is a fast-growing talent acquisition software
business, providing small to medium sized businesses (SMB)
with feature-rich, intuitive and user-friendly recruitment
software to optimise their recruitment processes and
maximise productivity. Breezy HR now operates as a separate
business within PeopleFluent.
Further performance-based payments, capped at $17.0
million are payable in cash to the Breezy HR sellers based
on ambitious revenue growth targets in each of the years
ending 31 December 2019, 2020 and 2021. In addition to this,
there is a contingent earn-out bonus equal to approximately
6% of the above payable to staff. These payments are
linked to continuous employment so are excluded from the
acquisition consideration and instead are recognised as
an expense over the service period within the Statement of
Comprehensive Income.
The following table summarises the consideration paid for
Breezy HR, the fair value of assets acquired and liabilities
assumed at the acquisition date.
Cost
Fair value
Consideration
Cash paid
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
Impact of IFRS 16 adjustments on acquisition
Deferred tax assets on acquisition
Deferred tax liabilities on acquisition
Intangible assets identified on acquisition
Total identifiable net assets
Goodwill
Total
£’000
9,726
9,726
962
20
138
(597)
(9)
134
(961)
3,698
3,385
6,341
9,726
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 Breezy HR 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 £1.5 million relate
to the valuation of the customer relationships which are
amortised over a period of five years, and £2.2 million
relates to the value of the acquired intellectual property and
software development which is amortised over four years.
Acquisition costs of £0.2 million have been charged to the
statement of comprehensive income in the year relating to
the acquisition of Breezy HR.
A deferred tax liability of £1.0 million in respect of the
acquisition-related intangible assets was established on
acquisition (refer to Note 19).
Breezy HR contributed £3.5 million of revenue for the period
between the date of acquisition and the reporting date
and £0.7 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 Breezy HR had been completed on the first day of the
financial year, Group revenues would have been £1.0 million
higher and Group profit attributable to equity holders of
the parent would have been £1.6 million lower including
adjustments to include a full year of amortisation on acquired
intangibles.
Details regarding the strategic decisions to acquire Breezy
HR can be found in the Chairman’s statement and Strategic
Report on pages 1 and 13 respectively.
Cost
At 1 January 2018
Additions on acquisitions
Additions
Disposals/impairment
Foreign exchange differences
At 31 December 2018
Additions on acquisition
Additions
Foreign exchange differences
At 31 December 2019
Accumulated amortisation
At 1 January 2018
Amortisation charged in year
Disposals/impairment
At 31 December 2018
Amortisation charged in year
At 31 December 2019
Carrying amount
At 31 December 2018
At 31 December 2019
Goodwil
Customer
contracts &
relationships
Branding
Acquired IP
Internal
Software
Development
Total
£’000
£’000
£’000
£’000
£’000
£’000
46,050
80,968
-
-
5,240
132,258
6,341
-
(3,614)
134,985
-
-
-
-
-
-
132,258
134,985
45,020
44,635
-
-
3,084
92,739
1,454
-
(1,661)
92,532
11,813
11,956
-
23,769
15,125
38,894
68,970
53,638
1,788
1,723
-
(1,048)
114
2,577
-
-
(53)
2,524
590
447
(367)
670
298
968
1,907
1,556
1,445
35,413
-
-
1,574
38,432
2,244
-
(996)
3,410
-
3,304
(178)
153
6,689
-
5,690
(90)
97,713
162,739
3,304
(1,226)
10,165
272,695
10,039
5,690
(6,414)
39,680
12,289
282,010
464
2,790
-
3,254
5,449
8,703
35,178
30,977
1,437
1,107
-
2,544
2,433
4,977
4,145
7,312
14,304
16,300
(367)
30,237
23,305
53,542
242,458
228,468
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 £23.3 million includes
£20.9 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 ten CGUs. The carrying amount of goodwill has
been allocated as follows:
Goodwill
Growth rate
Pre-tax discount rate
CGU
LEO
Preloaded
Eukleia
Rustici
PeopleFluent
Affirmity
VectorVMS
Gomo
Watershed
Breezy HR
2019
£’000
7,742*
2,180
2,764
13,280
42,761
18,864
37,300
1,381*
2,404
6,309
2018
£’000
7,435
2,180
2,764
13,726
43,875
19,496
38,552
1,746
2,484
-
134,985
132,258
2019
2018
%
4%
4%
4%
9%
7%
4%
4%
7%
12%
12%
%
4%
4%
4%
9%
7%
4%
4%
7%
-
-
2019
%
11.0%
12.5%
12.5%
12.5%
11.5%
11.0%
10.0%
14.0%
12.5%
12.0%
2018
%
11.0%
12.5%
12.5%
12.5%
11.5%
11.0%
10.0%
14.0%
-
-
*Part of the acquired Gomo business on the acquisition of PeopleFluent has been reallocated to the LEO CGU.
73
plc Annual Report 2019
plc Annual Report 2019 74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
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 12% for
the first five years. The terminal rate used for the value in use
calculation thereafter is 2.5%.
In the case of the recently acquired Watershed and Breezy HR
CGUs, the businesses are at an early stage of development.
Although the CGUs generated revenue growth of c30% and
c60% respectively in 2019 management has cautiously
assumed average annual growth rates of only 12% during
the next five years. In the case of VectorVMS CGU revenues
declined c10% in 2019 and are anticipated to decline
by c3% in 2020 primarily as a result of multi-year licences
terminated prior to acquisition. Management has assumed
the business will grow by an average rate of 4% over the next
five years.
Management has assessed that there is a reasonably
possible change to the discount rate assumption for
VectorVMS that could give rise to an impairment in the next
12 months. If the discount rate were to increase to 11.5% an
impairment would be indicated.
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.
14. Investments accounted for using the equity method
Joint Venture
The joint venture has share capital consisting solely of ordinary shares, which are held directly by the Group. The nature of the
investment at 31 December 2018 and 31 December 2019 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.
Associates
The movements in associate investments is as follows:
Balance at beginning of year
Share of losses for the year
Disposal on acquisition of 100% holding
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.
31 Dec 2019
31 Dec 2018
£’000
-
-
-
-
£’000
1,689
(132)
(1,557)
-
The Group acquired a 27.27% interest in Watershed on 28 January 2016, for a total consideration of $3.0 million (approximately
£2.1 million). The Group increased its holding to 100% in November 2018 and since this date Watershed has been accounted
for as a subsidiary rather than as an associate.
15. Trade receivables
31 Dec 2019
31 Dec 2018
Trade receivables
Allowance for impairment losses
Impairment losses:
At 1 January
Additions on acquisition
Additions/(disposals)
Foreign exchange
At 31 December
£’000
29,815
(904)
28,911
1,332
-
(418)
(10)
904
£’000
35,646
(1,332)
34,314
186
570
545
31
1,332
The Group’s normal trade credit term is 30 days. Other credit terms are assessed and approved on a case- by-case basis.
The fair value of trade receivables approximates their carrying amount, as the impact of discounting is not significant. No
interest has been charged to date on overdue receivables.
75
plc Annual Report 2019
plc Annual Report 2019 76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
16. Other receivables, deposits and prepayments
19. Deferred tax assets/(liabilities)
31 Dec 2019
31 Dec 2018
Current assets
Sundry receivables
Prepayments
Non-current assets
Sundry receivables
Sundry receivables includes rent deposits and other sundry receivables.
17. Amount recoverable on contracts
Current assets
Contract assets
Non-current assets
Contract assets
£’000
326
2,152
2,478
120
120
£’000
1,118
2,779
3,897
161
161
31 Dec 2019
31 Dec 2018
£’000
4,699
4,699
713
713
£’000
3,397
3,397
421
421
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 2019
31 Dec 2018
£’000
42,032
£’000
26,794
Included within the cash balance the Company holds £203,000 on behalf of participants in the LTG U.S. Employee Stock
Purchase Plan (2018: £nil) the liability for which is included within current liabilities.
Deferred tax assets
Share options
Tax losses
Short-term
timing differences
At 1 January 2018
Acquisition of subsidiaries
Deferred tax charge directly to the income statement
Deferred tax charged directly to equity
Exercise of share options
Exchange rate differences
At 31 December 2018
Acquisition of subsidiaries
Deferred tax charged directly to the income statement
Deferred tax charged directly to equity
Exercise of share options
At 31 December 2019
£’000
1,404
-
(15)
425
(1,084)
-
730
-
441
1,352
(183)
2,340
£’000
521
778
337
-
-
67
1,703
134
(202)
-
-
1,635
£’000
280
-
61
-
-
84
425
-
362
-
(1)
786
Deferred tax liabilities
Intangibles
Accelerated tax
depreciation
Short-term timing
differences
At 1 January 2018
Deferred tax on acquired intangibles and via acquisition
Deferred tax charge directly to the income statement
Exchange rate differences
At 31 December 2018
Deferred tax on acquired intangibles and via acquisition
Deferred tax charge directly to the income statement
Exchange rate differences
At 31 December 2019
£’000
(6,273)
(21,251)
3,250
(1,177)
(25,451)
(961)
4,772
657
£’000
(204)
(124)
(694)
174
(848)
-
(1,180)
-
£’000
-
(236)
236
-
-
-
(2,246)
-
(20,983)
(2,028)
(2,246)
(25,257)
Total
£’000
2,205
778
383
425
(1,084)
151
2,858
134
601
1,352
(184)
4,761
Total
£’000
(6,477)
(21,611)
2,792
(1,003)
(26,299)
(961)
1,346
657
77
plc Annual Report 2019
plc Annual Report 2019 78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
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 £20.0m (2018: £0.3m) 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. The Group has performed a
continuing evaluation of its deferred tax asset valuation
allowance on an annual basis to estimate whether sufficient
future taxable income will be generated to permit use of the
existing deferred tax assets.
On the basis of this evaluation, as of 31 December 2019, the
Group has concluded that it is not likely that PeopleFluent Inc
and the wider Group will generate sufficient taxable income
within the applicable net operating loss carry-forward periods
to realise a portion of its deferred tax assets. This conclusion,
and the resulting partial reversal of the deferred tax asset
valuation allowance, is based upon consideration of a
number of factors; particularly the impact of COVID-19 on
the wider market.
20. Trade and other payables
31 Dec 2019
31 Dec 2018
Trade payables
Deferred income
Tax and social security
Contingent consideration
Acquisition-related deferred consideration and earn-outs
Accruals
£’000
1,508
49,219
603
-
3,230
8,231
£’000
924
56,417
2,109
8
3,205
9,807
62,791
72,470
The acquisition-related deferred consideration and earn-outs
balance in 2019 relates wholly to the acquisition of Breezy
HR. The balance in 2018 relates partly to the acquisition of
Rustici Software LLC and partly 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. All of the current liability deferred income
balance at 31 December 2018 was recognised as revenue
in 2019 and the currently liability deferred income balance
at 31 December 2019 is expected to be recognised as
revenue in 2020.
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 2019 relates partly to the acquisition of Watershed
Systems Inc and partly to the acquisition of Breezy HR. 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 contract liabilities 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 contract liabilities balance at 31
December 2019 is expected to be recognised during 2021
and 2022.
22. Borrowings
On the acquisition of PeopleFluent Holdings Corp. in 2018 the
existing debt facility with Silicon Valley Bank (‘SVB’) was repaid
and a new debt facility with SVB and Barclays was entered
into for a total of $63.0 million.
This is made up of a $42.0 million term loan and a $21.0
million multicurrency revolving credit facility, both available to
the Group for five years. The facility attracts variable interest
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.
The bank loan is secured by a fixed and floating charge over
the assets of the Group and is subject to various financial
covenants.
The lease liabilities have arisen on adoption of IFRS 16 and
are secured by the related underlying assets. See Note 30
for the undiscounted maturity analysis of lease liabilities at 31
December 2019.
Current interest-bearing loans and borrowings
Non-current interest-bearing loans and borrowings
Current lease liabilities
Non-current lease liabilities
Total
31 Dec 2019
31 Dec 2018
£’000
6,344
31,858
2,880
9,077
50,159
£’000
6,602
31,657
-
-
38,259
23. Provisions
31 Dec 2018
31 Dec 2019
31 Dec 2018
21. Other long-term liabilities
31 Dec 2019
31 Dec 2018
At 1 January – brought forward
Acquisition-related deferred consideration and earn-outs
Contingent consideration
Contract liabilities
Other long-term liabilities
Total
£’000
165
2,542
5,449
287
8,443
£’000
20
2,378
6,603
7
9,008
Paid in the year
Addition
Total
Provisions primarily relate to regulatory and legal costs that
management considers are likely to be incurred as a result
of historic events in the ordinary course of business. These
include the Group’s share of dilapidation costs in respect of
costs to be incurred at the end of property leases.
£’000
301
(50)
602
853
£’000
257
-
44
301
79
plc Annual Report 2019
plc Annual Report 2019 80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
24. Share capital
Shares were issued during the year as follows:
Number of
shares
Share capital
Share premium
£’000
£’000
Merger
reserve
£’000
Total
£’000
At 1 January 2019
666,892,349
2,501
147,560
31,983
182,044
Unapproved share option plan:
Shares issued on the exercise of options
2,227,739
8
656
-
664
At 31 December 2019
669,120,088
2,509
148,216
31,983
182,708
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 2019 the EBT holds 404,340 ordinary shares in the Company. These shares are held
in treasury.
A total of 2,227,739 ordinary shares were issued during the course of the year as a result of the exercise of employee share
options.
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.
2019
2018
Number of options
Weighted average
exercise price
pence
Number of
options
Weighted average
exercise price
Approved share option plan - Enterprise Management Incentive (‘EMI’):
At 1 January
3,939,044
17.794
12,144,513
Options granted by Company
Forfeited
Exercised during the year
At 31 December
-
-
(680,000)
3,259,044
-
-
20.415
17.247
-
(1,638,331)
(6,567,138)
3,939,044
pence
11.446
-
19.449
5.642
17.794
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.
2019
2018
Number of options
Weighted average
exercise price
22,059,901
12,833,334
(4,766,667)
(1,300,000)
28,826,568
pence
70.441
79.913
71.427
34.500
76.116
Number of
options
12,809,901
15,200,000
(4,800,000)
(1,150,000)
22,059,901
Weighted average
exercise price
pence
39.295
93.679
69.079
36.326
70.441
At 1 January
Granted by Company
Forfeited
Exercised during the year
At 31 December
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, 2018 and 2019
Learning Technologies Group plc Sharesave Scheme in
April 2016, April 2017, April 2018 and April 2019 respectively.
The scheme enables U.K. 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, 68.4 and 55.0 pence per share respectively (the
‘Option Price’), being a discount of 20% on the share price
as of 26 April 2016, 20 April 2017, 11 April 2018 and 9 April
2019 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
2019
2018
Number of options
Weighted average
exercise price
Number of options
Weighted average
exercise price
2,297,473
764,189
(514,966)
(247,750)
2,298,946
pence
53.844
51.000
66.044
30.973
53.993
1,620,950
1,198,038
(81,525)
(439,990)
2,297,473
pence
33.436
68.400
43.862
20.146
53.844
(c) Employee stock purchase plan
The Company established the Learning Technologies
Group plc U.S. and Canada Employee Stock Purchase
Plan (ESPP) in May 2019. The scheme enables U.S. and
Canadian permanent employees of the Group to buy
shares in the Company at a discount on maturity of
a two-year savings contract. The savings are held by
PeopleFluent Inc and treated as restricted cash.
Each member of the scheme may save a fixed amount
each month over the two-year period, at the end of which
each employee may buy shares at a fixed price of 70.6p
per share (the ‘Option Price’), being a discount of 15% on
the share price as of 17 May 2019. No participant may
purchase more than 40,000 shares during an offering
period. At the end of two years, a participant’s option to
purchase shares will be exercised automatically on the
purchase date provided that the fair market value of the
shares is greater than the purchase price, otherwise the
accumulated payroll deductions held on behalf of a
participant will be repaid promptly.
81
plc Annual Report 2019
plc Annual Report 2019 82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
2019
2018
Number of shares under option
Sharesave Option Scheme:
At 1 January
Granted by Company
Forfeited
Exercised during the year
At 31 December
Number of options
Weighted average
exercise price
Number of options
-
1,043,094
(100,473)
-
942,621
pence
-
70.550
70.550
-
70.550
-
-
-
-
-
Weighted average
exercise price
pence
-
-
-
-
-
At 31 December 2019, 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
Jan 2015
Dec 2015
Dec 2015
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
343,945
200,000
1,075,000
1,000,000
50,000
590,099
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
609,901
200,000
200,000
450,000
200,000
200,000
200,000
200,000
200,000
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
841,295
600,000
1,000,000
200,000
200,000
200,000
200,000
100,000
300,000
300,000
300,000
200,000
-
-
-
-
-
-
-
-
-
-
-
Pence
2.718
15.500
17.625
19.000
20.250
25.250
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
-
713,060
68.400
Remaining
vesting
period
Fair value of
options
Life
Volatility
Pence
Years
Percent
-
-
-
-
-
-
-
-
Dec 2020
Dec 2021
-
Jan 2020
Jan 2021
Jan 2022
-
-
-
Jan 2021
-
Jan 2020
Jan 2021
Jan 2022
Jan 2020
Jan 2021
Jan 2022
Jan 2023
-
-
11.96
8.76
9.96
2.59 - 8.81
4.22 - 8.18
9.40
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
32.15
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
10
10
3
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%
Date of grant
Approved
Scheme
Unapproved
scheme
Sharesave
Scheme
Exercise Price
Jul 2018
Jul 2018
Jul 2018
Jul 2018
Aug 2018
Aug 2018
Aug 2018
Aug 2018
Apr 2019
Apr 2019
Apr 2019
Apr 2019
Apr 2019
Apr 2019
Jul 2019
Jul 2019
Nov 2019
Nov 2019
Nov 2019
Nov 2019
Dec 2019
Dec 2019
Dec 2019
Dec 2019
150,000
275,000
275,000
300,000
1,800,000
2,000,000
2,200,000
2,000,000
-
-
2,291,666
2,291,667
2,291,667
2,291,667
500,000
500,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
744,591
942,621
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Pence
102.000
102.000
102.000
102.000
103.490
103.490
103.490
103.490
55.100
70.550
75.200
75.200
75.200
75.200
75.200
75.200
113.000
113.000
113.000
113.000
113.000
113.000
113.000
113.000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Remaining
vesting
period
Fair value of
options
Life
Volatility
Pence
Years
Percent
Jan 2020
Jan 2021
Jan 2022
Jan 2023
Jan 2021
Jan 2022
Jan 2023
Jan 2024
-
-
Jan 2021
Jan 2022
Jan 2023
Jan 2024
-
-
Jan 2022
Jan 2023
Jan 2024
Jan 2025
Jan 2022
Jan 2023
Jan 2024
Jan 2025
52.61
52.61
52.61
52.61
56.14
56.14
56.14
56.14
35.12
44.37
55.64
55.64
55.64
55.64
92.09
92.09
75.10
75.10
75.10
75.10
88.04
88.04
88.04
88.04
10
10
10
10
10
10
10
10
3
2
10
10
10
10
10
10
10
10
10
10
10
10
10
10
38%
38%
38%
38%
40%
40%
40%
40%
66%
68%
68%
68%
68%
68%
71%
71%
57%
57%
57%
57%
52%
52%
52%
52%
Totals
3,259,044
28,826,568
3,241,567
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 £0.841 (2018: £1.007) and the
estimated fair value of each share option granted was
£0.617 (2018: £0.348).
The weighted average share price at grant date of the
Sharesave Scheme was £0.688 (2018: £0.855) and the
estimated fair value of each share option was £0.351 (2018:
£0.322). It is assumed that 50% of members will remain in
the Group after three years.
The weighted average share price at grant date of the ESPP
was £0.830 (2018: N/A) and the estimated fair value of each
share option was £0.444 (2018: N/A). It is assumed that 50%
of members will remain in the Group after two years.
A 1.78% (2018: 1.78%) risk-free interest rate has been
assumed for all three schemes.
This estimated fair value was calculated by applying a
Black-Scholes option pricing model. The expected volatility
of the Group’s share price is calculated based on an
assumption of historical volatility. The option life factored into
the model for EMI and Unapproved options is 10 years, for
Sharesave scheme options 3 years and for ESPP options 2
years.
The expense and equity reserve arising from share-based
payment transactions recognised in the year ended 31
December 2019 was £3,111,000 (year ended 31 December
2018: £1,254,000).
The weighted average share price at the date of exercise of
options under the EMI Share Option Scheme was £1.016.
The weighted average share price at the date of exercise of
options under the Unapproved Share Option Scheme was
£0.860.
The weighted average share price at the date of exercise of
options under the Sharesave Scheme was £1.008.
The number of options that are exercisable at 31 December
2019 is 7,468,945 (2018: 5,898,945).
83
plc Annual Report 2019
plc Annual Report 2019 84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
Company
Country of Registration or
Incorporation
Registered Office
Principle Activity
Percentage of ordinary
shares held by Company
26. Subsidiaries of the Group
The subsidiaries of the Group, all of which are private companies limited by shares, as at 31 December 2019, are as follows:
Company
Country of Registration or
Incorporation
Registered Office
Principle Activity
Percentage of ordinary
shares held by Company
Learning Technologies
Group Holdings (UK) Limited
(previously named Epic
Group Limited)
England and Wales
52 Old Steine, Brighton, BN1
1NH, England
Holding company
Gomo Learning Limited
England and Wales
52 Old Steine, Brighton, BN1
1NH, England
Mobile e-learning
100%
100%
Leo Learning Limited
(renamed Learning
Technologies Group (UK)
Limited in January 2020)
England and Wales
52 Old Steine, Brighton, BN1
1NH, England
Bespoke e-learning
100%
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
Learning Technologies
Group (Hong Kong) Limited
(previously known as
NetDimensions Limited)
Hong Kong
NetDimensions, Inc.
USA
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
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
NetDimensions (China)
Limited
NetDimensions (Australia) Pty
Limited (renamed Learning
Technologies Group Pty
Limited in January 2020)
Hong Kong
Australia
NetDimensions Asia Limited
Hong Kong/Philippines
Germany
Learning Technologies
Group GmbH (previously
known as NetDimensions
Germany GmbH)
Learning Technologies
Group Holdings Limited
(previously named
NetDimensions Holdings (UK)
Limited)
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
e-learning software
licencing and services
e-learning software
licencing and services
e-learning software
licencing and services
e-learning software
licencing and services
England and Wales
52 Old Steine, Brighton, BN1
1NH, England
Holding company
100%
NetDimensions (Holdings)
Limited
Cayman Islands
Line Communications
Holdings Limited
England and Wales
Maples Corporate Services
Limited, PO Box 309, Ugland
House, Grand Catman, KY1-
1104, Cayman Islands
52 Old Steine, Brighton, BN1
1NH, England
Dormant
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Line Communications Group
Limited
England and Wales
PeopleFluent Holdings Corp
USA
Learning Technologies
Group Inc. (previously
known as PeopleFluent Inc)
Learning Technologies
Group (Canada) Inc
(previously known as
Strategia Communications
Inc)
USA
Canada
Bedford HCIT Holdings Corp
USA
KZO Innovations Inc
USA
PeopleClick Limited
England and Wales
PeopleFluent Limited
England and Wales
Learning Technologies
Acquisition Corp
Watershed Systems, Inc.
Breezy HR, Inc.
USA
USA
USA
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
Dormant
Holding company
Integrated talent
management and
learning solutions
554-1111 RUE St-Charles O,
Longueuil Québec J4K5G4,
Canada
Integrated talent
management and
learning solutions
100%
100%
100%
100%
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
Corporation Trust Company,
Corporation Trust Centre,
1209 Orange Street,
Wilmington, New Castle DE
19801
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
SaaS Talent Acquisition
Platform
100%
100%
The accounting reference date of each of the subsidiaries is
coterminous with that of the Company with the exception of
PeopleClick Limited whose accounting reference date is 30
September.
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 IFRS3 ‘Business Combinations’. The reserve arises due
to the elimination of the Company’s investment in Epic
Group Limited. Since the shareholders of Epic Group Limited
became 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.
85
plc Annual Report 2019
plc Annual Report 2019 86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
28. Related party transactions
Amount owing (from)/to joint venture/associate:
Current
Trade balances with joint venture
Total
31 Dec 2019
31 Dec 2018
£’000
£’000
(18)
(18)
(7)
(7)
The amounts due to related parties were unsecured, interest-
free and repayable on demand.
Balances and transactions between the Company and its
subsidiaries are eliminated on consolidation and are not
disclosed in this Note. Balances and transactions between
the Group and other related parties are disclosed below.
Remuneration of Directors and other transactions
During the year there were no material transactions between
the Company and the Directors, other than their emoluments
(disclosed in Note 8) and the payments described below.
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
consultancy services totalling £6,000 in the year ended 31
December 2019 (2018: £nil) from Chapple by Design, owned
by Aimie Chapple, a non-executive director, on an arm’s
length basis. The amount due/accrued to Chapple by Design
at 31 December 2019 was £nil (31 December 2018: £nil).
During the normal course of business, the Group received
services income during the year ended 31 December 2019
totalling £2,000 (2018: £nil) from Piers Lea, an executive
director. The amount due from Piers Lea at 31 December
2019 was £2,000 (2018: £nil).
During the normal course of business, the Group purchased
translation and accommodation services from RWS Group
Limited totalling £428,000 in the year ended 31 December
2019 (2018: £521,000). Andrew Brode is the Chairman of
RWS Group Limited. The amount due/accrued to RWS Group
Limited at 31 December 2019 was £39,000 (31 December
2018: £124,000). These balances are included in trade and
other payables (refer to Note 20).
Transactions with joint venture
During the normal course of business, the Group purchased
graphics services from its joint venture, LEO Brazil, totalling
£2,000 and received licence fee income, totalling £10,000 in
the year ended 31 December 2019 (2018: 19,000 and £3,000
respectively).
29. Dividends paid
Final dividend paid
Interim dividend paid
Total
31 Dec 2019
31 Dec 2018
£’000
2,337
1,670
4,007
£’000
1,396
999
2,395
30. Financial instruments
(i) Foreign currency risk
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
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
£’000
£’000
£’000
55,520
38,767
33,564
39,615
579
-
274
37
5,435
7
7,048
10
Swiss
Francs
£’000
482
-
170
-
Canadian
Dollar
Australian
Dollar
Philippine
Peso
Total
£’000
£’000
£’000
£’000
1,354
-
1,695
3
569
-
409
-
5
-
12
2
63,944
38,774
43,172
39,667
31 Dec 2019
Financial assets
Financial liabilities
31 Dec 2018
Financial assets
Financial liabilities
Foreign currency risk sensitivity analysis
The following table details the sensitivity analysis to possible changes in the relative values of foreign currencies to which the
Group is exposed as at the end of each year, with all other variables held constant:
Effects on profit after taxation/equity
31 December 2019
increase/ (decrease)
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 Peso:
- Strengthened by 10%
- Weakened by 10%
£’000
1,675
(1,675)
58
(58)
543
(543)
48
(48)
135
(135)
57
(57)
1
(1)
31 December 2018
increase/ (decrease)
£’000
(605)
605
24
(24)
704
(704)
17
(17)
169
(169)
41
(41)
1
(1)
87
plc Annual Report 2019
plc Annual Report 2019 88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
(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.
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 2019 and net
assets at that date would decrease by £177,000 (2018:
£104,000). 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 financial assets (including cash and bank
balances), the Group minimises credit risk by dealing
exclusively with high credit rating counterparties.
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 low risk profile 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
units, products and geography. The loss allowance
calculated is detailed in Note 15.
Credit risk concentration profile
The Group did not have significant credit risk exposure to
any single counterparty or any group of counterparties
having similar characteristics (2018: 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:
Ageing analysis
The ageing analysis of the Group’s trade receivables is as follows:
31 Dec 2019
31 Dec 2018
Not past due
Past due:
Less than three months
Three to six months
Past six months
Gross amount
£’000
21,904
4,585
842
2,484
29,815
£’000
25,371
6,852
1,744
1,679
35,646
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:
United Kingdom
North America
Europe
Asia Pacific
Middle East and Africa
South and Central America
Allowance for impairment losses
31 Dec 2019
31 Dec 2018
Year ended 31 December 2019
£’000
4,124
18,443
3,497
980
2,521
250
(904)
28,911
£’000
7,079
22,601
4,527
583
635
221
(1,332)
34,314
Trade payables
Borrowings
Contingent consideration
Lease payments
Year ended 31 December 2018
Trade payables
Borrowings
Contingent consideration
Less than 1 year
1-2 years
2-3 years
>3 years
£’000
£’000
£’000
£’000
1,508
7,127
-
2,818
11,453
924
8,256
8
9,188
-
6,902
-
2,675
9,577
-
7,970
-
7,970
-
6,677
2,542
2,226
11,445
-
7,684
-
7,684
-
19,260
-
4,737
23,997
-
19,616
-
19,616
Total
£’000
1,508
39,966
2,542
12,456
56,472
924
43,526
8
44,458
89
plc Annual Report 2019
plc Annual Report 2019 90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
(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 ended 31 December 2018, the Group
fully repaid its 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 0.60 pence
per share during the year ended 31 December 2019
(2018: 0.36 pence per share).
Total equity increased from £168.8 million to £179.4 million
during the year and net funds increased from net debt of
£11.5 million to net cash of £3.8 million.
(c) Classification of financial instruments
Financial assets
Financial assets at amortised cost
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 2019
31 Dec 2018
£’000
£’000
28,911
4,699
18
42,032
75,660
34,314
3,979
7
26,794
65,094
31 Dec 2019
31 Dec 2018
£’000
£’000
2,542
2,542
1,508
38,202
11,957
51,667
2,386
2,386
924
38,259
-
39,183
(d) Reconciliation of liabilities arising from financing activities
Note
22
22
1 January
2019
38,259
14,465
Net
financing
cashflows
589
(3,275)
20, 21
2,386
(8)
Interest paid
Fair value
movement
Interest
accrued
Acquisition
of subsidiary
(1,449)
-
-
-
-
-
1,487
468
248
-
275
-
Foreign
exchange
movement
31
December
2019
(684)
24
(84)
38,202
11,957
2,542
Borrowings
Lease liabilities
Contingent
consideration
Note
1
January
2018
Net
financing
cashflows
Interest paid
Fair value
movement
Interest
accrued
Acquisition
of subsidiary
Foreign
exchange
movement
31
December
2018
22
14,614
21,307
(1,224)
-
1,512
-
2,050
38,259
20, 21
360
(193)
-
(183)
54
2,296
52
2,386
Borrowings
Contingent
consideration
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.
2019
Contingent consideration
Total
2018
Contingent consideration
Total
Level 1
£’000
-
-
Level 1
£’000
-
-
Level 2
£’000
-
-
Level 2
£’000
-
-
Level 3
£’000
2,542
2,542
Level 3
£’000
2,386
2,386
Total
£’000
2,542
2,542
Total
£’000
2,386
2,386
91
plc Annual Report 2019
plc Annual Report 2019 92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
COMPANY STATEMENT OF FINANCIAL POSITION (REGISTERED NUMBER: 07176993)
As at 31 December 2019
31. Events since the reporting date
On 10 March 2020 Learning Technologies Group plc
announced the proposed acquisition of the business
and assets of Open LMS from Blackboard Inc for cash
consideration of $31.7 million (subject to some customary
price adjustments), to be funded by the Group’s existing cash
and bank facilities.
The proposed acquisition of Open LMS adds complementary
expertise to the Group’s existing proprietary software solutions,
through the addition of expertise in the market’s leading
open-source Learning Management System (LMS), Moodle.
support Open LMS through its existing operational infrastructure
and, under a partnership arrangement, LTG will resell
Blackboard’s suite of products that integrate with Moodle to
meet the demands of current and future customers.
Open LMS will be acquired by way of a combined asset
carve-out and entity acquisition from Blackboard. In the year
ended 31 December 2019 the Open LMS business generated
unaudited revenues of c.$16 million. Approximately 70% of
Open LMS’s revenue is derived from recurring subscription fees.
All conditions relating to the acquisition of Open LMS were
satisfied and the transaction completed on 31 March 2020.
Following completion, Open LMS will be run as a standalone
brand within LTG’s portfolio of best-in-class businesses. LTG will
There have been no other notifiable events between the 31
December 2019 and the date of this Annual Report.
Note
31 Dec 2019
31 Dec 2018
£’000
£’000
3
4
8
9
7
7
7
7
152,297
152,297
46,654
17,886
64,540
7,018
7,018
57,522
209,819
31,858
177,961
2,509
148,176
9,714
4,411
13,151
177,961
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
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
Capital and reserves includes profit or (loss) for the year of the
parent company, of (£0.724) million (2018 - £5.300 million).
The Notes on pages 94 to 97 form an integral part of these
Financial Statements.
The Financial Statements on pages 92 to 97 were approved
and authorised for issue by the Board of Directors on 15 April
2020 and were signed on its behalf by:
Neil Elton
Chief Financial Officer
15 April 2020
93
plc Annual Report 2019
plc Annual Report 2019 94
COMPANY STATEMENT OF CHANGES IN EQUITY
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
Share capital
Share premium Merger reserve
Note
Share-based
payments
reserve
£’000
2,145
£’000
64,168
£’000
9,714
£’000
1,090
Issue of shares
6
356
At 1 January 2018
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Costs of issuing shares
Payment of dividends
Share-based payment charge credited
to equity
11
Transfer on exercise and lapse of
options
Transactions with owners
At 31 December 2018
Profit for the year
Other comprehensive income
Total comprehensive income for
the period
Issue of shares
Payment of dividends
Share-based payment charge credited
to equity
Transfer on exercise and lapse of
options
Transactions with owners
6
11
-
-
-
-
-
-
-
-
-
-
85,521
(2,169)
-
-
-
356
2,501
83,352
147,520
-
-
-
8
-
-
-
8
-
-
656
-
-
-
656
-
-
-
-
-
-
-
-
-
9,714
-
-
-
-
-
-
-
-
At 31 December 2019
2,509
148,176
9,714
-
-
-
-
-
-
1,254
(738)
516
1,606
-
-
-
-
-
3,111
(306)
2,805
4,411
Retained
profits
£’000
13,933
5,300
-
Total
£’000
91,050
5,300
-
5,300
5,300
-
-
(2,395)
-
738
(1,657)
17,576
(724)
-
85,877
(2,169)
(2,395)
1,254
-
82,567
178,917
(724)
-
(724)
(724)
-
(4,007)
-
306
(3,701)
13,151
664
(4,007)
3,111
-
(232)
177,961
1. General information
The Company is a public limited company, which is listed on
the AIM Market of the London Stock Exchange and domiciled
in England and incorporated and registered in England and
Wales. The address of its registered office is 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
loss attributable to members of the Company for the year
ended 31 December 2019 is £724,000 (year ended 31
December 2018: profit of £5,300,000).
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 U.K. and Republic
of Ireland”:
•
•
the requirements of Section 7 Statement of Cash Flows
the requirements of Section 11 Financial Instruments
(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.
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NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
3. Investment in subsidiaries
Cost
At 1 January
Additions
Disposals
At 31 December
Amortisation/impairment:
At 1 January
Provision for impairment
Disposals
At 31 December
Net Book Value
31 Dec 2019
31 Dec 2018
£’000
£’000
164,404
3,015
(15,122)
152,297
-
-
-
-
91,160
73,244
-
164,404
-
-
-
-
152,297
164,404
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.
During the year, the Company transferred its investments in Preloaded Limited and Eukleia Training Limited to its subsidiary, Leo
Learning Limited, as part of a Group restructuring project.
Details of the Company’s subsidiaries as at 31 December 2019 are set out in Note 26 to the Consolidated Financial Statements.
8. Creditors: amounts falling due within one year
4. Debtors
Amounts due from subsidiary undertakings
Deferred tax asset (see Note 5)
Other debtors
5. Deferred tax assets
At 1 January
Deferred tax credit on share options in issue
Release of deferred tax on exercise of share options
At 31 December
31 Dec 2019
31 Dec 2018
£’000
46,627
-
27
£’000
49,919
-
74
46,654
49,993
Trade creditors
Contingent consideration
Other creditors and accruals
Borrowings
9. Creditors: amounts falling due after more than one year
31 Dec 2019
31 Dec 2018
£’000
£’000
Borrowings
31 Dec 2019
31 Dec 2018
£’000
85
-
589
6,344
7,018
£’000
12
8
338
6,602
6,960
31 Dec 2019
31 Dec 2018
£’000
31,858
31,858
£’000
31,656
31,656
-
-
-
-
51
-
(51)
-
The interest expense relating to the movement in present value of contingent consideration in the year ending 31 December
2019 amounted to £nil (2018: £24,000).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2019
COMPANY INFORMATION
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
Foreign exchange differences
Closing amount due from related parties
31 Dec 2019
31 Dec 2018
£’000
49,919
(40,361)
38,365
(1,296)
46,627
£’000
13,091
(12,790)
46,830
2,788
49,919
The amounts owing to/from related parties are unsecured, interest-free and repayable on demand.
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’):
2019
2018
Number of options
Weighted average
exercise price
pence
Number of options
Weighted average
exercise price
At 1 January
Exercises
At 31 December
-
-
-
-
-
-
2,000,000
(2,000,000)
-
pence
5.88
5.88
-
An option-holder has no voting or dividend rights in the Company before the exercise of a share option.
No options were exercised during the year (2018: 2,000,000 options). No options were granted, forfeited or expired during the
year (2018: nil)
The number of options that are exercisable at 31 December 2019 is nil (2018: nil).
Share-based payments which were expensed in the entity and taken to equity in the year ended 31 December 2019,
amounted to £nil (year ended 31 December 2018: £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 2019 are shown in Note 31 to the Consolidated Financial Statements.
Directors
Andrew Brode, Non-executive Chairman
Aimie Chapple, Non-executive Director
Neil Elton, Chief Financial Officer
Piers Lea, Chief Strategy Officer
Leslie-Ann Reed, Non-executive Director
Jonathan Satchell, Chief Executive
Company Secretary
Claire Walsh
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
Plumtree Court
25 Shoe Lane
London
EC4A 4AU
Legal advisers
DLA Piper U.K. LLP
160 Aldersgate Street
London
EC1A 4HT
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