Learning Technologies buys rest of Watershed, ups medium-term goals
By Josh White
Date: Thursday 15 Nov 2018
(Sharecast News) - Integrated digital learning and talent management provider Learning Technologies Group announced the acquisition of the remaining 70% of Watershed Systems on Thursday.
The AIM-traded firm said that, following "strong progress" in 2018, including the recent acquisition of PeopleFluent, it was also announcing a new strategic goal to achieve run-rate revenues of £200m and run-rate EBIT of at least £55m by the end of 2021.
On the acquisition, it had initially acquired a 30% stake in Watershed on 29 January 2016, for a total consideration of $3m.
Watershed was described as a software-as-a-service (SaaS) business which developed learning analytics.
Customers used Watershed's actionable insights to adapt their learning strategy, creating more effective learning experiences and verifiable business results.
Since Learning Tech's investment in 2016, Watershed had reportedly made "good progress" developing its suite of analytical tools, and delivering compelling insights for a number of blue-chip customers.
Watershed now had proven ability to harness data about learners to analyse and assess the impact of learning on organisational performance, the Learning Tech board explained.
It said that was a "significant area" of innovation and progress for the e-learning industry.
As a wholly-owned business within Learning Tech, management said it believed that there were "compelling and immediate" opportunities to develop new routes to market for Watershed's product offering.
Watershed's revenue grew strongly in 2017 and in the year-to-date for 2018, albeit from a low base given its early stage of development.
It made a loss before tax of $0.5m in the nine months to 30 September.
Learning Tech management said it expected Watershed to break even in 2019, and that it would be earnings accretive from 2020.
Gross assets at the end of September were $2.5m.
Learning Tech would 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 from 2019 to 2021.
Looking at its goals, Learning Tech noted that when it came to AIM five years ago, the board set the target of achieving run-rate revenues of £50m and EBITDA margins of 20% by the end of 2018, with those targets met one year ahead of plan.
In October last year, the company announced new strategic objectives to the end of 2020, to double run-rate revenues to £100m and for run-rate EBIT to exceed £25m, achieved without significant dilution to shareholders.
On Thursday, it said that following strong organic growth and the acquisition of PeopleFluent in May, the 2020 goal set out last year had been achieved more than two years ahead of plan, with acceleration aided by a placing of new shares, equivalent to around 15% of issued share capital.
The board announced its new strategic objectives for the business on Thursday, which it said captured the positive outlook for the e-learning industry, the strong prospects for the group and the current momentum the firm was enjoying.
Its updated ambition was to achieve run-rate revenues of £200m and run-rate EBIT of at least £55m by the end of 2021.
Learning Tech said it intended to meet those financial objectives through a combination of organic growth and strategic bolt-on acquisitions, which complemented the current business.
It was the intention of the board to finance any acquisitions and research and development that supported the outlined revenue and EBIT targets through the use of internally-generated operating cash flows, and prudent debt financing.
In addition that, the board said it would continue to evaluate strategic acquisitions of scale that may require shareholder financing, and would be additive to those targets in financial contribution, or in accelerating them.
It said that strict criteria would continue to be used in assessing such acquisitions, including the financial effects, integration risk and prospective returns.
"I am thrilled that Learning Technologies Group 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," said chief executive officer Jonathan Satchell.
"In the past five years, LTG has gone through a fundamental transformation."
Satchell said that was reflected in its 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."
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN