Learning Technologies : Watershed Acquisition and Strategic Goals Update

15 November 2018

Learning Technologies Group plc

('LTG', the 'Group')

(AIM: LTG)

Watershed Acquisition and Strategic Goals Update

LTG acquires remaining 70% stake in Watershed

New strategic goals for 2021

Capital Markets Event today

Learning Technologies Group plc, the leading integrated digital learning and talent management services and technologies provider, announces the acquisition of the remaining 70% of Watershed Systems Inc ('Watershed').

Following strong progress in 2018, including the recent acquisition of PeopleFluent, LTG is also pleased to announce a new strategic goal to achieve run-rate revenues of £200 million and run-rate EBIT of at least £55 million by the end of 2021.

Further context on the long-term strategy to support this new strategic goal will be provided to analysts and investors at a Capital Markets Event in London today.

Acquisition of Watershed

LTG initially acquired a 30% stake in Watershed on 29 January 2016, for a total consideration of US$3.0 million.

Watershed is a SaaS business that develops learning analytics. Customers use Watershed's actionable insights to adapt their learning strategy, creating more effective learning experiences and verifiable business results.

Since LTG's investment in 2016, Watershed has made good progress developing its suite of analytical tools and delivering compelling insights for a number of blue-chip customers. Watershed now has proven ability to harness data about learners to analyse and assess the impact of learning on organisational performance. This is a significant area of innovation and progress for the e-learning industry. As a wholly owned business within LTG, management believes that there are compelling and immediate opportunities to develop new routes to market for Watershed's product offering.

Watershed's revenue grew strongly in 2017 and 2018 YTD, albeit from a low base given its early stage of development. It made a loss before tax of $0.5 million in the 9 months to 30 September 2018. Management expects Watershed to break-even in 2019 and that it will be earnings accretive from 2020. Gross assets at the end of September were $2.5 million. LTG will acquire the balance* of Watershed for an initial consideration of $2.9m and up to $8.7m in deferred contingent consideration, all in cash, payable on the achievement of significant incremental revenue growth over the period 2019-2021.

2021 Strategic Goals and Capital Markets Event

Today's Capital Markets Event will feature presentations from senior management including Piers Lea (Chief Strategy Officer), Tim Martin (Chief Innovation and Product Officer), Stephen Bruce (MD of PeopleFluent) and Bruce Kile and Jeffery Lewis (co-MDs of Affirmity).

The team will provide insight into LTG's strategy to capitalise on the long-term structural growth drivers in the workplace learning and talent management market. This will include a deep-dive on LTG's Software & Platforms division, and the transformation in its learning platforms and talent software offering following the recent acquisition of PeopleFluent.

When LTG came to AIM five years ago the Board set the ambitious target of achieving run-rate revenues of £50 million and EBITDA margins of 20% by the end of 2018. These targets were met one year ahead of plan.

In October 2017 LTG announced new strategic objectives to the end of 2020, to double run-rate revenues to £100 million and for run-rate EBIT to exceed £25 million, achieved without significant dilution to shareholders. Following strong organic growth and the acquisition of PeopleFluent in May 2018, the 2020 goal set out last year has been achieved more than two years ahead of plan with acceleration aided by a placing of new shares, equivalent to c15% of issued share capital.

The Board is pleased to announce today new strategic objectives for the business that capture the positive outlook for the e-learning industry, the strong prospects for the Group and the current momentum we are enjoying. The Board's updated ambition is to achieve run-rate revenues of £200 million and run-rate EBIT of at least £55 million by the end of 2021.

LTG intends to meet these financial objectives through a combination of organic growth and strategic bolt-on acquisitions that complement the current business. It is the intention of the Board to finance any acquisitions and research & development that support the outlined revenue and EBIT targets through the use of internally generated operating cash flows and prudent debt financing.

In addition to the above, the Board will continue to evaluate strategic acquisitions of scale that may require shareholder financing and would be additive to these targets in financial contribution and / or in accelerating them. Strict criteria will continue to be used in assessing such acquisitions including the financial effects, integration risk and prospective returns.

The presentation and video from the Capital Markets Event will be available on our website in due course.

Jonathan Satchell, Chief Executive, said:

'I am thrilled that LTG is taking full ownership of Watershed, enabling the Group to capitalise on the ability to harness data insights to assess the impact of learning on organisational performance.

In the past five years, LTG has gone through a fundamental transformation. This is reflected in our organic growth, shift to a recurring revenue model, and increased US presence. Successfully integrating acquisitions, and driving improvement in the operating model and performance of the businesses we acquire, has been central to this evolution.

The successful integration of PeopleFluent announced at the time of our interim results remains on track, which alongside the performance of our other businesses gives the Board confidence in the outturn for 2018 and beyond. Today's new strategic goals to 2021 demonstrate our ambition to continue consolidating the high growth corporate e-learning market.'

* The vendors of Watershed are Mike Rustici, Tim Martin and the Tennessee Technology Development Corporation. Approximately 14% of the initial and deferred consideration will be payable to Watershed employees.

ENDS

Enquiries:

Learning Technologies Group plc Jonathan Satchell, Chief Executive Neil Elton, Chief Financial Officer	[phone]
Numis Securities Limited (NOMAD and Corporate Broker) Stuart Skinner, Nick Westlake, Michael Wharton (Nomad) Ben Stoop (Corporate Broker)	[phone]
Goldman Sachs International (Joint Corporate Broker) James A Kelly, Adam Laikin (Corporate Broker)	[phone]
FTI Consulting(Public Relations Adviser) Rob Mindell / Jamie Ricketts	[phone]

About LTG

LTG is a leader in the high growth workplace digital learning and talent management market. The Group offers truly end-to-end learning solutions ranging from strategic consultancy, through a range of content and platform solutions to analytical insights that enable corporate and government clients to meet their performance objectives.

LTG is listed on the London Stock Exchange's Alternative Investment Market (LTG.L) and headquartered in London. The Group has offices in Europe, the United States, Asia-Pacific and South America.