LEARNING TECHNOLOGIES GROUP PLC

Earnings Release • Sep 26, 2023

National Storage Mechanism | Additional information RNS Number : 5978N Learning Technologies Group PLC 26 September 2023 26 September 2023 Learning Technologies Group plc HALF YEAR RESULTS 2023 Resilient performance with high levels of visibility from recurring revenues FY23 performance expected to be in line with analyst estimates Learning Technologies Group plc, a global market leader in digital learning and talent management, announces half year results for the six months ended 30 June 2023. All figures relate to that period unless otherwise stated. Strategic and operational highlights �� Resilient, diversified business model reflected in long-term contract wins for Software & Platforms and wins for major customers in Content & Services �� Solid performance from SaaS and long-term contracts which account for 72% of H1 2023 revenue (H1 2022: 71%) �� As indicated previously, challenging macroeconomic backdrop continues to impact transactional and project-based work �� One-off issues relating to LEO integration within GP Strategies resolved in July, as previously indicated, with significant improvement in major KPIs in GPLX since Q2 Financial highlights �� Reported revenues up 2% to ��284.6 million (H1 2022: ��277.8 million continuing operations) �� Flat revenues on an organic constant currency basis: Content & Services up 2% and Software & Platforms down 5% �� Adjusted EBIT slightly down 1% to ��43.1 million (H1 2022: ��43.6 million continuing operations) �� Good cash performance with conversion of 65% (last year 60%) �� Ongoing deleveraging supporting a planned voluntary debt repayment of $25 million on 29 September 2023, for an expected $0.4 million interest benefit in Q4 2023 �� Robust balance sheet with net debt of ��108.4 million at 30 June 2023 (31 December 2022: ��119.8 million) and net debt: EBITDA ratio of 0.9x (FY 2022: 1.1x), allowing for select accretive acquisitions Dividend �� The Board is pleased to declare an interim dividend of 0.45 pence per share (H1 2022: 0.45 pence). Current trading and outlook �� We continue to see resilience in our SaaS and long-term contracts, offset by lower transactional volumes in line with the broader macroeconomic environment as well as lower demand in GP Strategies, notably in China �� GP Strategies is expected to deliver a significantly improved exit run-rate EBIT margin of c.17%, driven by improvements to GPLX and a commercial transformation programme �� FY23 performance expected to be in line with analyst estimates, including updated expectations for FX and share-based payments1 1 Median company-compiled analyst estimates, as at 14 September 2023, are ��560.2m revenues and ��98.0m Adjusted EBIT for FY23 Jonathan Satchell, Chief Executive Officer of Learning Technologies Group, said: "LTG has delivered a resilient performance in a challenging macro backdrop, underpinned by our SaaS and long-term contracts, which represent 72% of H1 2023 revenues. Revenues, on an organic constant currency basis, were flat as a result of lower transactional volumes, as indicated in July. LTG remains uniquely placed to capture growth opportunities in a >$100 billion addressable market as a result of our scale and breadth of offering in digital learning and talent management. Our balance sheet supports investment and accretive acquisitions that fit with our business model, whilst also allowing us to make a voluntary debt repayment. Demand from organisations to recruit, motivate and retain the best talent, allied with improvements from our commercial transformation programme in GP Strategies, support our confidence of meeting analyst estimates for FY23." Financial summary: Continuing Reported ��m unless otherwise stated H1 2023 H1 2022 Change H1 2022 Revenue 284.6 277.8 2% 281.8 Organic growth* 0.1% 5.2% Software & Platforms organic growth (4.7)% 6.5% Content & Services organic growth 1.8% 1.6% SaaS & long-term contracts 72% 71% Adjusted EBIT 43.1 43.6 (1)% 44.1 Adjusted EBIT margin 15.1% 15.7% 15.6% Statutory PBT 16.5 18.0 (8)% 18.5 Adj. Diluted EPS (pence) 3.293 3.666 (10)% 3.715 Basic EPS (pence) - continuing & discontinued 1.376 1.848 Net Debt / (Cash) 108.4 145.3 Dividend (pence) 0.45 0.45 * Organic growth on a constant currency basis Analyst and investor presentation: LTG will host an analyst and investor webcast at 09:00 today, 26 September 2023. The registration link can be found below: https://attendee.gotowebinar.com/register/6277184884607235423 Telephone dial-in details: +44 330 221 9922 (+1 (951) 384-3421 for international dial-in). Access Code: 838-970-977 Enquiries: Learning Technologies Group plc Jonathan Satchell, Chief Executive Kath Kearney-Croft, Chief Financial Officer +44 (0)20 7832 3440 Numis Securities Limited (NOMAD and Corporate Broker) Nick Westlake, Ben Stoop, Tejas Padalkar +44 (0)20 7260 1000 Goldman Sachs International (Joint Corporate Broker) Bertie Whitehead, Adam Laikin +44 (0)20 7774 1000 FTI Consulting (Public Relations Adviser) Jamie Ricketts, Emma Hall, Lucy Highland, Jemima Gurney +44 (0)20 3727 1000 About LTG Learning Technologies Group plc (LTG) is a leader in the growing workplace digital learning and talent management market. The Group offers end-to-end learning and talent solutions ranging from strategic consultancy, through a range of content and platform solutions to analytical insights that enable corporate and government clients to close the gap between current and future workforce capability. LTG is listed on the London Stock Exchange's Alternative Investment Market (LTG.L) and headquartered in London. The Group has offices in Europe, North America, South America and Asia-Pacific. Chief Executive Review Introduction LTG is a global provider of integrated talent management and learning software and services. Our purpose is shared by all of our companies: we help organisations keep up with ever-changing workforce development needs. Organisations need to recruit, motivate and retain the best talent. To meet this demand, we have built a broad offering to capture a >$100 billion addressable market for digital learning and talent management. The size of the opportunity reflects long-term, structural drivers. Our businesses are a cohesive federation of like-minded, highly profitable leaders in talent management and learning software and services with a common go-to-market strategy. Where it is advantageous to our strategy, performance and client needs, we collaborate on bilateral cross-selling and we integrate our businesses' systems. LTG continues to evolve by building out our offering through a combination of organic growth and strategic acquisitions that complement the current business. Our strong cash generation and prudent balance sheet give us a platform to pursue select accretive acquisitions. The Group remains well placed to benefit from AI and continues to make progress with its AI strategy. A number of projects, trials and policies are underway across the Group. For example, GP Strategies is helping some of its largest clients to train their own AI models across learning and talent and recently launched its AI Consulting framework in May 2023. GP Strategies expects to launch its AI learning programme in October for Learning and Development leaders. Where relevant, our businesses are collaborating on AI initiatives. Character-based AI initiated by the PRELOADED team is being introduced to the largest GP Strategies client for character-based learning assistant exploration. As part of our long-term strategy, we will consider acquisitions of AI technology businesses who have good products but need access to the market. Resilient performance with high levels of visibility from recurring revenues Revenues from continuing operations for the six months to June 2023 grew by 2% to ��284.6 million (H1 2022: ��277.8 million). Our recurring revenues were offset by lower transactional volumes in the first half of 2023, as indicated in our July update, resulting in flat revenues on an organic constant currency basis. This performance in a challenging macro backdrop underlines the resilience of our model, with SaaS and long-term contracts representing 72% of H1 2023 revenue (H1 2022: 71%). As expected, the operational focus in H1 2023 remained the large-scale commercial transformation of GP Strategies, acquired in 2021. The addition of GP Strategies has been a step-change for our scale, tripling revenues and doubling profits. One-off issues in the first half of the year relating to the integration of LEO into GP Strategies' content division to form GPLX, impacted its first half performance. These have now been resolved and we have seen an improvement in GPLX margins in July and August compared to H1 with further improvement expected in the remainder of the second half of the year. As expected, overall margins in GP Strategies are improving and we expect the exit run-rate adjusted EBIT margin for the entire GP Strategies business will be in line with expectations at c.17%. Adjusted EBIT was slightly lower at ��43.1 million (H1 2022: ��43.6 million). Statutory operating profit from continuing operations improved 5% to ��23.2 million (H1 2022: ��22.2 million), including adjusting items of ��19.9 million (H1 2022: ��21.4 million). LTG is a cash generative business, which enables us to make a voluntary debt repayment of $25 million on 29 September 2023, giving an expected $1.7 million benefit per annum on interest payments at current interest rates. As announced in December 2022, a non-core asset within GP Strategies had been identified for disposal in 2023. The sale of this business is progressing well and we expect to provide a further update before the end of the year. Corporate Governance ESG initiatives remain at the forefront of our business process and strategy as we continue to advance towards our 2023 targets, including making progress during the first half of the year around sustainable procurement, scope 3 data, colleague engagement and training. We implemented a group-wide sustainable procurement policy and will continue to refine our data and supplier review process, including cascading our recently updated supplier code of conduct policy. These steps help us to ensure that our supply chain is aligned to our goals in the ESG space. In addition, we are focusing heavily on our scope 3 data, looking more in-depth at our upstream purchased goods and service category and evaluating our supply chain. Our Ecovadis scores from our February 2023 submission improved substantially and we have reduced our Scope 1 and Scope 2 emissions by more than 60% over our 2019 baseline year. From the colleague perspective, we reactivated our engagement survey to measure satisfaction and had a response rate of 75%. Whilst there is no room for complacency, we were heartened by most of results and qualitative feedback. We have implemented disciplined processes for action planning and follow-up and we have several other colleague initiatives underway in parallel to include delivering our in-house designed core leadership programme, and strengthening our performance enablement process to proactively address development planning and well-being. I am also excited to share that our largest subsidiary, GP Strategies, had numerous internal promotions further diversifying their senior leadership team. We remain focused and committed to meeting the ESG goals that we set forth in the 2022 annual report. Operational Review With effect from this interim report, reporting divisions have been updated to reflect internal reporting on a business unit basis, and the revised format is consistent with that used by the Chief Operating Decision Maker. Following the reorganisation and integration of LEO and PDT into GP Strategies, the Content & Services division now includes all three businesses in addition to Affirmity and PRELOADED. The Software and Platforms division reflects the results for the Product companies. The categorisation of the companies under the division heading is outlined below. Note 3 to the accounts includes a restatement of the prior year's comparative result. Content & Services (74% of H1 2023 Group revenue) Content & Services comprises GP Strategies, PRELOADED and Affirmity. GP Strategies is a global workforce transformation provider of organisational and technical performance learning solutions. PRELOADED is a BAFTA-winning immersive games studio. Affirmity provides a portfolio of software, consulting services and blended learning solutions to help US-based enterprise and mid-market companies measure diversity, build inclusive workforces and operate effective DE&I and affirmative action programmes. Revenue increased by 4.5% to ��211.5 million (H1 2022: ��202.3 million) reflecting the benefit of the strength of the US dollar and 1.8% organic constant currency growth with particularly strong growth in Affirmity and PRELOADED. There was moderate growth in GP Strategies despite lengthening sales cycles and the challenging macro environment impacting on transactional and project-based work. As outlined previously, the integration challenges within GPLX that impacted performance in the first half of the year have been resolved. Long-term contracts continued to perform as organisations maintained their investment in delivering effective workforce transformation solutions in a digital, flexible and fast-paced corporate environment. Effective 1 January 2023, LEO Learning, a digital learning specialist was integrated with GP Strategies' global content design team to create the world's largest and most creative custom content and learning experience design offering, called GPLX. Simultaneously, PDT Global joined GP Strategies' Leadership Training division to create a combined force in Diversity, Equity and Inclusion (DE&I). These additions to GP Strategies' portfolio enhance its capabilities as a world-leading learning and talent transformation company. GP Strategies' solutions improve the effectiveness of organisations by delivering innovative and superior consulting, training, and business improvement solutions. Clients include Global 500 companies, automotive, financial services, technology, aerospace and defence industries, and other commercial and government customers. The business has experienced good growth in managed learning services with the ramp up of new accounts, and in the Americas division with the expansion and growth in existing accounts and non-US automotive accounts. AMEA had strong growth in H1 2023 following a slower Covid recovery in H1 2022. This was partially offset by the temporary GPLX H1 integration challenges and lower transactional revenue due to a slowdown in spending in large Human Capital Management implementation projects. PRELOADED has seen a strong start to the year and continues to win highly innovative contracts with significant clients including a global entertainment company and a global international social media company. During the first half of 2023, Affirmity delivered strong revenue growth driven by an improvement to the client renewal rate, cross-selling at renewal and adding new clients. Software & Platforms (26% of H1 2023 Group revenue) The Software & Platforms division comprises SaaS and on-premise licenced product solutions as well as hosting, support and maintenance services. PeopleFluent provides cloud-based talent management solutions and services to large-enterprise clients that require recruiting, performance, succession, compensation, learning and organisation charting capabilities beyond what is available within their current HR systems. Breezy provides a largely self-service SaaS talent acquisition solution aimed at small and medium-sized businesses. Bridge is an employee-focused learning and performance platform operating in the higher growth, mid-market with proven potential to move into sectors of the enterprise market. Rustici Software is a global expert in e-learning interoperability software. Open LMS provides the largest scale capability in the global open-source Moodle��� services market. VectorVMS is a market-leading SaaS-based technology for the contingent workforce. Software & Platforms revenue of ��72.9 million (H1 2022: ��75.5 million) declined 3% due to a combination of mixed business performance and FX tailwinds. On an organic constant currency basis Software & Platforms declined 4.7% driven by a 10.8% decline in PeopleFluent as expected, lower revenue in Breezy due to softer transactional revenue from the US SME recruitment market and lower year-on-year performance in Reflektive due to softness in technology sector customers and the commencement of a strategy to migrate customers to a version of Reflektive within Bridge. This was partially offset by continued strong growth in Rustici and Bridge, and moderate growth in OpenLMS. The macroeconomic picture has suppressed Breezy's performance in H1 2023, as a 49% reduction in transactional revenue related to job postings, now representing c15% of Breezy revenues, masks a 3% growth in platform hosting revenues. Rustici has continued to deliver strong organic revenue growth in the first half of the year driven by its Content Controller product which represents 60% of the growth (as it is the youngest and fastest growing) and SCORM Cloud products. Open LMS had moderate organic constant currency revenue growth as customers rebased their requirements following strong performance in the Covid years. VectorVMS reported a slight softening in revenues compared to the first half of 2022 as a result of customers reducing their utilisation of contingent labour and healthcare labour rates moderating after strong demand in Covid years. Dividend On 14 July 2023, the Company paid a final dividend of 1.15 pence per share, giving a total dividend for 2022 of 1.60 pence per share. Given its confidence in the continuing success of the Group, the Board is pleased to declare an interim dividend of 0.45 pence per share (2022: 0.45 pence per share). This dividend will be paid on 27 October 2023 to all shareholders on the register as at 6 October 2023. Current trading and outlook In line with the pattern established in the first half of 2023, LTG continues to see resilient trading in our SaaS and long-term contracts, offset by lower transactional volumes, consistent with current macroeconomic trends. While GP Strategies has seen lower demand in certain regions such as China, it is expected to deliver a significantly improved exit run-rate EBIT margin of c.17%, driven by improvements to GPLX and a commercial transformation programme. The Board expects FY23 performance to be in line with analyst estimates, including updated expectations for FX and share-based payments. The Group remains well-placed to capitalise on greater project activity as macro conditions improve. LTG remains uniquely placed to capture growth opportunities in a >$100 billion addressable market as a result of our scale and breadth of offering in digital learning and talent management. Our balance sheet supports accretive acquisitions that fit with our culture. Demand from organisations to recruit, motivate and retain the best talent, allied with improvements from our commercial transformation programme in GP Strategies, support our confidence of further progress in the second half of the year. Jonathan Satchell Chief Executive 26 September 2023 Chief Financial Officer's Review In the six months ended 30 June 2023, despite the challenging economic climate, revenues for continuing operations increased by 2% to ��284.6 million (H1 2022: ��277.8 million). The Group has experienced growth and resilience in SaaS and long-term contracts in contrast to transactional revenue with the proportion of this category of revenue increasing to 72% from 71% in H1 2022. Revenue in Content & Services increased 5% to ��211.5 million (H1 2022: ��202.3 million) with the division now accounting for 74% of Group revenue (H1 2022: 73%). Organic constant currency revenue growth was 1.8% (H1 2022: 1.6%), due to a combination of moderate growth in GP Strategies and strong growth in Affirmity and PRELOADED. Long-term contracts accounted for 65% of the division's revenue, an increase from 62% in H1 2022, a testament to the resilience of recurring revenue. GP Strategies saw strong growth in managed learning services contracts, and AMEA following a slower Covid recovery in 2022, and the Americas division. Offsetting this good growth were the temporary H1 integration challenges in GPLX, slowdown in spending in large implementation projects and the macroeconomic climate affecting transactional revenues. PRELOADED revenue growth was fuelled by an increased US presence alongside developing stronger long-term client relationships resulting in increased work from existing clients. Affirmity also delivered strong growth driven by an improvement to the client renewal rate, cross-selling at renewal and acquiring new clients. Revenue in Software & Platforms decreased 3% to ��72.9 million (H1 2022: ��75.5 million) with the division now representing 26% of Group revenue (H1 2022: 27%). On an organic constant currency basis Software & Platforms declined 4.7% (H1 2022: 6.5% growth) driven by an expected 10.8% decline in PeopleFluent, continued challenges in Breezy as the transaction business related to the SME US labour market remained subdued despite resilient SaaS revenues, and Reflektive due to softness in technology sector customers and the strategy to migrate customers to a version of Reflektive within Bridge. These challenges were partially offset by continued growth in Rustici driven by its Content Controller product and moderate growth in OpenLMS as customers rebalance their requirements following the Covid years, including some organisations losing their government sponsored funding and a move back to face-to-face learning. Adjusted EBIT from continuing operations decreased slightly to ��43.1 million (H1 2022: ��43.6 million continuing operations). The resulting adjusted EBIT margin of 15.1% was down from 15.7% in H1 2022, driven primarily by lower revenue in the Software & Platforms division resulting in operational deleverage and the temporary H1 challenges in GPLX which are now resolved. Adjusted EBIT margin in the Content & Services division at 11.8% (H1 2022: 12.0%) was broadly in line with the prior year. Software & Platforms adjusted EBIT margin reduced from 25.5% in H1 2022 to 24.8% due to a decline in revenues resulting in slight operational deleverage. The Group reported an increase in operating profit of 5% to ��23.2 million (H1 2022: ��22.2 million continuing operations, ��21.4 million reported) which is stated after amortisation of acquired intangibles, various acquisition earn-out charges, loss on disposal of fixed assets, transaction and integration costs. Amortisation of acquired intangibles decreased to ��16.6 million (H1 2022: ��18.0 million). Acquisition earn-out charges decreased to ��1.1 million (H1 2022: ��2.3 million). Contingent consideration arrangements are in place for eThink, eCreators, and PDT and are all dependent on challenging incremental revenue growth targets. Loss on disposal of fixed assets were ��0.9 million (H1 2022: ��0.2 million). Integration costs decreased to ��1.2 million (H1 2022: ��2.3 million) related to the integration of GP Strategies, with further costs expected in H2. We remain on track to complete the integration in line with our initial estimate of $13 million. For further details of the items excluded from statutory operating profit, see note 6. Net finance expenses of ��6.7 million (H1 2022: ��4.2 million) include interest on borrowings of ��7.0 million (H1 2022: ��3.1 million), ��0.3 million (H1 2022: ��0.3 million) relating to the Group's leases under IFRS 16, and ��0.5 million interest receivable (H1 2022: ��0.2 million). The Group reported a profit before tax of ��16.5 million for the six months ended 30 June 2023 (H1 2022: ��18.0 million). The tax charge of ��4.5 million (H1 2022: tax charge of ��3.8 million) is primarily driven by applying UK and international tax rates to associated results offset by the net favourable impact of tax rate changes on deferred assets and liabilities and net non-deductible foreign exchange adjustments. Discontinued operations, reflecting the closure of the UK Apprenticeship business, generated a loss after taxation of ��1.1 million for the period (H1 2022: ��0.4 million profit). Basic earnings per share for continuing and discontinued operations in H1 2023 was 1.376 pence (H1 2022: 1.848 pence). Adjusted diluted earnings per share for continuing operations as set out in Note 9 was 10% down on the prior year at 3.293 pence (H1 2022: 3.666 pence) reflecting marginally lower adjusted operating profit, a significant increase in interest costs and a higher number of shares including the potential dilutive impact of share options. Gross cash of ��78.1 million and net debt of ��108.4 million, excluding ��12.6 million of lease liabilities, at 30 June 2023 compares with gross cash of ��94.8 million and net debt of ��119.8 million, excluding ��14.9 million of lease liabilities, at 31 December 2022. The covenant net debt / adjusted EBITDA ratio was 0.9x in June 2023 (1.1x in December 2022). Share-based payments are lower year-on-year due to a release of prior year costs resulting from leavers and performance criteria not being met. Cash generated from operations was strong at ��32.6 million (H1 2022: ��26.8 million) as we tightly manage our working capital, and net cash flow from operating activities was ��26.7 million (H1 2022: ��18.6 million). Free cash flow2 was ��5.6 million (H1 2022: ��8.2 million) as set out below, and we expect free cash flow to continue to be H2 weighted. ��m H1 2023 H1 20223 Variance Statutory operating profit 23.2 21.4 1.8 Adjusting items 19.9 22.7 (2.8) Adjusted EBIT 43.1 44.1 (1.0) Depreciation & Amortisation 7.1 7.8 (0.7) Share based payment charges 3.1 4.1 (1.0) Dec / (Inc) in working capital4 (12.1) (17.7) 5.6 Capital expenditure (7.2) (5.0) (2.2) Lease liabilities (3.2) (4.0) 0.8 Other (2.8) (3.0) 0.2 Adjusted operating cash flow2 28.0 26.3 1.7 Cash Conversion2 65% 60% 5% pts Net Interest paid (10.6) (3.7) (6.9) Tax paid (5.9) (8.2) 2.3 Integration & transaction costs (1.2) (2.3) 1.1 Earnout & contingent consideration (4.7) (6.2) 1.5 Proceeds from asset sale - 2.3 (2.3) Free cash flow2 5.6 8.2 (2.6) Adjusted operating cash flow was ��1.7 million higher than H1 2022 primarily reflecting a lower working capital investment offset by higher capital expenditure in the period and lower share-based payment charges. Cash conversion was 65%, an improvement from 60% in H1 2022. Net interest payments increased to ��10.6 million from ��3.7 million, including ��4.5m related to interest costs from 2022 payable in January 2023 as the loan was rolled for 6 months to mitigate interest rate rises in H2 2022. Tax payments decreased to ��5.9 million (H1 2022: ��8.2 million) due to a combination of the reorganisation and prior year payments. Integration and transaction costs primarily relate to the GP Strategies acquisition in late 2021. Earnout payments relate to Breezy and eCreators. Proceeds from asset sale were ��nil in H1 2023, with the 2022 net cash inflow due to the sale of an investment of ��2.3 million related to the sale of the NAS JV completed in April 2022. The Group plans to voluntarily repay $25 million of its term loan in addition to the normal quarterly payment of $9.6 million on 29 September 2023. The expected benefit of the voluntary repayment in 2023, at current interest rates, is c.$1.7 million per annum. Net assets decreased to ��419.6 million at 30 June 2023 (31 December 2022: ��426.3 million) and total equity per share2 decreased from 54.0 pence per share to 53.0 pence per share. 2 Alternative Performance Measure (APM) term defined and explained in the Glossary 3 As reported in H1 2022 4 Excludes integration & transaction costs Kath Kearney-Croft CFO 26 September 2023 Consolidated statement of comprehensive income Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 Dec 2022 Note ��'000 ��'000 ��'000 Revenue 3 284,582 277,836 588,587 Operating expenses (258,320) (252,991) (532,743) Share-based payment charge (3,081) (4,061) (6,693) Profit on sale of joint venture - 1,242 1,242 Share of profit from equity accounted investment - 155 155 Operating profit 23,181 22,181 50,548 Adjusted EBIT 43,115 43,585 99,925 Adjusting items included in Operating profit 6 (19,934) (21,404) (49,377) Operating profit 23,181 22,181 50,548 Finance expenses 7 (7,243) (4,361) (10,475) Finance income 7 539 184 429 Profit before taxation from continuing operations 16,477 18,004 40,502 Income tax charge 4 (4,472) (3,841) (9,784) Profit after taxation from continuing operations 12,005 14,163 30,718 (Loss) / Profit on discontinued operations, net of tax 5 (1,125) 394 (312) Profit for the period/year 10,880 14,557 30,406 Profit for the period/year attributable to the owners of the parent 10,880 14,557 30,406 Other comprehensive income: Exchange differences on translating foreign operations (11,920) 34,483 30,961 Total comprehensive (loss)/profit for the period/year (1,040) 49,040 61,367 Earnings per share from continuing operations Basic (pence) 9 1.518 1.798 3.897 Diluted (pence) 9 1.476 1.749 3.748 Adjusted earnings per share Basic (pence) 9 3.387 3.768 8.351 Diluted (pence) 9 3.293 3.666 8.032 Earnings per share from continuing and discontinued operations Basic (pence) 9 1.376 1.848 3.857 Diluted (pence) 9 1.338 1.798 3.710 Adjusted earnings per share Basic (pence) 9 3.253 3.818 8.443 Diluted (pence) 9 3.163 3.715 8.121 Consolidated statement of financial position Note 30 June 2023 ��'000 30 June 2022 ��'000 31 Dec 2022 ��'000 NON-CURRENT ASSETS Property, plant and equipment 11 2,433 3,233 2,857 Right-of-use assets 11 10,449 14,235 11,808 Intangible assets 10 527,173 585,623 560,972 Deferred tax assets 15 7,331 4,584 4,084 Other receivables, deposits and prepayments 2,146 324 1,874 Amounts recoverable on contracts - 1,362 1,303 549,532 609,361 582,898 CURRENT ASSETS Trade receivables 12 105,768 122,872 136,025 Other receivables, deposits and prepayments 13 14,620 17,876 16,765 Amounts recoverable on contracts 39,349 41,800 33,221 Inventory 2,403 4,823 2,432 Amounts due from related parties - 96 59 Cash and cash equivalents 14 78,132 71,933 94,847 Restricted cash balances 14 2,303 3,158 2,608 242,575 262,558 285,957 Assets in disposal groups classified as held for sale 19 6,695 - 8,369 TOTAL ASSETS 798,802 871,919 877,224 CURRENT LIABILITIES Lease liabilities 17 4,162 8,194 5,082 Trade and other payables 16 141,581 174,470 180,634 Amounts due to related parties - 6 - Borrowings 17 31,220 23,845 36,714 Provisions 18 1,621 7,185 1,602 Corporation tax 5,468 4,395 602 ESPP scheme liability 881 703 500 184,933 218,798 225,134 NON-CURRENT LIABILITIES Lease liabilities 17 8,486 13,196 9,792 Deferred tax liabilities 15 23,547 26,101 27,265 Other long-term liabilities 1,466 806 3,517 Borrowings 17 155,289 193,367 177,944 Corporation tax payable 763 1,428 1,431 Provisions 18 534 949 1,857 190,085 235,847 221,806 Liabilities directly associated with assets in disposal groups classified as held for sale 19 4,137 - 3,984 TOTAL LIABILITIES 379,155 454,645 450,924 NET ASSETS 419,647 417,274 426,300 EQUITY Share capital 2,967 3,037 2,962 Share premium account 318,699 317,406 318,183 Merger relief reserve 31,983 31,983 31,983 Reverse acquisition reserve (22,933) (22,933) (22,933) Share based payment reserve 17,674 13,322 14,714 Foreign exchange translation reserve 13,809 29,251 25,729 Accumulated retained earnings 57,448 45,208 55,662 TOTAL EQUITY 419,647 417,274 426,300 Consolidated statement of changes in equity Share capital Share Premium Merger relief reserve Reverse acquisition reserve Share based payments reserve Foreign exchange reserve Retained earnings Total equity ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 Balance at 1 January 2022 3,034 317,114 31,983 (22,933) 11,148 (5,232) 36,224 371,338 - - - - - - - - Profit for period - - - - - - 14,557 14,557 Exchange differences on translating foreign operations - - - - - 34,483 - 34,483 Total comprehensive income for the period - - - - - 34,483 14,557 49,040 Issue of shares net of share issue costs 3 292 - - - - - 295 Share based payment charge / credited to equity - - - - 4,061 - - 4,061 Distributions in respect of cancelled share options - - - - (1,887) - - (1,887) Tax credit on share options - - - - - - (58) (58) Transfer on exercise and lapse of options - - - - - - - - Dividends paid - - - - - - (5,515) (5,515) Balance at 30 June 2022 3,037 317,406 31,983 (22,933) 13,322 29,251 45,208 417,274 Profit for period - - - - - - 15,849 15,849 Exchange differences on translating foreign operations - - - - - (3,522) - (3,522) Total comprehensive income for the period - - - - - (3,522) 15,849 12,327 Issue of shares net of share issue costs 5 737 - - - - - 742 Reserves transfer (80) 40 - - - - 40 - Share based payment charge / credited to equity - - - - 2,632 - - 2,632 Share-based payment charge treated as consideration, credited to equity - - - - 542 - - 542 Distributions in respect of cancelled share options - - - - (1,782) - - (1,782) Tax credit on share options - - - - - - (1,888) (1,888) Transfer on exercise and lapse of options - - - - - - - - Dividends paid - - - - - - (3,547) (3,547) Balance at 31 December 2022 2,962 318,183 31,983 (22,933) 14,714 25,729 55,662 426,300 Profit for period - - - - - - 10,880 10,880 Exchange differences on translating foreign operations - - - - - (11,920) - (11,920) Total comprehensive (expense) / income for the period - - - - - (11,920) 10,880 (1,040) Issue of shares net of share issue costs 5 516 - - - - - 521 Reserves transfer - - Share based payment charge / credited to equity - - - - 3,081 - - 3,081 Share based payment consideration debited to equity - - - - (121) - - (121) Tax credit on share options - - - - - - - - Transfer on exercise and lapse of options - - - - - - - - Dividends paid - - - - - - (9,094) (9,094) Transactions with owners 5 516 - - 2,960 - (9,094) (5,613) Balance at 30 June 2023 2,967 318,699 31,983 (22,933) 17,674 13,809 57,448 419,647 Consolidated statement of cash flows Note Six months to 30 June 2023 ��'000 Six months to 30 June 2022 ��'000 Year to 31 Dec 2022 ��'000 Cash flow from operating activities Profit before taxation 16,477 18,004 40,502 (Loss)/profit before taxation from discontinued operations 5 (1,452) 486 (26) Adjustments for:- Loss on disposal of PPE and right-of-use assets 893 232 230 Share based payment charge 3,081 4,061 7,235 Amortisation of intangible assets 20,880 21,359 43,183 Depreciation of plant and equipment 11 745 2,334 2,141 Depreciation of right-of-use assets 11 2,128 2,140 4,343 Impairment of Goodwill and acquired intangibles - - 7,958 Finance expense 7 257 306 573 Interest on borrowings 7 6,986 3,297 9,102 Acquisition-related contingent consideration and earn-outs 6 1,088 2,254 3,273 Fair value movement on contingent consideration - - (21) Payment of acquisition-related contingent consideration and earn-outs (4,726) (6,163) (6,139) Profit on sale of joint venture - (1,242) (1,242) Share of profit in equity accounted investment - (155) (155) Interest income 7 (539) (108) (429) Operating cash flow before working capital changes 45,818 46,805 110,528 Decrease/(increase) in trade and other receivables 24,189 8,113 (6,521) Increase in inventory (70) (3,727) (1,210) (Increase)/decrease in amount recoverable on contracts (6,187) (10,222) 3,647 Decrease in payables (31,190) (14,213) (14,317) Cash generated from operations 32,560 26,756 92,127 Income tax paid (5,904) (8,151) (20,180) Net cash flow from operating activities 26,656 18,605 71,947 Cash flow used in investing activities Purchase of property, plant and equipment (490) (289) (1,641) Development of intangible assets (6,707) (4,700) (9,966) Sale of Investment in associates or joint ventures - 2,300 2,300 Net cash flow used in investing activities (7,197) (2,689) (9,307) Cash flow (used in)/from financing activities Dividends paid 8 - - (9,062) Cash generated from issue of shares, net of share issue costs 521 293 1,037 Repayment of bank loans (15,409) (30,496) (38,458) Interest paid1 (11,147) (3,851) (4,609) Interest received 539 108 352 Contingent consideration payments in the period - - (705) Interest paid on lease liabilities (261) (334) (614) Cash payments for the principal portion of lease liabilities (2,977) (3,707) (6,719) Net cash flow (used in)/from financing activities (28,734) (37,987) (58,778) Net (decrease) / increase in cash and cash equivalents (9,275) (22,071) 3,862 Cash and cash equivalents at beginning of the period/year 94,847 83,850 83,850 Effects of foreign exchange rate changes (7,440) 10,154 7,135 Cash and cash equivalents at end of the period/year 14 78,132 71,933 94,847 1 Interest paid for six months ending 30 June 2023 (��11.1 million) is higher than interest charged for the same period (��6.9 million), mainly as the last six months interest of 2022 were paid in January 2023 as per the lending agreement. Notes to the consolidated financial statements for the six months to 30 June 2023 1. General information Learning Technologies Group plc ("the Company'') and its subsidiaries (together, "the Group'') provide a range of learning and talent software and services to corporate customers. 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, England, EC4A 1BW. The registered number of the Company is 07176993. 2. Basis of preparation The unaudited condensed consolidated interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2022 annual report. The interim results for the six months to 30 June 2023 are unaudited and do not therefore constitute statutory accounts in accordance with Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2022 have been filed with the Registrar of Companies and the auditor's report was unqualified, did not contain any statement under Section 498(2) or 498(3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report. The accounting policies used in preparing the interim results are the same as those applied to the latest audited annual financial statements. Going concern The Group meets its day-to-day working capital requirements from the positive cash flows generated by its trading activities and its available cash resources. These may be supplemented, if required, by additional drawings under the Group's committed $50.0 million revolving credit facility (RCF) which is available until October 2025; refer to Note 17 for further details. The Group continues to hold a strong liquidity position as at 30 June 2023, with gross cash and cash equivalents of ��78.1 million (Note 14). Net debt of ��108.4 million includes a fully drawn $265.0 million term loan which is repayable in quarterly instalments of $9.6 million commencing in December 2022 (Note 17) (31 December 2022: gross cash was ��94.8 million and net debt was ��119.8 million). Whilst there are a number of risks to the Group's trading performance, as summarised in the 'Principal risks and uncertainties' section on pages 27 - 28 within the 2022 Annual Report, the Group is confident of its ability to continue to access sources of funding in the medium term. The directors report that they have re-assessed the principal risks, reviewed current performance and forecasts, combined with expenditure commitments, including capital expenditure, and borrowing facilities. The Group's forecasts demonstrate it will generate profits and cash in the year ending 31 December 2023 and beyond and that the Group has sufficient cash reserves to enable it to meet its obligations as they fall due, as well as operate within its banking covenants, for a period of at least 12 months from the date of signing of these financial statements. The Directors have concluded that it is appropriate to adopt the going concern basis of accounting in preparing the interim financial information, having undertaken a review of a reforecast for 2023 and the impact this forecast has on the Group's gross cash, net debt and ability to meet bank covenants under the existing facilities agreement. Alternative performance measures The Group has identified certain alternative performance measures ("APMs") that it believes will assist the understanding of the performance of the business. The Group believes that Adjusted EBIT, adjusting items, SaaS and long-term contracts, transactional revenue, total equity per share and net cash / debt provide useful information to users of the financial statements. The terms are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, IFRS measures. Adjusting items The Group has chosen to present an adjusted measure of profit and earnings per share, which excludes certain items which are separately disclosed due to their size, nature or incidence, and are not considered to be part of the normal operating costs of the Group. These costs may include the financial effect of adjusting items such as, inter alia, restructuring costs, impairment charges, amortisation of acquired intangibles, costs relating to business combinations, one-off foreign exchange gains or losses, integration costs, acquisition-related share-based payment charges, contingent consideration and earn-outs, cloud computing configuration and customisation costs, joint venture profits, profit on sale of a joint venture and fixed asset and right-of-use asset disposal gains or losses. 3. Segment analysis Geographical information The Group's revenue from external customers and non-current assets by geographical location are detailed below. UK Europe North America1 Asia Pacific Rest of world Total ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 Six months to 30 June 2023 Revenue from continuing operations 33,023 26,916 194,875 17,637 12,131 284,582 Total Revenue 33,023 26,916 194,875 17,637 12,131 284,582 Non-current assets 29,653 900 493,927 17,270 451 542,201 Six months to 30 June 2022 Revenue from continuing operations 30,357 26,463 189,383 18,859 12,774 277,836 Revenue from discontinued operations 3,973 - - - - 3,973 Total Revenue 34,330 26,463 189,383 18,859 12,774 281,809 Non-current assets 44,246 912 537,933 21,056 630 604,777 Year to 31 December 2022 Revenue from continuing operations 58,679 71,637 407,343 21,824 29,104 588,587 Revenue from discontinued operations 8,315 - - - - 8,315 Total Revenue 66,994 71,637 407,343 21,824 29,104 596,902 Non-current assets 31,017 569 527,634 19,177 417 578,814 1 The values as presented for Canada and the United States for the six months to 30 June 2022 have been combined into 'North America' to align with the geographical segmentation as reported to the Chief Operating Decision Maker internally. The total non-current assets figure is exclusive of deferred tax assets in each of the periods above. The non-current assets as at 30 June 2022 have been represented following the prior year acquisition measurement adjustments as detailed in the Annual Report for the year ended 31 December 2022. 3. Segment analysis (continued) Information about reported segment revenue, profit or loss from continuing operations and assets Software & Platforms Content & Services Other Total On-Premise Software Licences Hosting & SaaS Platforms Professional Services & Other Support and Maintenance Total Global Services Regional Services Other Technical Services Total Rental Income ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 Six months to 30 June 2023 Saas and long-term contracts 15,191 50,249 2,057 1,958 69,455 44,142 90,311 2,183 136,636 189 206,280 Transactional - 31 3,386 - 3,417 9,724 50,991 14,170 74,885 - 78,302 Revenue 15,191 50,280 5,443 1,958 72,872 53,866 141,302 16,353 211,521 189 284,582 Depreciation and amortisation (3,978) (2,391) (6,369) Adjusted EBIT 18,050 24,876 189 43,115 Amortisation of acquired intangibles (8,995) (7,581) - (16,576) Acquisition related adjusting items (1,046) (1,192) - (2,238) Other adjusting items (287) (833) - (1,120) Finance (expenses)/income (1,717) (4,987) - (6,704) Profit before tax 6,005 10,283 189 16,477 Additions to intangible Assets 1,717 4,990 6,707 Total assets 204,547 594,255 798,802 Six months to 30 June 2022 Saas and long-term contracts 15,104 52,395 1,983 2,020 71,502 40,106 82,097 3,214 125,417 70 196,989 Transactional - 42 3,931 - 3,973 3,698 56,128 17,048 76,874 - 80,847 Revenue 15,104 52,437 5,914 2,020 75,475 43,804 138,225 20,262 202,291 70 277,836 Depreciation and amortisation (3,673) (2,865) (6,538) Adjusted EBIT 19,217 24,298 70 43,585 Amortisation of acquired intangibles (9,249) (8,741) - (17,990) Acquisition-related adjusting items (787) (3,792) - (4,579) Other adjusting items 317 848 - 1,165 Finance expenses (1,134) (3,043) - (4,177) Profit before tax 8,364 9,570 70 18,004 Additions to intangible Assets 4,433 267 4,700 Total assets 236,858 635,061 871,919 3. Segment analysis (continued) Effective with this interim report, there are changes to the grouping of businesses within the reportable segments, including restating the prior year's comparative result. Adjusted EBIT is the main measure of profit reviewed by the Chief Operating Decision Maker. The total assets figure is inclusive of deferred tax assets in each of the periods above. Information about major customers In the six months to 30 June 2023 no customer accounted for more than 10 per cent of reported revenues (Six months to 30 June 2022: no customer accounted for more than 10 per cent of reported revenues). 4. Taxation Current and deferred tax for the six months to 30 June 2023 has been calculated by applying the jurisdictional statutory rates on an entity-by-entity basis to derive the Group's total income tax expense. This is allocated to current and deferred tax as outlined below: Six months to Six months to Year to 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Current tax: Tax on profits for the period/year - 1,860 (282) Adjustments in respect of prior periods / years 1,449 134 2,522 Foreign current tax on profits for the period / year 9,034 11,091 19,193 Total current tax 10,483 13,085 21,433 Deferred tax: Origination and reversal of temporary differences (5,836) (5,830) (7,459) Adjustments in respect of prior periods / years (359) (87) (3,597) Change in deferred tax rate (143) (3,235) (307) Total deferred tax (6,338) (9,152) (11,363) Income tax expense 4,145 3,933 10,070 Of the total income tax expense, ��4,472,000 relates to taxation on continuing operations (six months to June 2022 expense ��3,841,000 and year to 31 December 2022 expense ��9,784,000). 5. (Loss) / Profit on discontinued operations, net of tax The table below show the results of the discontinued operations which are included in the Group Income Statement and Group Statement of Cash Flows respectively. Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 Dec 2022 ��'000 ��'000 ��'000 Revenue - 3,973 8,315 Operating expenses (1,452) (3,487) (8,341) Operating (loss) / profit (1,452) 486 (26) Adjusted EBIT (1,389) 486 1,018 Adjusting items included in Operating (loss) / profit (Loss) / profit on disposal of fixed assets (1) - 3 Closure costs (62) - (1,047) Operating (loss) / profit (1,452) 486 (26) (Loss) / Profit before taxation (1,452) 486 (26) Taxation 327 (92) (286) (Loss) / Profit after taxation (1,125) 394 (312) Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 Dec 2022 ��'000 ��'000 ��'000 Net cash (used in) / from operating activities (1,452) 486 (29) Net cash from investing activities - - 3 Net cash from discontinued operations (1,452) 486 (26) 6. Adjusting items These items are included in the normal operating costs of the business, but are significant cash and non-cash expenses that are separately disclosed because of their size, nature or incidence. It is the Group's view that excluding them from Operating Profit gives a better representation of the underlying performance of the business in the period. Further details of the adjusting items are included below. Six months to Six months to Year to 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Adjusting items included in Operating profit: Acquisition related costs: Amortisation of acquired intangibles 16,576 17,990 35,723 Acquisition-related contingent consideration and earn-outs 1,088 2,254 3,273 Acquisition-related share based payment charge - - 542 Fair value movement on contingent consideration - - (21) Acquisition costs - 43 304 Integration costs 1,150 2,282 3,512 Total acquisition related costs 18,814 22,569 43,333 Other adjusting items: Impairment of goodwill and intangibles - - 7,958 Loss on disposal of fixed assets 41 - 5 Loss on disposal of right-of-use assets 852 232 228 Share of profit of joint venture - (155) (155) Profit on sale of joint venture - (1,242) (1,242) Cloud computing configuration and customisation costs 122 - 719 Disposal costs 105 - - Other income - - (1,469) Total other adjusting items 1,120 (1,165) 6,044 Total adjusting items 19,934 21,404 49,377 As outlined above, the material adjustments during the period are made in respect of: - Amortisation of acquired intangibles - the cost of ��16.6 million (2022: ��18.0 million) is excluded from the adjusted results of the Group since the costs are non-cash charges arising from investment activities. As such, they are not considered reflective of the core trading performance of the Group. - Impairment of goodwill and intangibles and closure provisions - these costs are excluded from the adjusted results of the Group since the costs are one-off charges related to closure of the non-core UK apprenticeship business in early 2023 as announced in 2022. - Acquisition-related share-based payments, contingent consideration and earn-outs - these costs are excluded from the adjusted results since these costs are also associated with business acquisitions and represent post-combination remuneration, which is not included in the calculation of goodwill and also not considered part of the core trading performance of the Group. 6. Adjusting items (continued) - Fair value movement on contingent consideration - similar to the above, any adjustments to contingent consideration through profit or loss are excluded from adjusted results on the basis that it is non-cash non-operational income or costs. - Disposal costs relate to the fees incurred for the sale of a non-core asset (see note 19). - Costs of acquisition and integration - the costs of acquiring and integrating subsidiaries purchased. These costs associated with completed acquisitions are excluded from the adjusted results on the basis they are directly attributable to investment activities, rather than the core trading activities of the Group. Included within the ��1.2 million integration costs are legal and professional fees of ��0.2 million, an allocation of internal labour for employees who have worked on integration activities during the year of ��0.9 million and costs relating to facilities of ��0.1 million. - Other income includes amounts received in relation to a contract and is an adjusting item due to its quantum and non-recurring nature. - Cloud computing configuration and customisation costs reflects the impact of a change in accounting policy following review of IFRIC guidance issued in March 2021 relating to capitalisation of cloud computing software implementation costs. Where there is no underlying intangible asset over which we retain control, the Group recognises configuration and customisation costs as an expense. 7. Finance expenses Six months to Six months to Year to 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Interest on borrowings 6,986 3,148 9,102 Net foreign exchange differences - 908 800 IFRS 16 finance expense 257 305 573 Finance expense 7,243 4,361 10,475 Credit on contingent consideration - - (77) Interest receivable (539) (184) (352) Finance income (539) (184) (429) Net finance expense 6,704 4,177 10,046 8. Dividends paid Six months to Six months to Year to 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Final dividends paid 9,094 5,515 5,515 Interim dividend paid - - 3,547 9,094 5,515 9,062 The declared interim dividend of 0.45 pence per share, amounting to a total dividend payment of ��3.6 million, is not included as a liability in these financial statements and will be paid on 27 October 2023 to shareholders on the register at the close of business on 6 October 2023. 9. Earnings per share Six months to Six months to Year to 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Basic earnings per share (pence) 1.376 1.848 3.857 Diluted earnings per share (pence) 1.338 1.798 3.710 Adjusted basic earnings per share (pence) 3.253 3.818 8.443 Adjusted diluted earnings per share (pence) 3.163 3.715 8.121 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 period. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has share options that are dilutive potential ordinary shares. 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 earnings per share is stated after the impact of the adjusting items disclosed in note 6. In the six month period ended 30 June 2022, management had excluded the profit or losses on disposal of fixed assets and right-of-use assets and included the impact of financing items (note 7) in their calculation of adjusted earnings per share. When including the profit or losses on disposal of fixed assets and excluding interest receivable, finance expense on contingent consideration and finance expense on lease liabilities to present earnings per share on a like for like basis, the adjusted basic earnings per share for the period ended 30 June 2022 would have been 3.717p and adjusted diluted earnings per share 3.617p, a difference of 0.101p and 0.098p, respectively. On a like for like basis for the period ended 30 June 2022 in relation to continuing operations, the adjusted basic earnings per share would have been 3.667p and the adjusted diluted earnings per share 3.568p, a difference of 0.101p and 0.098p, respectively. The calculation of earnings per share from continuing and discontinued operations is based on the following earnings and number of shares. Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022 Profit after tax Weighted average number of shares Pence per share Profit after tax Weighted average number of shares Pence per share Profit after tax Weighted average number of shares Pence per share ��'000 '000 ��'000 '000 ��'000 '000 Basic earnings per ordinary share 10,880 790,677 1.376 14,557 787,765 1.848 30,406 788,295 3.857 Effect of adjustments: Total adjusting items (see note 6) 19,997 22,646 50,421 Adjusting items excluded from earnings per share adjustments: Loss on disposal of fixed assets - (232) - Profit on disposal of joint venture - (1,242) - Interest receivable - (184) - Net foreign exchange gain on borrowings - 907 - Finance expense on lease liabilities (IFRS 16) - 305 - Income tax (credit)/expense 4,145 3,933 10,070 Effect of adjustments 24,142 - 3.053 26,133 - 3.317 60,491 7.674 Adjusted profit before tax 35,022 - - 40,690 - - 90,897 Tax impact after adjustments (9,305) - (1.177) (10,613) - (1.347) (24,338) (3.087) Adjusted basic earnings per ordinary share 25,717 790,677 3.253 30,077 787,765 3.818 66,559 788,295 8.443 Effect of dilutive potential ordinary shares: Share options - 22,509 (0.090) - 21,807 (0.103) 31,310 (0.322) Adjusted diluted earnings per ordinary share 25,717 813,186 3.163 30,077 809,572 3.715 66,559 819,605 8.121 Diluted earnings per ordinary share attributable to the owners of the parent 10,880 813,186 1.338 14,557 809,572 1.798 30,406 819,605 3.710 The calculation of earnings per share from continuing operations is based on the following earnings and number of shares. Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022 Profit after tax Weighted average number of shares Pence per share Profit after tax Weighted average number of shares Pence per share Profit after tax Weighted average number of shares Pence per share ��'000 '000 ��'000 '000 ��'000 '000 Basic earnings per ordinary share 12,005 790,677 1.518 14,163 787,765 1.798 30,718 788,295 3.897 Effect of adjustments: Total adjusting items (see note 6) 19,934 22,646 49,377 Adjusting items excluded from earnings per share adjustments: Loss on disposal of fixed assets - (232) - Profit on disposal of joint venture - (1,242) - Interest receivable - (184) - Net foreign exchange gain on borrowings - 907 - Finance expense on lease liabilities (IFRS 16) - 305 - Income tax (credit)/expense 4,472 3,841 9,784 Effect of adjustments 24,406 3.087 26,041 3.306 59,161 7.505 Adjusted profit before tax 36,411 40,204 89,879 Tax impact after adjustments (9,632) (1.218) (10,521) (1.336) (24,052) (3.051) Adjusted basic earnings per ordinary share 26,779 790,677 3.387 29,683 787,765 3.768 65,827 788,295 8.351 Effect of dilutive potential ordinary shares: Share options - 22,509 (0.094) - 21,807 (0.101) - 31,310 (0.319) Adjusted diluted earnings per ordinary share 26,779 813,186 3.293 29,683 809,572 3.666 65,827 819,605 8.032 Diluted earnings per ordinary share attributable to the owners of the parent 12,005 813,186 1.476 14,163 809,572 1.749 30,718 819,605 3.748 . 10. Intangible assets Goodwill Customer contracts and relationships Branding Acquired IP Internal software develop-ment Total ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 Cost At 1 January 2022 337,754 188,860 15,277 90,314 26,199 658,404 Additions - - - - 4,700 4,700 Foreign exchange differences 34,404 10,808 10,808 1,396 7,100 1,202 - 54,910 At 30 June 2022 372,158 199,668 199,668 16,673 97,414 32,101 28,844 718,014 Additions - - - - 5,266 5,266 Adjustment related to cloud computing costs - - - - (640) (640) Reclassified as assets held for sale (501) (1,095) (450) (28) - (2,074) Impairment (5,401) (2,581) (497) (59) - (8,538) Foreign exchange differences 1,013 3,129 1,052 2,245 1,089 8,528 At 31 December 2022 367,269 199,121 16,778 99,572 37,816 720,556 Additions - - - - 6,707 6,707 Foreign exchange differences (14,025) (4,354) (595) (3,883) (1,101) (23,958) At 30 June 2023 353,244 194,767 16,183 95,689 43,422 703,305 Accumulated amortisation At 1 January 2022 - 70,947 2,068 23,179 14,838 111,032 Amortisation charged in period - 10,760 1,466 5,764 3,369 21,359 At 30 June 2022 - 81,707 3,534 28,943 18,207 132,391 Amortisation charged in period - 9,891 1,590 6,252 4,091 21,824 Reclassified as assets held for sale - (182) (105) (7) - (294) Impairment - (446) (120) (14) - (580) Foreign exchange differences - 2,703 981 1,944 615 6,243 At 31 December 2022 - 93,673 5,880 37,118 22,913 159,584 Amortisation charged in period - 9,367 1,424 5,785 4,304 20,880 Foreign exchange differences - (2,080) (196) (1,474) (582) (4,332) At 30 June 2023 - 100,960 7,108 41,429 26,635 176,132 Carrying amount At 30 June 2022 372,158 117,961 13,139 68,471 13,894 585,623 At 31 December 2022 367,269 105,448 10,898 62,454 14,903 560,972 At 30 June 2023 353,244 93,807 9,075 54,260 16,787 527,173 11. Property, Plant, equipment and right-of-use assets Right of Use Assets Computer equipment Property Motor vehicles Total Computer equipment Property Motor vehicles Total ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 Cost At 1 January 2022 1,804 438 1,617 3,859 559 23,347 134 24,040 Additions 631 9 7 647 - 587 - 587 Foreign exchange differences 151 31 138 320 21 475 (13) 483 Transfer between cost and depreciation (11) - - (11) Disposals (53) (1) - (54) (67) (3,331) - (3,398) At 30 June 2022 2,522 477 1,762 4,761 513 21,078 121 21,712 Reclassifications 1,134 140 (1,274) - Additions 884 94 16 994 - 1,475 - 1,475 Foreign exchange differences 1,902 (57) 91 1,936 (9) (276) 13 (272) Reclassified as assets held for sale (236) (48) (43) (327) - (278) - (278) Disposals (538) (232) (159) (929) (34) (2,097) (57) (2,188) At 31 December 2022 5,668 374 393 6,435 470 19,902 77 20,449 Additions 415 12 63 490 - 1,316 - 1,316 Foreign exchange differences (154) 262 (121) (13) (2) (232) - (234) Disposals (1,706) (23) (142) (1,871) - (313) - (313) At 30 June 2023 4,223 625 193 5,041 468 20,673 77 21,218 Accumulated Depreciation At 1 January 2022 281 124 222 627 186 6,596 13 6,795 Charge for the period 675 103 123 901 86 2,366 34 2,486 Disposals (14) (1,790) - (1,804) At 30 June 2022 956 227 345 1,528 258 7,172 47 7,477 Charge for the period 944 167 129 1,240 75 1,763 19 1,857 Reclassifications 129 - (129) - Disposals (480) (221) (148) (849) (6) (560) (22) (588) Reclassified as assets held for sale (178) (47) (43) (268) - (105) - (105) Foreign exchange differences 1,765 (10) 172 1,927 - - - - At 31 December 2022 3,136 116 326 3,578 327 8,270 44 8,641 Charge for the period 558 97 90 745 58 2,055 15 2,128 Disposals (1,704) (23) (105) (1,832) - - - - Foreign exchange differences (18) 253 (118) 117 - - - - At 30 June 2023 1,972 443 193 2,608 385 10,325 59 10,769 Net book value At 30 June 2022 1,566 250 1,417 3,233 255 13,906 74 14,235 At 31 December 2022 2,532 258 67 2,857 143 11,632 33 11,808 At 30 June 2023 2,251 182 - 2,433 83 10,348 18 10,449 12. Trade receivables 30 Jun 30 Jun 31 Dec 2023 2022 2022 ��'000 ��'000 ��'000 Trade receivables 109,890 128,384 140,951 Allowance for impairment losses (4,122) (5,512) (4,926) 105,768 122,872 136,025 The Group's normal trade credit term is 30-60 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. In accordance with IFRS 15, the Group has disclosed trade receivable balances net of the associated contract liabilities, as outlined below. These balances will be shown net until the earlier of either the date the payment becomes due and a receivable is recognized or the date that the services are delivered and an associated contract asset is recognized. 30 Jun 30 Jun 31 Dec 2023 2022 2022 ��'000 ��'000 ��'000 Contract liabilities offset within trade receivables above 3,981 7,085 6,639 13. Other receivables, deposits and prepayments 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Sundry receivables 6,742 4,258 6,767 Prepayments 7,878 13,618 9,998 14,620 17,876 16,765 Sundry receivables as at 30 June 2022 have been adjusted relating to the impact of prior year acquisition measurement period adjustment (see the Annual Report for the year ended 31 December 2022). 14. Cash and cash equivalents, restricted cash and short-term deposits For the purpose of the statement of cash flows, cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less: 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Cash and cash equivalents 78,132 71,933 94,847 Restricted cash balances comprise amounts held on behalf of third parties and employees as part of the Employee Stock Purchase Plan ('ESPP'): 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Restricted cash 2,303 3,158 2,608 15. Deferred tax assets / liabilities The movement in deferred tax assets and liabilities prior to offsetting are shown below: Deferred Tax Assets Share options Tax losses Short-term timing differences Intangibles Total ��'000 ��'000 ��'000 ��'000 ��'000 At 31 December 2022 3,622 5,248 12,814 4,939 26,623 Deferred tax charged directly to the income statement - 1,920 1,058 - 2,978 Exchange rate differences (48) (166) (507) (198) (919) Changes in tax rate - 124 36 - 160 At 30 June 2023 3,574 7,126 13,401 4,741 28,842 Deferred Tax Liability Intangibles Accelerated tax depreciation Short-term timing differences Total ��'000 ��'000 ��'000 ��'000 At 31 December 2022 46,541 615 2,648 49,804 Deferred tax charge directly to the income statement (4,284) (9) 1,075 (3,218) Deferred tax charged directly to equity (1,402) - - (1,402) Exchange rate differences - (26) (118) (144) Changes in tax rate - - 18 18 At 30 June 2023 40,855 580 3,623 45,058 15. Deferred tax assets / liabilities (continued) The total deferred tax assets and liabilities subject to offsetting are presented below: Total Deferred tax assets Total Deferred tax liabilities 30 June 2023 ��'000 30 June 2022 ��'000 31 Dec 2022 ��'000 30 June 2023 ��'000 30 June 2022 ��'000 31 Dec 2022 ��'000 Prior to offsetting 28,842 19,682 26,623 45,058 41,199 49,804 Offset of tax (21,511) (15,098) (22,539) (21,511) (15,098) (22,539) After offsetting 7,331 4,584 4,084 23,547 26,101 27,265 The deferred tax assets and liabilities have been represented in the balance sheet as at 30 June 2022 to reflect the requirements of IAS12 to offset deferred tax assets and liabilities when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. This has resulted in a reduction of deferred tax assets and liabilities included in non-current assets and non-current liabilities respectively of ��15.1 million. There is no impact on net assets, cash flow or reserves. 16. Trade and other payables 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Trade payables 15,056 27,919 31,813 Contract liabilities 74,292 80,431 99,303 Tax and social security 11,574 23,188 22,300 Contingent consideration - - 21 Acquisition-related contingent consideration and earn-outs 1,610 4,776 4,876 Accruals and other payables 39,049 38,156 22,321 141,581 174,470 180,634 Trade payables as at 30 June 2022 have been adjusted relating to the impact of prior year acquisition measurement period adjustment (see the Annual Report for the year ended 31 December 2022). 17. Borrowings The Group has a debt facility dated 15 July 2021 with HSBC UK Bank PLC, HSBC Innovation Bank Limited, Barclays Bank PLC, Fifth Third Bank NA and The Governor and Company of the Bank of Ireland. At the outset this comprised two committed term loans, Term Facility A, with an original commitment of $265.0 million available to the Group until October 2025 and Term Facility B for $40.0 million, subsequently fully repaid in March 2022. The facilities available also include a $50.0 million committed Revolving Credit Facility (��39.6 million at the period-end exchange rate) and a $50.0 million uncommitted accordion facility (��39.6 million at the period-end exchange rate), both available until July 2025. The term facility attracts variable interest based on LIBOR plus a margin of between 1.25% and 2.75% per annum, based on the Group's leverage to December 2023, following this it attracts SOFR plus the margin discussed above and an adjusted credit spread until repaid. Term Facility A is repayable with quarterly instalments, starting December 2022, of $9.6 million (c ��7.6 million at the period-end exchange rate) with the balance repayable on the expiry of the loan in October 2025. Term Facility B was repayable in full in April 2022 but was fully repaid early in March 2022. The bank loan is secured by a fixed and floating charge over the assets of the Group and is subject to financial covenants that are tested quarterly based on a calendar year. The financial covenants are that the Group must ensure that its interest cover ratio is at least 4.0 times and its leverage ratio does not exceed 3.0 times. The interest cover and leverage ratio is not a statutory measure and so its basis and composition may differ from other leverage measures published by other companies. The interest cover ratio is the ratio of EBITDA to Finance Charges and the leverage ratio is total net debt on the last day of the relevant period to adjusted EBITDA for that relevant period. Both numerator and denominator in each calculation comprise several adjustments as defined in the debt facility agreement and as such are not directly calculable from the financial statements. The Group was compliant with all financial covenants throughout the period and as at 30 June 2023, the Group's interest cover was 8.96 and its leverage ratio was 0.94. The lease liabilities have arisen on adoption of IFRS 16 and are secured by the related underlying assets. 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Current interest-bearing loans and borrowings 31,220 23,845 36,714 Non-current interest-bearing loans and borrowings 155,289 193,367 177,944 Current lease liabilities 4,162 8,194 5,082 Non-current lease liabilities 8,486 13,196 9,792 199,157 238,602 229,532 Net debt reconciliation Net debt can be analysed as follows: 30 June 2023 30 June 2022 31 Dec 2022 ��'000 ��'000 ��'000 Cash and cash equivalents 78,132 71,933 94,847 Borrowings: - Term loan (186,509) (217,212) (214,658) Net debt (108,377) (145,279) (119,811) 18. Provisions Property provisions Litigation and regulation provisions Onerous contract provisions Closure provisions Total ��'000 ��'000 ��'000 ��'000 ��'000 At 1 January 2022 1,075 6,489 1,024 - 8,588 Released to the income statement (242) - (212) - (454) Foreign exchange movement - - - - - At 30 June 2022 833 6,489 812 - 8,134 Charged / (released) to the income statement 208 (3,769) (431) - (3,992) Paid in the period (143) (2,260) - - (2,403) Additions 204 - - 1,047 1,251 Foreign exchange movements (99) 461 107 - 469 At 31 December 2022 1,003 921 488 1,047 3,459 Released to the income statement - - (319) (62) (381) Paid in the period (86) (11) - (718) (815) Additions 6 - - - 6 Foreign exchange movements (64) (37) (13) - (114) At 30 June 2023 859 873 156 267 2,155 Current 325 873 156 267 1,621 Non-current 534 - - - 534 At 30 June 2023 859 873 156 267 2,155 The provisions as at 1 January 2022 have been restated to include the impact of measurement period adjustments as described in the Annual Report for the year ended 31 December 2022. 19. Assets and liabilities classified as held for sale In December 2022, the Group decided to dispose a non-core business as soon as practicable and communicated this decision internally and to investors on 19 December 2022. This business was acquired as part of the GP Strategies acquisition in October 2021. Following its classification as held for sale the asset group is held at the lower of fair value less costs to sell and net book value. 19. Assets and liabilities classified as held for sale (continued) Effect of the assets and associated liabilities on financial position of the Group 30 Jun 31 Dec 2023 2022 ��'000 ��'000 Non-current assets Goodwill 501 501 Intangible assets 1,279 1,279 Property, plant and equipment 53 58 Right of use assets 143 173 1,976 2,011 Current assets Trade receivables 3,629 5,299 Other receivables, deposits and prepayments 180 82 Amounts recoverable on contracts 910 977 4,719 6,358 Assets in disposal groups classified as held for sale 6,695 8,369 Current liabilities Lease liabilities 16 77 Trade and other payables 3,984 3,809 4,000 3,886 Non-current liabilities Lease liabilities 137 98 Liabilities directly associated with assets in disposal groups classified as held for sale 4,137 3,984 The net assets held for sale as at 30 June 2023 exclude deferred tax assets of ��39,000 (31 December 2022: ��39,000) and current tax liabilities of ��635,000 (31 December 2022: ��412,000) which remain within the Group tax position. The Group expects to recover greater than the net book value from the eventual sale which is progressing well and we expect to provide a further update before the end of the year. 20. Events after the balance sheet date On 5 September 2023, the Group sold its 17% investment in LEO Brasil Tecnologia Educacional Ltda (formerly Epic Brasil Tecnologia Educacional Ltda) for proceeds of R$3 million (��0.5 million), realising a gain on sale of ��0.4 million. Glossary Alternative Performance Measures In reporting financial information, the Group presents alternative performance measures ("APMs") which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional useful information on the underlying trends, performance and position of the Group and are consistent with how business performance is measured internally. The alternative performance measures are not defined by IFRS and therefore may not be directly comparable with other companies' alternative performance measures. The key APMs that the Group uses are outlined below. Closest equivalent IFRS measure Reconciling items to IFRS measure Definition and purpose Income Statement Measures Adjusted EBIT Operating profit Adjusting items Adjusted EBIT excludes adjusting items. A reconciliation from Adjusted EBIT to Operating profit is provided in the Consolidated statement of comprehensive income. Adjusting items None Refer to definition Items which are not considered part of the normal operating costs of the business, are separately disclosed because of their size, nature or incidence are treated as adjusting. The Group believes the separate disclosure of these items provides additional useful information to users of the financial statements to enable a better understanding of the Group's underlying financial performance. An explanation of the nature of the items identified as adjusting is provided in Note 6 to the financial statements. Saas and long-term contracts Revenue Refer to Note 3 Saas and long-term contracts are defined as the revenue streams of the Group that are predictable and expected to continue into the future upon customer renewal. Transactional Revenue Refer to Note 3 Transactional revenue is defined as the revenue streams of the Group that arise from one-off fees or services that may or may not happen again. Balance Sheet Measures Net cash or debt None Refer to Note 17 Net cash / debt is defined as Cash and cash equivalents and short-term deposits, less Bank overdrafts and other current and non-current borrowings. A reconciliation is provided in Note 17 to the financial statements. Total equity per share None Refer to definition Calculated as Total Equity at the end of the period/year divided by the number of shares in issue at the end of the period/year, The shares in issue at 31 December 2022 were 789,824,841 (based on Note 26 of the 2022 Annual report) and 791,160,022 at 30 June 2023. Cash Flow Measures Adjusted operating cash flow None Refer to definition Cash flow in the period after accounting for operating activities and capital expenditure. Cash conversion None Refer to definition Adjusted operating cash flow as a percentage of Adjusted EBIT. Free cash flow None Refer to definition Cash flow in the period after accounting for operating activities, investing activities, lease payments, interest and tax. Company information Directors Andrew Brode, Non-Executive Chairman Jonathan Satchell, Chief Executive Officer Kath Kearney-Croft, Chief Financial Officer Piers Lea, Chief Strategy Officer Simon Boddie, Non-executive Director Aimie Chapple, Non-Executive Director Leslie-Ann Reed, Non-Executive Director Company Secretary Claire Walsh Company number 07176993 Registered address 15 Fetter Lane Ground Floor London England EC4A 1BW Independent auditors BDO LLP Chartered Accountants and Statutory Auditors 55 Baker Street London W1U 7EU 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 Bankers HSBC UK Bank plc 71 Queen Victoria Street, London, EC4V 4AL, UK HSBC Innovation Bank Limited Alphabeta, 14-18 Finsbury Square, London, EC2A 1BR, UK Fifth Third Bank NA 142 W 57th Street, Suite 1600, New York, NY 10019, USA Barclays Bank plc 1 Churchill Place, London, E14 5HP, UK The Governor and Company of the Bank of Ireland 4th Floor, Bow Bells House, 1 Bread Street, London, EC4M 9BE, UK Communications consultancy FTI Consulting LLP 200 Aldersgate Aldersgate Street London EC1A 4HD This information is provided by RNS, the news service of the London Stock Exchange. 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