Pick of AIM by Miles Nolan

For organisations, the cost of taking employees away from the office to conduct training exercises can be crippling, in terms of both the financial and opportunity cost. The e-learning market is worth £472 million in the UK and is forecast to grow 12 per cent this year, but the market for digital learning products is around £5 billion.

Education-focused entrepreneur Andy Hasoon has recently turned up as chief executive at Intellego. He intends to build a major player in the digital market, both in the UK and globally.Though training focused, the AIM company he inherited had lost its way. But the debt pile of £1.6 million has now been eliminated, and with new management on board Intellego has refreshed its ‘sales leads’ – indeed, the prospect pipeline has since doubled.

In May it acquired PIXELearning, a ‘gamification’ business involved in serious games. This is the process of applying serious gaming techniques to the workplace – an area Gartner reckons will be used by 70 per cent of the Global 2000 by 2014.The plan is to develop off-the-shelf products that will be sold via subscription and pay-as-you-go.

Research suggests that modern learners want to pick up content in bite-sized pieces – preferably at a time suitable to them.Stake in the marketIntellego has also picked up a stake in the Digital Learning Marketplace (DLM), a new learning platform intended to allow SMEs, corporations and professionals to access their day-to-day learning requirements.

It has secured a £740,000 grant from the UK government, and has signed up Pearson Education and Ashridge Business School as participants. The DLM will have global appeal, but as part of a two-year development phase will not be fully operational until 2013.Within its existing business, Intellego has slashed overheads and is now selling products at much higher margins. In the year to March, it returned to the black with a £146,000 pre-tax profit (2010: £1 million loss) on sales down 14per cent to £1.6 million. It has since recorded a ‘significant improvement’ across all divisions. 

Hasoon is keeping his acquisition targets close to his chest, but for those that invest now the next few years should provide an interesting ride.Overseas expansion Hammersmith-based ILX Group originally listed as Time2Learn back in 2000, but is now a very different animal. Using a range of software and classroom-based learning, it is a best-practice training company that has trained over 500,000 people across more than 100 countries. ILX is the world’s leading provider of PRINCE2 training – a process-based method for project management, which is well regarded and used extensively by UK government.

CEO Ken Scott says, ‘We remain very committed to PRINCE2, but are mindful of the ongoing shift to be able to deliver across all digital platforms.’ ILX has a diverse customer base of more than 5,000 customers, but with the UK a tough market, it has been seeking international growth. In the six months to September, overseas sales more than doubled to £2.4 million, which translated to a trebling of its profits contribution to £771,000.

Australia has been the real star, though Europe enjoyed 30 per cent growth and the Middle East was up 8 per cent – driven by new contracts in Oman. Overall results revealed a 7 per cent uplift in sales to £5.9 million, as pre-tax profits increased 69 per cent to £115,000.Of more significance, ILX has refinanced its loans and now has a £2 million facility – this will more than halve its interest costs.

The deal with HSBC provides plenty of headroom for organic growth, as well as selected acquisitions. Traditionally second-half-weighted, house broker finnCap predicts 2012 pre-tax profits of £1.7 million and EPS of 4.5p. At 26.5p, the AIM-listed shares are on a grudging rating, while also offering a near 6 per cent yield.