Learning Technologies adjusts guidance after resilient first half

The AIM-traded firm said that indicated flat year-on-year organic revenue growth for the first half of 2023.

It put its resilience down to a strong performance in software-as-a-service (SaaS) and long-term services contracts, which together constituted 71% of total revenues in the 2022 financial year.

However, that growth was offset by lower-than-expected levels of transactional and project-based work, primarily due to extended sales cycles, particularly within the financial services and technology sectors.

Group adjusted EBIT from continuing operations for the first half was meanwhile expected to be at least £43m, slightly lower than the £43.5m reported in the first six months of 2022.

Its subsidiary GP Strategies delivered margins of about 12% in the period - in line with average margins in 2022, but lower than the 14% margins achieved in the fourth quarter.

LTG said GP Strategies' performance during the first half was impacted by certain one-off factors stemming from the integration of LEO with GP's content business.

The merger formed a new entity called GPLX, which contributed 16% of GP Strategies' revenues in the period.

Although the integration initially caused some disruption, the board said the issues had been resolved, and the business refocused with new processes implemented in the last two months to enhance productivity.

The company said it was confident that “significantly improved” margins would be seen in the second half, reflecting the positive changes in GPLX and ongoing progress with the commercial transformation programme.

As a result, the expected exit run rate EBIT margin for GP Strategies was estimated to be about 17%.

Considering its performance in the first half, LTG adjusted its full-year revenue and adjusted EBIT forecasts for the year.

Its new revenue range was projected to be between £550m and £570m, while adjusted EBIT was expected to fall within the £98m to £103m range.

LTG said its financial position remained robust, with continued efforts to reduce debt, adding that as at 30 June its net debt totalled £108.4m, narrowing from £119.8m at the end of 2022.

“LTG has high levels of recurring revenues, underpinned by long-term services and software-as-a-service contracts,” said chief executive officer Jonathan Satchell.

“While macro conditions have impacted transactional volumes, we are well placed to take advantage of greater project activity as the macro environment improves.”

Satchell described the firm’s model as “highly resilient”, adding that it expected the commercial transformation programme within GP Strategies to continue to deliver substantial margin improvements in the second half and beyond.

“Our strong balance sheet allows for select accretive acquisitions, which supports our confidence of further progress in the second half of the year.”

Learning Technologies said it would publish its half-year financial results in September.

At 1435 BST, shares in Learning Technologies Group were down 19.87% at 67.75p.

Reporting by Josh White for Sharecast.com.