Learning Technologies Group PLC (LON:LTGL)announced a strong set of H1 results, incorporating c 18% underlying organic growth. LEO, Rustici, Preloaded and gomo have been performing exceptionally well and the numbers were slightly ahead of management plans. Consequently, we have upgraded our forecasts, with profits getting an additional boost from the incorporation of LTG accounting policies at NetDimensions. Given the attractive growth drivers, the P/E of c 24x our FY18e EPS is not demanding and our DCF analysis indicates upside potential of 31% to 87%.
H1 results: Underlying organic growth of c 18-19%
H1 organic growth was 33%, including 3-4% FX tailwind (46% of revenues are from outside the UK) and a c 11% one-off effect from the CSL contract. That leaves underlying growth at c 18-19%. The H1 operating margin dipped as planned, due to the initial inclusion of low-margin NetDimensions, but cost savings from the acquisition are on target and will begin coming through in H2. Recurring revenues were 37% of the total, and are expected to approach 50% in the full year. The group ended the period with net debt of £6.1m. There are also outstanding acquisition liabilities of c £9.3m, the majority of which are contingent on incremental revenue growth, which takes the adjusted net debt to £15.4m.
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