TIDMMRL
RNS Number : 3060E
Marlowe PLC
29 June 2023
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 as amended by
regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations
2019/310. Upon the publication of this announcement via Regulatory
Information Service, this inside information is now considered to
be in the public domain.
29 June 2023
Marlowe plc
Preliminary unaudited results for the year ended 31 March
2023
Strong trading performance and strategic progress
Marlowe plc ("Marlowe", the "Group" or the "Company"), the
leader in business-critical services and software which assure
safety and regulatory compliance , announces its unaudited results
for year ended 31 March 2023 ("FY23").
Financial performance
ADJUSTED RESULTS FY23 FY22 Change
---------------------------------------- ---------- ---------- -------
Revenue GBP465.7m GBP315.9m 47%
EBITDA(1,2) GBP82.7m GBP54.4m 52%
Divisional EBITDA margin(1,2,3) 19.0% 18.7% 30bps
Operating profit(2) GBP64.3m GBP42.0m 53%
Profit before tax(2) GBP53.6m GBP38.1m 41%
Earnings per share - basic(2) 45.3p 37.7p 20%
Net debt (excluding lease liabilities) GBP160.8m GBP108.8m
---------------------------------------- ---------- ---------- -------
STATUTORY RESULTS FY23 FY22
---------------------------------------- ---------- ----------
Revenue GBP465.7m GBP315.9m
EBITDA(1) GBP48.8m GBP37.8m
Operating profit GBP6.4m GBP10.5m
(Loss)/profit before tax GBP(6.9)m GBP5.9m
Earnings per share - basic (3.9)p 0.8p
Net cash generated from operations GBP74.3m GBP34.0m
Net debt GBP188.9m GBP133.3m
---------------------------------------- ---------- ----------
Marlowe is holding a full year results presentation for
investors and analysts at 09:00 BST today. A
link to this event is here .
An on-demand version of the presentation will subsequently be
made available on the Marlowe plc website.
(1) Earnings before interest, taxes, depreciation and
amortisation ("EBITDA")
(2) Explanation of non-IFRS measures are contained within the
Chief Financial Officer's review
(3) Divisional EBITDA margin does not include central costs
Financial highlights
Strong and resilient performance as we continue to execute our
compliance strategy and achieve our medium term financial
targets
-- Group revenue increased 47% to GBP465.7 million
-- Adjusted EBITDA increased 52% to GBP82.7 million
-- We have now surpassed our target of generating GBP500 million
run-rate revenue by the end of FY24 and continue to expect to
exceed our c.GBP100 million run-rate adjusted EBITDA target
organically by the same date
o Current annualised run-rate revenue GBP505 million
o Current annualised run-rate EBITDA GBP93 million
-- Statutory EBITDA increased 29% to GBP48.8 million
-- Statutory loss before tax was GBP6.9 million reflecting the
non-cash increase in amortisation of acquisition intangibles,
significant integration investment and material movement in
contingent consideration provisions
Record levels of organic growth across service &
software
-- Organic revenue growth of 10%, ahead of previous guidance,
with both divisions delivering strong growth in excess of market
(GRC growth of 8%; TIC growth of 11%)
-- Organic growth driven by good levels of new business and
increasing market share, up-sell and cross-sell and increasing
client lifetime value, supported by pricing
-- Approximately 85% of revenue was recurring (either SaaS,
consultancy subscription or service contracts) and is underpinned
by regulatory compliance
-- Software Annual Recurring Revenue ("SaaS ARR") of over GBP43
million approximately 10% of Group revenues
-- Software activities generate approximately GBP20 million of
Group annualised run-rate adjusted EBITDA
-- Continued attractive structural growth across our markets
Strong balance sheet and operating cash flow
-- Net cash generated from operations increased by 119% to
GBP74.3 million (FY22: GBP34.0 million), free cash flow conversion
of 90% in line with our medium-term target
-- Net cash generated from operating activities after interest,
tax and acquisition and restructuring costs increased by 291% to
GBP33.6 million (FY22: GBP8.6 million)
-- Net debt (excluding leases) for year ended 31 March 2023 was
GBP160.8 million (GBP156.2 million at 30 September 2022), lower
than previous guidance. The H2 movement in net debt reflects the
GBP18 million settlement of deferred consideration from previous
acquisitions and the GBP9 million acquisition of PCS Consultancy in
February 2023. This was largely offset by strong cash generation in
the second half of the year
-- Working capital increases in the first half due to adverse
timing unwound as expected in the second half:
o Free cash flow conversion in the second half of the year of
127%
-- Net debt/adjusted EBITDA leverage ratio was just below 2.0x
as at 31 March 2023 (2.1x as at 30 September 2022), within our
target range of 1.5x to 2.5x
Margin expansion
-- Divisional adjusted EBITDA margin increased by 30bps to 19.0% driven by
o Integration programmes and operational improvements and the
benefits of our increased scale in the context of margin dilutive
M&A
o Successful use of price to maintain margins in the context of
the inflationary but manageable cost pressures we have seen during
the year
Successful execution of M&A and integration programme
-- GBP56 million of capital invested (1) during FY23 across 11
bolt-on acquisitions, for an average multiple of 6.5x adjusted
EBITDA
-- Integrations on-track and acquisitions performing in-line with pre-acquisition expectations
o Strong progress made with Occupational Health integration
programme and eLearning integration now complete
o New divisional GRC organisational structure in place driving
further revenue & cost synergies
-- Pipeline of earnings enhancing acquisitions is well-developed
(1) Based on enterprise value of GBP56 million which includes
expected deferred consideration of GBP11m
Current trading and outlook
-- The new financial year has started well, with continued
organic momentum, and we expect to continue to deliver strong
financial performance with at least high single digit organic
growth complemented by selective earnings enhancing
acquisitions
-- We have completed four bolt-on acquisitions since the start
of the new financial year for a total consideration of GBP15.3
million
-- Continued strong levels of demand across Marlowe's client
base, supported by attractive market growth and the
non-discretionary nature of our services & software which are
driven by regulatory requirements
Commenting on the results Alex Dacre, Chief Executive, said:
"We are pleased to report another strong underlying financial
performance in the year in which we saw excellent growth in organic
revenues, profits and earnings per share, compounded by selective
acquisitions across our service and software business streams. As
expected, cash flow was strong in the second half with GBP74.3
million of cash generated from our operations during the year, up
119% on the prior year.
We delivered record levels of organic growth during the year at
10% and are now a business with over GBP500 million run-rate
revenues, exceeding our end of FY24 medium term target. Run-rate
EBITDA is GBP93 million, and we continue to expect to reach our
GBP100 million EBITDA target organically by the end of FY24.
Divisional EBITDA margins have continued their consistent upward
trend and increased by 30bps to 19.0% as we leverage operational
and integration efficiencies.
Following a highly acquisitive FY22 during which we deployed
over GBP320 million, we focused strongly on integration programmes
in FY23. These programmes are on track and largely complete, and we
expect integration costs to significantly decrease into FY24.
Alongside this, we have continued to selectively deliver on our
acquisition programme, deploying a further GBP56m during the
financial year .
We have made a positive start to the new financial year, with
strong levels of organic growth. We have completed a further four
bolt-on acquisitions post year-end deploying GBP15.3 million of
capital. Our acquisition pipeline is well-developed, and we expect
to use our attractive cash-flow characteristics to selectively
execute upon these opportunities whilst appropriately managing
leverage."
For further information:
Marlowe plc
Alex Dacre, Chief Executive www.marloweplc.com
Adam Councell, Chief Financial Officer 0203 813
Benjamin Tucker, Investor Relations Manager 8498
IR@marloweplc.com
Cenkos Securities (Nominated Adviser & Joint 0207 397
Broker) 8900
Nicholas Wells
Ben Jeynes
George Lawson
Berenberg, Gossler & Co. KG, London Branch 0203 207
(Joint Broker) 7800
Mark Whitmore
Ben Wright
Dan Gee-Summons
0207 710
Stifel (Joint Broker) 7600
Matthew Blawat
Francis North
0203 727
FTI Consulting 1340
Nick Hasell
Alex Le May
CHIEF EXECUTIVE'S REVIEW
Group results
During FY23 we delivered on each of our key strategic and
operational objectives in our mission to build the leader in
business-critical services and software which assure regulatory
compliance:
-- Deepening & Broadening our compliance scale and
capabilities as the one-stop compliance service & software
provider, via organic growth & bolt-on acquisitions
-- Strengthening our operations via operational improvements and
effective integration programmes resulting in margin expansion,
whilst ensuring our SaaS products and service provision are
best-in-breed
-- Digitising our compliance offering, both organically and
inorganically, as part of our goal to build the leader in
Compliance Software
Whilst delivering this pleasing strategic and operational
progress, the Group delivered a strong financial performance with
revenue increasing 47% to GBP465.7 million (FY22: 315.9 million),
driven by excellent organic growth of 10% and contributions from
acquisitions made during the year and the prior year. Adjusted
EBITDA increased by 52% to GBP82.7 million with adjusted EBITDA
margin increasing 30bps to 19.0% (FY22: 18.7%) as we continue to
drive efficiencies and integration synergies and also benefit from
growth in some of our higher margin segments, particularly
Compliance Software. Adjusted profit before tax increased 41% to
GBP53.6 million and adjusted EPS increased 20% to 45.3p (FY22:
37.7p).
Statutory EBITDA was GBP48.8m (FY22: GBP37.8m). Statutory
operating profit was GBP6.4 million (FY22: GBP10.5 million). This
reflects a non-cash increase in amortisation of acquisition
intangibles, movement in contingent consideration related to
increased provisions for acquisition earn-outs where we expect to
see strong outperformance and significant investment in integration
in the year. Statutory loss before tax was GBP6.9m million (FY22:
GBP5.9 million profit) and basic loss per share was 3.9p (FY22:
0.8p profit), reflecting the above factors combined with higher
finance costs on the Group's debt facilities as a result of
increases in interest rates. Further details of Marlowe's financial
performance are set out in the Chief Financial Officer's review on
pages 11 to 14.
We operate in highly cash generative sectors with beneficial
working capital characteristics (working capital was 2% of revenue
for the year) and free cash flow generation is a key focus for
management. As expected, we saw strong cash performance in the
second half of the year (H2 cash conversion 127% with GBP51.7
million net cash generated from operations). Net cash generated
from operations for the full year was GBP74.3 million representing
growth of 119% compared the prior year (FY22: GBP34.0m) and the
Group continued to deliver strong cash conversion of 90% for the
full year. The cash we generate is redeployed into bolt-on M&A
activity whilst maintaining our leverage within our target range,
and this strategy coupled with our consistently strong organic
growth creates highly attractive returns.
At 31 March 2023 adjusted net debt was GBP160.8 million (31
March 2022: GBP108.8 million), excluding lease liabilities of
GBP28.1 million (31 March 2022: GBP24.5million), and the net
debt/run-rate adjusted EBITDA gearing ratio of just below 2.0x was
within our target range of 1.5x to 2.5x.
A year of record organic growth
We delivered excellent organic growth of 10% in the year,
significantly ahead of the market, demonstrating the resilience and
attractions of our business model and markets. We provide market
leading compliance services and software products to clients:
client lifetime value is growing and our ability to up and
cross-sell across our broad range of capabilities is complementing
our strong levels of new business. We have successfully used price
to pass through the manageable cost inflation that we have seen
onto our customers, allowing us to protect our margins.
We occupy markets that are undergoing attractive structural
growth. Businesses require our advice, support and SaaS products to
understand which regulations are relevant to their employees, their
organisations and the safety of their business premises. Our
compliance intelligence SaaS products, including Barbour and
Cedrec, provide this understanding. Our Health & Safety
consultants and Employment Lawyers deliver the retained advice that
our clients rely on and our compliance eLearning products train
their staff in critical regulations. Our clients then require our
professional expertise in order to adhere to these complex
regulations which we deliver on a recurring and contracted basis
alongside the assurance, health surveillance or safety inspections
they are required to carry out to ensure they remain compliant on
an ongoing basis. All of these regulatory challenges can be
simplified and controlled by one of our risk management SaaS
products such as Corestream, Meridian or Omnitrack and we continue
to benefit from the ongoing transition towards digital methods of
risk management. Regulation and legislation are constantly evolving
and becoming more onerous, and these changes, coupled with an
increasing enforcement burden, continue to drive growth across our
markets. Our comprehensive proposition keeps our customers
compliant in this stringent regulatory environment and ensures that
their workforce and organisations remain healthy, safe and
efficient.
Across our markets we are seeing a heightened focus on ESG
issues inherent in business with public and corporate expectations
around safety, compliance and governance on the rise. Alongside
this, there is a greater internal focus on employee health &
wellbeing with an estimated GBP90 billion+ being lost through
absence and presenteeism in the UK alone.
We build upon these structural tailwinds through both the
cross-sell and up-sell of services and software across our business
lines. The same individual in our clients' organisations is often
responsible for several compliance areas, whether it be Head of
Risk, a Health & Safety Director, an HR Director, or an SME
business operator. For example, the person responsible for
procuring fire safety services is often also responsible for
procuring water & air hygiene services and health & safety
software. Similarly, if an individual is responsible for procuring
risk management software, they are also likely be responsible for
procuring occupational health, HR and employment law services,
compliance eLearning or HR compliance software. Through providing
best-in-class services we can leverage this common channel to
market allowing us to cross-sell and up-sell both services and
software to one of our existing 50,000 customers. Cross-sell
contributes in the region of 2% to our organic growth each year and
is part of the reason we are able to grow faster than our wider
markets.
Software also acts a key differentiator in our markets.
Providing compliance software either as a standalone product or
bundled alongside our services allows us to provide a more
comprehensive end-to-end compliance solution. Our consultancy &
advisory services help our clients to understand and audit their
compliance obligations which can then be tracked, managed and
controlled via our software. We find clients who take both software
and service from our Group achieve much higher standards of
compliance. Software now generates over GBP43 million of ARR which
we expect to continue to grow organically at a fast pace. These
SaaS revenues are generated through recurring monthly SaaS
subscriptions, typically as part of multi-year contracts and we
continue to achieve customer net retention rates consistently over
100%.
On a run-rate basis our Group now has revenue of over GBP500
million, surpassing our FY24 revenue target, and this scale
provides a number of competitive advantages. Due to our extensive
range of capabilities and geographic coverage, we are uniquely
positioned to serve both small and large, multi-site and complex
clients right across their compliance requirements, nationwide.
Additionally, collaboration between our in-house expertise of over
130 software developers and some 3,500 fee-earning compliance
specialists allows us to continually improve our service and
software and bring new software innovations to market.
Resilient business model
The software and services Marlowe provide are underpinned by
regulation and are therefore predominantly non-discretionary and
essential throughout the economic cycle. For example, the Health
& Safety Act requires a health & safety risk assessment to
be completed and recorded by a competent person if a business has
five or more employees. Additionally, employees must be provided
with adequate health & safety training which can be conducted
via our compliance eLearning offering. The cost of non-compliance
is significant including large fines with the average Health &
Safety fine increasing over 300% since 2018. Non-compliance can
also result in increased insurance premiums and, for the most
serious offences, prosecution or even imprisonment. This
non-discretionary nature of our services and software leads to a
high degree of revenue visibility with approximately 85% recurring
and secured via long-term contracts.
The impact of inflation, largely related to wages, has been
mitigated through inflationary linked contract agreements or via
annual increased contract pricing. We remain confident in our
ability to pass through future costs increases in this way. Our
software and service offerings are a relatively small cost for our
customers and are often linked to their compliance budgets , which
tend to be ring-fenced given the major potential costs associated
with non-compliance . This, coupled with our high levels of service
and technology benefits, results in deep and durable customer
relationships, with an average duration of over 12 years.
The Group has low customer concentration and works across a
broad range of sectors. We serve 50,000 B2B customers from SMEs to
large multinationals or public sector organisations, with no
customer representing more than 2% of revenues. Within GRC,
customers largely pay for our services and software in advance as a
monthly subscription and are usually committed to 3 or 5 year
contracts. In TIC, we are paid monthly in arrears as part of
similarly long-term contracts.
Disciplined approach to M&A
During FY23, the Group successfully completed 11 bolt-on
acquisitions for a total consideration of GBP56 million with ten
acquisitions in the first half and one in the second half alongside
a continued focus on integration projects. We have deepened our
presence across GRC in compliance software, employment law &
HR, occupational health and within TIC compliance services. We have
subsequently deployed GBP15.3 million on four bolt-on acquisitions
post year end within our TIC business.
Acquisition has been a key tool that we have used to build the
scale that we enjoy across our markets. We have a top-3 position in
each of the compliance markets we occupy yet they remain highly
fragmented with our GBP505 million run-rate revenue indicating we
only serve c.6% of our GBP8.6 billion addressable market. The
opportunities for future growth via market consolidation are very
significant.
We have a well-designed divisional structure to support growth
via M&A and integration. We possess a strong in-house corporate
development capabilities which enable us to source deals, conduct
due-diligence and efficiently execute upon our acquisition
strategy. This agility, resource and expertise allows us to
capitalise on acquisitions that our peers and competitors would
struggle to replicate and we are seen as an attractive acquiror
across our markets. Over 70% of the deals completed are off-market
allowing us to achieve attractive valuations and unlock deals that
are a targeted fit with our strategic criteria.
We have a well-developed pipeline of earnings enhancing bolt-on
acquisitions which we expect to selectively capitalise on during
the course of FY24 and beyond, both through reinvesting the
increasing level of cash that we generate and through an
appropriate use of our balance sheet.
Strengthening and integrating
The investments we make in integration and acquisition-related
restructuring are a vital element of our strategy for growth and
are essential to generate the returns on investment that we do. It
is thanks to the successful delivery of these integration
programmes that we have been able to accelerate our organic growth
rate from 4% in FY17 to 10% in FY23 and increase our adjusted
divisional EBITDA margin from 16% in FY17 to over 19% today.
During the year, we have placed a particular emphasis on
integration, building upon the intensively active and successful
growth period we delivered during FY22, where we deployed over
GBP320 million of capital across 20 acquisitions.
We have made significant progress with the integration programme
in Occupational Health following the acquisition of Optima for
GBP135 million in January 2022, TP Health in April 2022 and our
existing Healthwork occupational health activities. We successfully
established a unified management team, streamlined our back-office
operations, and implemented a single operating model across the
combined business. The entire merged business now operates under
the Optima brand. In eLearning we have completed the integration of
five eLearning platforms into VinciWorks with a single compliance
content library and software environment now in place, supported by
a fully integrated management and support team. Both these
integration programmes have delivered highly attractive cost
synergies via the removal of duplicated headcount, IT systems and
properties.
Our well-designed organisational structure, which prioritises
divisional autonomy and agility, has been instrumental in enabling
us to successfully pursue our growth strategy, which combines
organic growth with bolt-on acquisitions. With a siloed approach to
integration, our six entrepreneurial management teams have been
able to remain focused on driving organic growth while also
directing and overseeing their integration initiatives. Significant
investments have been made in dedicated integration resource to
ensure we deliver these programmes efficiently.
This structure enables us to integrate acquired businesses
simultaneously across business lines, with an integration programme
for one acquisition being largely discrete from another. This
approach has allowed us to maintain the necessary bandwidth to
continue pursuing strategic acquisitions and also to position us
well for sustained inorganic growth.
As we continue to pursue a balanced blend of organic and
inorganic growth this investment in integration is driving our
long-term shareholder returns.
Outlook
We expect to see strong continued demand for our software and
services. We operate in resilient markets that are undergoing
structural growth, and we have consistently exceeded that growth
organically through the delivery of our business model and the
application of our organic initiatives.
Our businesses are highly cash generative, and increasingly so,
which now allows us to successfully execute our bolt-on acquisition
strategy from self-generated resources and we remain well
positioned to benefit selectively from executing upon the
opportunities within our pipeline.
We have made a positive start to the new financial year, with
strong levels of organic growth. We have completed a further four
bolt-on acquisitions post year-end deploying GBP15.3 million of
capital. Our acquisition pipeline is well-developed, and we expect
to use our attractive cash-flow characteristics to selectively
execute upon these opportunities whilst appropriately managing
leverage
Governance, Risk & Compliance
Our GRC consulting and software solutions help our customers
mitigate business risk and ensure legally compliant governance
standards. We operate across Health & Safety, Employment Law
& HR, Occupational Health, Enterprise Risk Management and
eLearning. The majority of the compliance services we deliver
revolve around our clients' employee and organisational risks.
FY23 FY22
GBPm GBPm Change
------------------------------------ --------- --------- -------------
Revenue 193.1 94.2 105%
Adjusted EBITDA (1,2) 51.5 28.4 81%
Adjusted operating profit (2) 44.7 25.4 76%
Adjusted EBITDA margin (1,2) 26.7% 30.1% (340)bps
------------------------------------ --------- --------- -------------
(1) Earnings before interest, taxes, depreciation and
amortisation ("EBITDA")
(2) Explanation of non-IFRS measures are contained within the
Chief Financial Officer's review
Financial Review
Our GRC division performed well during FY23, with revenue
increasing 105% to GBP193.1 million (FY22: GBP94.2 million). This
reflected strong organic growth of 8% and the benefit from
acquisitions completed in the year, together with the full year
contribution of acquisitions made in the prior year. Organic growth
was driven by new business, up-selling to existing customers,
cross-selling and price increases via inflationary linked contracts
or annual renegotiations. The vast majority of GRC revenues are
delivered as multiyear contracts, retained consultancy
subscriptions or as SaaS subscriptions.
Adjusted EBITDA increased by 81% to GBP51.5 million (FY22:
GBP28.4 million), as we benefited from organic growth, operational
improvements and integration synergies. Adjusted EBITDA margin was
26.7% (FY22 30.1%). This reflects business mix following
significant acquisitions in Occupational Health in the latter end
of FY22 and the beginning of FY23, which as expected, operates at a
lower margin than the rest of the GRC business lines. Excluding the
impact of Occupational Health acquisitions, GRC margins increased
materially, particularly within compliance software. This margin
expansion, which we expect to continue in the current financial
year, is on the back of integration efficiencies, operational
gearing and successful pricing strategies.
Operational review
We made good progress during FY23 following on from the
successful growth period in FY22 where we deployed c.GBP300 million
over 11 acquisitions within GRC. This was a very active period for
the Group and successful integration was a vital component to
ensure we deliver integration synergies, enhance our returns on
invested capital and can drive continued future growth. During the
year we undertook two significant integration projects within GRC
alongside embedding smaller bolt-on acquisitions. Within
Occupational Health, we have made significant progress in
consolidating all of the occupational health acquisitions into the
Optima platform. Similarly, within Compliance eLearning, we have
brought all five of our compliance eLearning businesses under
VinciWorks.
During the year we made six acquisitions deploying GBP39 million
of capital as we deepened our presence across HR & Employment
Law and Occupational Health. This included the GBP23 million
acquisition of TP Health in April 2022.
Compliance Software which includes compliance eLearning,
Enterprise Risk Management solutions (EHS, GRC, HR & Contractor
Risk) and regulatory data and information, performed well in the
year. We delivered strong margin enhancements as we executed on
integration plans, and we continued to drive organic growth in the
high single digits. We expect to materially accelerate this in the
coming year as we benefit from the revenues synergies that we have
created following the merging of our eLearning and regulatory
intelligence (Barbour & Cedrec) businesses.
Our Employment Law, HR and Health & Safety business stream
represents around a quarter of total GRC revenues. We saw mid to
high single digit organic revenue growth in our Employment Law
& HR businesses, reflecting new customer growth and the
successful implementation of price increases with existing
customers. We continued to drive margins as we more efficiently
triage staff through our case management software, CaseNest, which
has, since implementation, resulted in a c.20% decrease in the
number of specialists required to service the same volume of case
work. Health & Safety customer attrition was slightly higher
than targeted towards the end of FY22 which was reflected in FY23
revenues but has since normalised. Additionally, we experienced a
more challenging labour market within some of our Health &
Safety businesses at the start of the financial year, but this has
now trended back to a more normalised level.
Occupational Health has undergone a transformational year
following the acquisition of Optima Health in January 2022 and TP
Health in April 2022. We are of a scale now where we can leverage
our extensive capabilities to service national and complex
customers. Additionally, we are benefiting from knowledge sharing
across our portfolio that allows us to ensure each client has the
most comprehensive and effective package to meet their employee
health, well-being and compliance needs. We saw high single digit
organic revenue growth in the year, driven by both new business and
also the upselling of additional services across our range of
corporate health & wellbeing services.
Testing, Inspection & Certification
The services we provide within our Testing, Inspection and
Certification (TIC) division largely revolve around keeping our
customers business premises safe and compliant with relevant
regulation and legislation. Our services address compliance
requirements across fire safety & security, and water & air
hygiene.
FY23 FY22
GBPm GBPm Change
--------------------------------- ------ ------ --------
Revenue 272.6 221.7 23%
Adjusted EBITDA (1,) (2) 36.8 30.6 20%
Adjusted operating profit (2) 25.6 21.4 20%
Adjusted EBITDA margin (1,) (2) 13.5% 13.8% (30)bps
--------------------------------- ------ ------ --------
(1) Earnings before interest, taxes, depreciation and
amortisation ("EBITDA")
(2) Explanation of non-IFRS measures are contained within the
Chief Financial Officer's review
Financial Review
TIC performed strongly in FY23, with revenues increasing 23% to
GBP272.6 million (FY22: GBP221.7 million). We delivered strong
organic growth of 11%, reflecting above-market growth within Water
& Air Hygiene and particularly strong growth within our Fire
Safety & Security business. Our performance also benefited from
acquisitions completed in the year, together with the full year
contribution of acquisitions made in the prior year. Approximately
80% of our revenues within TIC are recurring and typically
delivered via 3-5 year contracts. We are delivering excellent
service standards across TIC with compliance KPI's of close to
100%. These high levels of service result in reduced client
attrition, increased client share of wallet and enhanced organic
growth rates. Organic growth was also driven by new business and
up-selling as we leverage our significant national scale and
breadth of compliance capabilities across our clients range of
requirements, both of which provide significant competitive
advantage in winning business across our target client base and in
particular with larger complex and multi-site clients. These types
of clients demand best in class delivery capabilities with
efficient service right across the UK and a breadth of technical
capability to address all of their property safety & compliance
needs, supported by a well-invested operating model and technology.
We differentiate ourselves from the market in this way and believe
we will continue winning market share and outpacing market growth
as a result. Cross-sell between our Fire Safety & Security and
Water & Air Hygiene business lines, which share the same
channel to market, continues to accelerate our organic growth and
generated around GBP6 million of incremental revenue growth during
the year.
Adjusted EBITDA was up 20% to GBP36.8 million (FY22: GBP30.6
million) as a result of organic growth and further operational
improvements, acquisitions and integration synergies. Adjusted
EBITDA margins remained materially in line year-on-year. Underlying
organic margin improvement due to scale and integration
efficiencies, was offset by lower margins on business acquired in
FY22. As we have scaled our TIC business, we continue to benefit
from improved route density which allows us to increase revenue per
day per fee earner and decrease travel time between client sites as
a result of our proximity to our clients. This density results in
both improved client service standards and enhanced revenue and
profitability.
We expect to continue benefiting significantly from the major
investments that we have made in building out our platform
infrastructure and systems over the past seven years as we can
support additional revenues more efficiently, both organically and
via our continued bolt-on M&A programme. Following 50
acquisitions since 2016 and consistent organic growth, our TIC
business is now by some margin the largest provider of property
safety and compliance services across the UK. We believe that this
scale and integration expertise places us in a uniquely strong
position to continue consolidating the fragmented market in which
we operate. As the acquiror of choice in the market, we are able to
source attractive bolt-ons that fit our criteria amidst the
numerous available M&A targets in our pipeline at sensible
valuations. Now that our platform is well established we believe
that we are primed to accelerate this growth with increasingly
attractive integration synergies and economies of scale. The
returns on capital employed that we are generating in TIC of 22%
clearly demonstrate that this model is highly effective at
generating economic value.
Operational Review
Fire Safety & Security has continued to deliver very
impressive growth in the year, significantly above market rate. Our
strong focus on achieving best-in-class compliance rates has
resulted in low attrition rates throughout our customer base and
subsequently this customer goodwill allows us to upsell additional
services, increasing each individual customer spend. An example of
our additional capabilities is the expansion into the fast-growth
passive-fire (2) services segment of the market where we have
delivered very strong growth in the year.
A key accelerator of growth has been through our increasing
ability to service complex and multi-site customers. We can
effectively displace competitors who struggle to achieve a similar
compliance service levels or lack our breadth of service
capabilities.
We have completed three bolt-on acquisitions in the year. The
integration of these acquisitions is largely completed and the
businesses are trading in-line with pre-acquisition expectations.
Since the year-end we have completed a further four acquisitions,
including the leading national service provider Clymac Fire &
Security which has contributed around GBP12 million of additional
revenues, as we deepen and strengthen our presence in this market
and further build our route density.
2 Passive fire protection is a barrier or shield, stopping the
spread of fire from one area to another
Water & Air Hygiene has seen above-market organic revenue
growth as we have leveraged our leading sales and account
management teams and placed a focus on upselling capabilities to
larger and more complex customers.
During the year we undertook a large integration project as we
have rolled out our new end-to-end ERP system, Wave. This system
handles all of our water operations and allows us to schedule our
specialist technicians more effectively, operate our back-office
processes more efficiently and provide access to richer, more
valuable compliance data to our clients via automated portals,
helping them to effectively reduce risk. Additionally, the
integration of the GBP30 million Hydro-X acquisition is now largely
complete following its major integration programme into the WCS
infrastructure and operating model.
We completed two bolt-on acquisitions in the year, including the
GBP9m acquisition of PCS in February 2023, as we deepen and
strengthen our position in the Air Hygiene market. The integration
of these acquisitions is on track and the businesses are performing
in-line with expectations.
Chief Financial Officer's Review
Revenue grew in the year to GBP465.7 million (FY22: GBP315.9
million). The increase reflects continued strong organic growth of
10% and the contribution from acquisitions completed in the year
together with the full year benefit of those completed in FY22. The
largest of these was the acquisition of Optima Health in January
2022 which had annualised revenues of GBP66 million at the point of
acquisition. Organic revenue growth % on a like-for-like basis is
defined as the year-on-year growth of our entire business. This
includes the growth or decline of acquisitions from the day of
completion, by including their performance from the corresponding
prior period. The benefit of this approach is that it provides
insight as to how recently acquired businesses, along with our
existing business, are performing organically.
Adjusted operating profit increased by 53% to GBP64.3 million
(FY22: GBP42.0 million) and adjusted EBITDA increased by 52% to
GBP82.7 million (FY22: GBP54.4 million). Adjusted EBITDA means
operating profit before interest, tax, depreciation and
amortisation and excludes separately disclosed acquisition and
other costs. Group divisional adjusted EBITDA margin increased to
19.0% from 18.7% in FY22. The increase in margin has been primarily
driven by the increase in size of the higher margin GRC division.
Statutory operating profit was GBP6.4 million (FY22: GBP10.5
million) with the reduction representing a significant GBP10.6
million increase in investment in integration projects during the
year, a GBP9.1 million increase in non-cash amortisation charges
resulting from a higher carrying value of intangible assets and a
GBP10.2 million increase in provisions for contingent consideration
payments due to the strong performance of certain acquired
businesses.
Adjusted profit before tax was GBP53.6 million (FY22: GBP38.1
million). On a statutory basis loss before tax for the year was
GBP6.9 million compared to a profit before tax of GBP5.9 million in
FY22 with the movement being driven by the same factors noted under
statutory operating profit combined with higher finance costs on
the Group's debt facilities resulting from higher base rates of
interest.
Non-IFRS measures
IFRS measures ensure that the financial statements contain all
the information and disclosures required by all accounting
standards and regulatory obligations that apply to the Group. The
Annual Report and financial statements also include measures which
are not defined by generally accepted accounting principles such as
IFRS. We believe this information, along with comparable IFRS
measures, is useful as it provides investors with a basis for
measuring the performance of the Group on an underlying basis. The
Board and our managers use these financial measures to evaluate our
operating performance. Non-IFRS financial measures should not be
considered in isolation from, or as a substitute for, financial
information presented in compliance with IFRS. Similarly, non-IFRS
measures as reported by us may not be comparable with similar
measures reported by other companies.
Due to the nature of acquisitions, costs associated with those
acquisitions, subsequent integration costs and the non-cash element
of certain charges, the Directors believe that adjusted EBITDA and
adjusted measures of operating profit, profit before tax and
earnings per share provide shareholders with a useful
representation of the underlying earnings derived from the Group's
business and a more comparable view of the year-on-year underlying
financial performance of the Group.
A reconciliation between statutory operating profit and EBITDA
is shown below:
FY23 FY22
Continuing operations GBPm GBPm
--------------------------------------------------- ------ ------
Operating profit 6.4 10.5
Amortisation of acquisition intangibles 24.0 14.9
Depreciation and amortisation of non-acquisition
intangibles 18.4 12.4
EBITDA 48.8 37.8
A reconciliation between statutory profit and the adjusted
performance measures noted above is shown below:
(Loss)/profit Operating
before tax profit EBITDA
GBPm GBPm GBPm
------------------------------------------------ -------------- ---------- -------------
Statutory reported (6.9) 6.4 48.8
Acquisition costs 2.7 2.7 2.7
Restructuring costs 21.1 21.1 21.1
Amortisation of acquisition intangibles 24.0 24.0 -
Share-based payments (excluding SAYE
schemes) 1.7 1.7 1.7
Fair value losses in contingent consideration
and acquisition related incentive
schemes 8.4 8.4 8.4
Exceptional finance costs 2.6 - -
Adjusted results 53.6 64.3 82.7
Acquisition and other costs
Acquisition and other costs totalled GBP2.7 million in the year
(FY22: GBP6.0million).
Acquisition costs include legal fees, professional fees and
staff costs incurred as part of the acquisitions. They have reduced
during the year due to the lower level of M&A activity.
Restructuring costs, being the costs associated with the
integration of acquisitions, remain a key component of delivering
shareholder value by increasing returns made on acquired
businesses. We are now delivering a total pre-tax return on
invested capital (3) of 14%, close to our 15% target. Restructuring
costs for the year were GBP21.1 million (FY21: GBP10.5 million).
The increase reflects the significant scale of integration
programmes conducted in year following the large amount of capital
deployed in FY22 of (GBP314 million of initial capital deployed in
FY22 as compared to GBP41 million deployed in FY21. Ongoing
integration programmes are on track and are expected to be largely
complete midway through FY24 with the exception of recently
completed M&A. The current integration resource will either
leave on completion of the relevant integration programme or
transfer onto another integration programme. Once started typical
integration programmes take one year to complete, although this is
often shorter for smaller bolt on businesses. Restructuring costs
primarily consist of:
-- Costs incurred recruiting and making employees redundant
post-acquisition, and cost of duplicated staff roles during the
integration period;
-- Costs incurred in managing the integration process; and
-- IT costs associated with the integration and transfer to
Group IT systems, including costs of third party software used in
the delivery of customer contracts where there is a programme to
transition such software to one of the Group's existing
platforms.
(3) Pre tax-return on invested capital is calculated on run-rate
EBITDA excluding head office costs over the summation of initial
capital deployed, restructuring costs, acquisition costs and
deferred consideration.
Amortisation of acquired intangible assets for the year was
GBP24.0 million (FY22: GBP14.9 million) with the increase
attributable to the higher carrying value of intangible assets
resulting from the continued execution of the Group's M&A
strategy.
Non-cash share-based payment charges for the year were GBP1.7
million (FY22: GBP1.9 million) and largely represent the charge for
the Executive Incentive Plan.
Certain long term incentive schemes for platform businesses have
been established to incentivise key members of our platform
acquisition's senior management to create shareholder value through
the successful acquisition, restructuring and integration of
businesses in their chosen service sectors. These schemes have
similar characteristics to earn out structures in place within the
Group and have a similar purpose. As such, we consider the charge
associated with these schemes to be similar in nature as
"Acquisition and other costs" as we continue to execute our stated
strategy. The total charge for these schemes and for movements in
deferred consideration
provisions during the year totalled GBP8.4 million (FY22: GBP1.8
million releases) with approximately half the movement resulting
from an increase in the provision for the Corestream earn following
revised forecast expectations.
Exceptional finance costs for the year were GBP2.6 million
(FY22: GBP0.7 million) and relate to the non-cash unwinding of the
discount applied to contingent consideration to reflect the time
value of money. In the prior year exceptional finance costs
reflected the write down of prepaid arrangement fees on Marlowe's
previous debt facility upon its increase and extension in February
2022.
Further details on the items considered when arriving at
adjusted performance measures can be found in Note 3.
Further details behind our approach to the treatment of
acquisition and other costs can be found in note 3.
Earnings per share
Basic adjusted earnings per share are calculated as adjusted
profit for the year less a standard tax charge divided by the
weighted average number of shares in issue in the year. Basic
earnings per share reflect the actual tax charge.
Earnings per share* (EPS) FY23 FY22
----------------------------------- ------- ------
Basic adjusted earnings per share 45.3p 37.7p
Basic (loss)/earnings per share (3.9)p 0.8p
----------------------------------- ------- ------
*Refer to note 5
Interest
Finance costs, excluding exceptional finance costs, amounted to
GBP10.7 million in the year (FY22: GBP3.9 million). This movement
reflects the increased costs of borrowing driven by SONIA and
higher levels of utilisation of the Group's enlarged debt
facilities following a refinancing in February 2022. The BoE base
rate at the start of the financial year was 0.75% and increased by
3.5% during the year. The increased cost of debt is being factored
into our ongoing M&A strategy.
Taxation
UK Corporation Tax is calculated at 19% (FY22: 19%) of the
estimated assessable profit for the year. In addition, deferred
taxes at the statement of financial position date were remeasured
to reflect the 25% tax rate from 1 April 2023.
Statement of financial position
The Group maintains a strong balance sheet with net assets as at
31 March 2023 of GBP443.3 million (31 March 2022: GBP446.0 million.
At the same date total assets were GBP851.4 million (2022: GBP791.2
million), and total liabilities were GBP408.1 million (2022:
GBP345.2 million). Total assets primarily consisted of intangible
assets of GBP644.1 million and trade and other receivable of
GBP116.4 million. Total liabilities include bank loans of GBP191.0
million and trade and other payables of GBP123.2 million.
Cash flow
The Group benefits from revenues which have beneficial
underlying working capital characteristics. As a result, working
capital as a % of run-rate revenue at the full year was 2%.
Across the whole year net cash generated from operations was
GBP74.3 million (FY22 GBP34.0 million) an increase of 119%. Free
cash flow conversion in the year was 90%, in line with our
medium-term target. Operating cash flows in FY22 were affected by
the normalisation of working capital following a COIVD affected
FY21.
We have delivered a strong cash performance in the second half
of the year and as guided the short-term increase in accrued income
in the TIC division at 30 September 2022 has returned to levels
comparable with that seen at the beginning of the financial year.
The increase in the first half relates to working capital
requirements from billing cycles which included the implementation
of a new operating and billing system in our Water & Air
Hygiene business and short-term delays to billing on project work
in our Fire and Security business.
We have also made strong progress in reducing debtor days in the
final quarter after they came under pressure at the start of the
second half of the year. The net result is that cash generation in
the second half increased materially with net cash generated from
operations of GBP51.7 million in the six months and cash conversion
of 127%.
FY23 FY22
GBPm GBPm
------------------------------------------------ ------- -------
Adjusted operating profit 64.3 42.0
Net cash generated from operations 74.3 34.0
Acquisition and restructuring costs (23.8) (16.5)
Interest (8.6) (2.6)
Tax (8.3) (6.3)
------------------------------------------------ ------- -------
Net cash after restructuring, interest and tax 33.6 8.6
Net cash from operations (after capex) 57.9 24.9
Free cash flow conversion % 90% 59%
Capital expenditure totalled GBP16.4 million (FY22: GBP9.1
million) reflecting the increased scale of the Group and further
investment in our software systems and ongoing investment in our
businesses. Roughly two thirds of capital expenditure is related to
software.
Net debt and financing
Net debt as at 31 March 2023, including inter alia GBP28.1
million of lease liabilities, was GBP188.9 million (FY22: GBP133.3
million). Adjusted net debt (excluding lease liabilities) at year
end was GBP160.8 million (FY22: GBP108.8 million).
The increase reflects the successful execution of the M&A
strategy with GBP56 million deployed in the year and over GBP20
million of deferred consideration settled which has been offset by
strong cash generation, particularly in the second half of the
year.
Group run-rate leverage (excluding leases) ratio was just below
2x as at 31 March 2023 (2.1x as at 30 September 2022), within our
target range of 1.5x to 2.5x.
In February 2022 the Group announced a new GBP180 million,
3-year, RCF facility which extended the lending syndicate to a
total of six lenders and included a GBP60 million optional
accordion facility.
In October 2022 the Group exercised GBP53.3 million of the
accordion facility through the support of the existing syndicate.
As a result, the Group remains well-funded and continues to have
sufficient resources, including headroom on its financing facility,
to meet the needs of the Group and to fund acquisitions as part of
its strategy.
Key Performance Indicators ('KPIs')
The Group uses many different KPIs at an operational level which
are specific to the business and provide information to management.
The Board uses KPIs that focus on the financial performance of the
Group such as revenue, adjusted EBITDA, adjusted EPS and net cash
generated from operations.
Unaudited Consolidated Statement of Comprehensive Income
For the year ended 31 March 2023
Year ended Year ended
31 March 31 March
2023 2022
Notes GBPm GBPm
----------------------------------------------- ------ ----------- -----------
Revenue 2 465.7 315.9
Cost of sales (276.7) (176.7)
----------------------------------------------- ------ ----------- -----------
Gross profit 189.0 139.2
Administrative expenses excluding acquisition
and other costs (124.7) (97.2)
Acquisition costs 3 (2.7) (6.0)
Restructuring costs 3 (21.1) (10.5)
Amortisation of acquisition intangibles 3 (24.0) (14.9)
Share based payments (excluding SAYE
schemes) and
legacy long-term incentives 3 (1.7) (1.9)
Fair value gains/(losses) in contingent
consideration and acquisition related
incentive schemes 3 (8.4) 1.8
----------------------------------------------- ------ ----------- -----------
Total administrative expenses (182.6) (128.7)
Operating profit 6.4 10.5
Exceptional finance costs 3 (2.6) (0.7)
Net finance costs (10.7) (3.9)
----------------------------------------------- ------ ----------- -----------
Total finance costs (13.3) (4.6)
(Loss)/profit before tax (6.9) 5.9
Income tax credit / ( charge) 4 3.1 (5.2)
(Loss)/profit for the year (3.8) 0.7
Other comprehensive income - -
----------------------------------------------- ------ ----------- -----------
(Expense)/income and total comprehensive
(loss)/profit for the year from continuing
operations (3.8) 0.7
----------------------------------------------- ------ ----------- -----------
Attributable to owners of the parent (3.8) 0.7
----------------------------------------------- ------ ----------- -----------
(Loss)/earnings per share attributable
to owners of the parent (pence)
---------------------------------------- ------- -----
Total
---------------------------------------- ------- -----
Basic 5 (3.9)p 0.8p
Diluted 5 (3.9)p 0.8p
Unaudited Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
Share Share Merger Other Retained Total
capital premium Reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 April 2021 38.5 217.4 7.9 0.4 (0.8) 263.4
Profit for the period - - - - 0.7 0.7
----------------------------- --------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the year - - - - 0.7 0.7
----------------------------- --------- --------- --------- ---------- ---------- --------
Transaction with owners
Issue of shares during the
year 9.4 171.7 - - - 181.1
Issue costs - (4.3) - - - (4.3)
Acquisition - - 2.0 - - 2.0
Share-based payments - - - 1.7 - 1.7
Deferred tax on share-based
payments - - - 1.4 - 1.4
9.4 167.4 2.0 3.1 - 181.9
----------------------------- --------- --------- --------- ---------- ---------- --------
Balance at 31 March 2022 47.9 384.8 9.9 3.5 (0.1) 446.0
Loss for the period - - - - (3.8) (3.8)
----------------------------- --------- --------- --------- ---------- ---------- --------
Total comprehensive loss
for the year - - - - (3.8) (3.8)
----------------------------- --------- --------- --------- ---------- ---------- --------
Transaction with owners
Share-based payments - - - 2.3 - 2.3
Deferred tax on share-based
payments - - - (1.2) - (1.2)
----------------------------- --------- --------- --------- ---------- ---------- --------
- - - 1.1 - 1.1
----------------------------- --------- --------- --------- ---------- ---------- --------
Balance at 31 March 2023 47.9 384.8 9.9 4.6 (3.9) 443.3
----------------------------- --------- --------- --------- ---------- ---------- --------
Unaudited Consolidated Statement of Financial Position
As at 31 March 2023
Year ended Year ended
31 March 31 March
2023 2022
Notes GBPm GBPm
------------------------------------------- ------ ----------- -----------
ASSETS
Non-current assets
Intangible assets 8 644.1 609.5
Property, plant and equipment 11.7 12.1
Right of use assets 27.4 24.1
Trade and other receivables 4.8 4.7
Deferred tax asset 4.4 3.9
------------------------------------------- ------ ----------- -----------
692.4 654.3
------------------------------------------- ------ ----------- -----------
Current assets
Inventories 9.3 7.6
Trade and other receivables 9 116.4 98.1
Held for sale property 1.3 -
Cash and cash equivalents 30.2 31.2
Current tax asset 1.8 -
159.0 136.9
------------------------------------------- ------ ----------- -----------
Total assets 851.4 791.2
------------------------------------------- ------ ----------- -----------
LIABILITIES
Current liabilities
Trade and other payables (123.2) (111.5)
Financial liabilities - lease liabilities (9.7) (8.0)
Current tax liabilities - (1.2)
Provisions (1.4) (0.9)
------------------------------------------- ------ ----------- -----------
(134.3) (121.6)
------------------------------------------- ------ ----------- -----------
Non-current liabilities
Trade and other payables 10 (12.0) (14.7)
Financial liabilities - borrowings 12 (191.0) (140.0)
Financial liabilities - lease liabilities (18.4) (16.5)
Deferred tax liabilities (51.2) (50.5)
Provisions (1.2) (1.9)
------------------------------------------- ------ ----------- -----------
(273.8) (223.6)
------------------------------------------- ------ ----------- -----------
Total liabilities (408.1) (345.2)
------------------------------------------- ------ ----------- -----------
Net assets 443.3 446.0
------------------------------------------- ------ ----------- -----------
EQUITY
Share capital 13 47.9 47.9
Share premium account 13 384.8 384.8
Merger relief reserve 13 9.9 9.9
Other reserves 4.6 3.5
Retained earnings (3.9) (0.1)
------------------------------------------- ------ ----------- -----------
Equity attributable to owners of parent 443.3 446.0
------------------------------------------- ------ ----------- -----------
Unaudited Consolidated Statement of Cash Flows
For the year ended 31 March 2023
Year ended Year ended
31 March 31 March
2023 2022
Notes GBPm GBPm
----------------------------------------------- ------ ----------- -----------
Net cash generated from operations 14 74.3 34.0
Net finance costs (8.6) (2.6)
Income taxes paid (8.3) (6.3)
----------------------------------------------- ------ ----------- -----------
Net cash generated from operating activities
before acquisition and restructuring
costs 57.4 25.1
Acquisition and restructuring costs (23.8) (16.5)
----------------------------------------------- ------ ----------- -----------
Net cash generated from operating activities 33.6 8.6
Cash flows used in investing activities
Purchases of property, plant and equipment
and non-acquisition intangibles (16.4) (9.1)
Disposal of property, plant and equipment 1.4 1.1
Purchase of subsidiary undertakings
net of cash acquired (59.0) (316.0)
Cash flows used in investing activities (74.0) (324.0)
----------------------------------------------- ------ ----------- -----------
Cash flows from financing activities
Proceeds from share issues - 181.0
Repayment of borrowings (14.0) (146.5)
Repayment of debt upon purchase of subsidiary
undertaking (0.5) (5.4)
New bank loans raised 65.0 286.5
Cost of share issues - (4.3)
Lease repayments (including interest) (11.1) (8.9)
Net cash generated in financing activities 39.4 302.4
----------------------------------------------- ------ ----------- -----------
Net (decrease)/increase in cash and
cash equivalents (1.0) (13.0)
Cash and cash equivalents at start of
period 31.2 44.2
----------------------------------------------- ------ ----------- -----------
Cash and cash equivalents at the end
of period 30.2 31.2
----------------------------------------------- ------ ----------- -----------
Cash and cash equivalents shown above
comprise:
Cash at bank 30.2 31.2
----------------------------------------------- ------ ----------- -----------
Notes to the financial information for the year ended 31 March
2023
For the year ended 31 March 2023
1. Basis of Preparation
Basis of preparation
This preliminary announcement has been prepared in accordance
with the recognition and measurement requirements of UK-adopted
international accounting standards (IFRS) and the Companies Act
2006 and international financial reporting interpretations
committee (IFRIC) interpretations currently issued and
effective.
The financial information for the year ended 31 March 2023 and
31 March 2022 does not constitute statutory financial information
as defined in Section 434 of the Companies Act 2006 and does not
contain all of the information required to be disclosed in a full
set of IFRS financial statements. Statutory accounts for the year
ended 31 March 2022 have been delivered to the registrar of
companies and those for the year ended 31 March 2023 will be
delivered to the registrar in due course. This announcement was
approved by the Board of Directors and authorised for issue on 28
June 2023. Statutory accounts for the year ended 31 March 2023 have
not yet been reported on by the Group's Independent Auditor, RSM UK
Audit LLP.
The Company's previous auditor reported on the statutory
accounts for the year ended 31 March 2022: their report was
unqualified, did not draw attention to any matters by why of
emphasis and did not contain a statement under section 498(2) or
(3) of the Companies Act 2006
The consolidated preliminary results are presented in pounds
sterling and, unless stated otherwise, shown in pounds million to
one decimal place.
Going concern
The Directors have considered the Group's forecast cash flows
and net debt, as well as the Group's liquidity requirements and
borrowing facilities, including downside scenarios reflecting the
full financial impact of a sustained material event reducing
revenues by 10% over the next twelve months. The cash flow
forecasts are based on the current group structure. At the time of
approving the financial statements the Group had an undrawn
committed borrowing facility of GBP22.3m and to the extent to which
further acquisitions require more than the committed facility they
will only be done so following agreement of the lenders to the use
of the accordion facility or once additional funding has been
obtained. Whilst the Group saw some disruption from COVID-19 during
the year ending 31 March 2021, the impact was manageable and, given
the regulations that govern the requirement for its essential
services, the business model has demonstrated resilience. In the
event of further disruption to the business in the future as a
result of COVID-19 or an escalation of the Ukrainian crisis the
Directors are confident that additional cost reduction and cash
preservation measures could be utilised in conjunction with the
Group's existing debt facility to reduce costs and preserve cash.
Furthermore, the Group updates its assessment of forward looking
headroom on its covenant position each time there is a change in
base interest rates or a material acquisition is likely to
complete. This assessment is used to decide if any proactive
actions are required to ensure covenant compliance. The board have
considered sensitivities which would cause the covenants to be
breached and do not consider there to be a plausible scenario in
which this would occur. For example, based on current forecasts,
interest rates would need to increase by over 200bps for the
duration of the next 12 months before any mitigating actions would
need to be taken by the business. Following this review and a
discussion of the sensitivities the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the next twelve months. Thus they
continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
2. Segmental analysis
The Group is organised into two main reporting segments,
Governance, Risk & Compliance ("GRC") and Testing, Inspection
& Certification ("TIC"). The key profit measures are revenue,
adjusted EBITDA and adjusted profit before tax and are shown before
acquisition and restructuring costs, amortisation of acquisition
intangibles, fair value gains/losses in contingent consideration,
and share based payments and legacy long term incentives. The vast
majority of trading of the Group is undertaken within the United
Kingdom. Segment assets include intangibles, property, plant and
equipment, inventories, receivables and cash. Central assets
include acquisition intangibles, deferred tax and head office
assets. Segment liabilities comprise operating liabilities. Central
liabilities include deferred tax, corporate borrowings and head
office liabilities. Capital expenditure comprises additions to
application software and property, plant and equipment. Segment
assets and liabilities are allocated between segments on an actual
basis.
Head 2023
GRC TIC Office Total
Continuing operations GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------- ------- -------- --------
Revenue 195.9 283.5 - 479.4
----------------------------------------------- ------- ------- -------- --------
Inter-segment elimination (2.8) (10.9) - (13.7)
Revenue from external customers 193.1 272.6 - 465.7
----------------------------------------------- ------- ------- -------- --------
Segment adjusted operating profit/(loss) 44.7 25.6 (6.0) 64.3
Acquisition costs (2.7)
Restructuring costs (21.1)
Amortisation of acquisition intangibles (24.0)
Fair value losses in contingent consideration (8.4)
Share based payments (excluding SAYE
schemes) and legacy long-term incentives (1.7)
----------------------------------------------- ------- ------- -------- --------
Operating profit 6.4
Exceptional finance costs (2.6)
Net finance costs (10.7)
----------------------------------------------- ------- ------- -------- --------
Loss before tax (6.9)
Tax credit 3.1
----------------------------------------------- ------- ------- -------- --------
Loss after tax (3.8)
Segment assets 119.1 157.2 575.1 851.4
Segment liabilities (60.6) (63.3) (284.2) (408.1)
Capital expenditure (9.7) (6.5) (0.2) (16.4)
Depreciation and amortisation (6.8) (11.2) (24.4) (42.4)
----------------------------------------------- ------- ------- -------- --------
Head 2022
GRC TIC Office Total
Continuing operations GBP'm GBP'm GBP'm GBP'm
------------------------------------------- ------- ------- -------- --------
Revenue 94.6 228.5 - 323.1
------------------------------------------- ------- ------- -------- --------
Inter-segment elimination (0.4) (6.8) - (7.2)
Revenue from external customers 94.2 221.7 - 315.9
------------------------------------------- ------- ------- -------- --------
Segment adjusted operating profit/(loss) 25.4 21.4 (4.8) 42.0
Acquisition costs (6.0)
Restructuring costs (10.5)
Amortisation of acquisition intangibles (14.9)
Fair value gains/(losses) in contingent
consideration 3.5
Share based payments (excluding SAYE
schemes) and legacy long-term incentives (3.6)
------------------------------------------- ------- ------- -------- --------
Operating profit 10.5
Exceptional finance costs (0.7)
Net finance costs (3.9)
------------------------------------------- ------- ------- -------- --------
Profit before tax 5.9
Tax charge (5.2)
------------------------------------------- ------- ------- -------- --------
Profit after tax 0.7
------------------------------------------- ------- ------- -------- --------
Segment assets 116.0 151.1 524.1 791.2
Segment liabilities (48.8) (72.0) (224.4) (345.2)
Capital expenditure (4.9) (4.1) (0.1) (9.1)
Depreciation and amortisation (3.0) (9.2) (15.1) (27.3)
------------------------------------------- ------- ------- -------- --------
Head 2023
GRC TIC Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------------------ ------ ------ -------- -------
Segment adjusted operating profit/(loss) 44.7 25.6 (6.0) 64.3
Depreciation and amortisation of
non-acquisition intangibles 6.8 11.2 0.4 18.4
------------------------------------------ ------ ------ -------- -------
Adjusted EBITDA 51.5 36.8 (5.6) 82.7
------------------------------------------ ------ ------ -------- -------
Head 2022
GRC TIC Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------------------ ------ ------ -------- -------
Segment adjusted operating profit/(loss) 25.4 21.4 (4.8) 42.0
Depreciation and amortisation of
non-acquisition intangibles 3.0 9.2 0.2 12.4
------------------------------------------ ------ ------ -------- -------
Adjusted EBITDA 28.4 30.6 (4.6) 54.4
------------------------------------------ ------ ------ -------- -------
The above tables reconcile segment adjusted operating
profit/(loss) to adjusted EBITDA, which excludes separately
disclosed acquisition and other costs, to the standard profit
measure under IFRS (Operating Profit). This is the Group's
Alternative Profit Measure used when discussing the performance of
the Group. The Directors believe that adjusted EBITDA and operating
profit is the most appropriate approach for ascertaining the
underlying trading performance and trends as it reflects the
measures used internally by senior management for all discussions
of performance and also reflects the starting profit measure when
calculating the Group's banking covenants.
Adjusted EBITDA is not defined by IFRS and therefore may not be
directly comparable with other companies' adjusted profit measures.
It is not intended to be a substitute, or superior to, IFRS
measurements of profit.
Major customers
For the year ended 31 March 2023, no customers (2022: nil)
individually accounted for more than 10% of the Group's total
revenue.
3. Adjusting items
Due to the nature of acquisitions and other costs in relation to
each acquisition and the non-cash element of certain charges, the
Directors believe that adjusted operating profit, adjusted EBITDA
and adjusted measures of profit before tax and earnings per share
provide shareholders with a more appropriate representation of the
underlying earnings derived from the Group's business and a more
comparable view of the year-on-year underlying financial
performance of the Group. The adjusting items shown on the
consolidated statement of comprehensive income and the rationale
behind the Directors' view that these should be included as
adjusting items are detailed below:
Adjusting item Rationale
Acquisition Acquisition costs include professional fees, transaction
costs costs and staff costs associated with completing
acquisitions. These costs are non-recurring to the
extent that if the Group were to cease further M&A
activity these costs would not continue.
---------------------------------------------------------------
Restructuring Restructuring costs include the costs associated
costs with the integration of acquisitions, include:
* The cost of duplicated staff roles and other
duplicated operational costs during the integration
and restructuring period;
* The redundancy cost of implementing the post
completion staff structures; and
* IT costs associated with the integration and transfer
to Group IT systems, including costs of third-party
software used in the delivery of customer contracts
where there is a programme to transition such
software to one of the Group's existing platforms.
Each integration programme is distinct and one-off
in nature such that when complete the costs associated
that that programme would cease.
Of the GBP21.1m restructuring costs incurred in FY23,
GBP10.0m will not continue into FY24. Of the remaining
GBP11.1m, GBP6.7m relates to costs which are expected
to continue into the FY24 year, but will have ceased
by 31 March 2024, with the balance of GBP4.4m primarily
consisting of integration resource which will either
move onto new integration projects or leave the business
at the end of the existing projects.
---------------------------------------------------------------
Amortisation The amortisation charge for those intangible assets
of recognised on business combinations is excluded from
acquired intangibles the adjusted results of the Group since they are
volatile between periods based on the timing and
extent of acquisitions. As such, they are removed
to provide better comparability of performance between
periods.
---------------------------------------------------------------
Share-based Charges associated with share-based payment schemes
payments (excluding (excluding SAYE schemes which remain are classed
SAYE schemes) as administrative expenses) have been included as
and legacy long-term adjusting items. Although share-based compensation
incentives is an important aspect of the compensation of our
employees and executives, management believes it
is useful to exclude share-based compensation expenses
from adjusted profit measures to better understand
the long-term performance of our underlying business.
Share-based compensation expenses are non-cash charges
and are determined using several factors, including
expectations surrounding future performance, employee
forfeiture rates and, for employee payroll-related
tax items, the share price. As a result, these charges
are not reflective of the value ultimately received
by the awards.
---------------------------------------------------------------
Fair value gains/ Movements in contingent consideration are considered
(losses) in to be part of the investing activities of the Group
contingent and are therefore not considered to be reflective
Consideration of the underlying trading performance. Further, share
and acquisition based compensation expenses are not reflective of
related incentive the value ultimately received by the recipients of
schemes the awards. In addition, certain legacy long terms
incentives are considered to be part of the investing
activities of the Group and non-recurring in nature.
---------------------------------------------------------------
Exceptional Exceptional finance costs in FY23 relate to the non-cash
finance unwinding of the discount applied to contingent consideration
costs to reflect the time value of money. In prior year
exceptional finance costs reflect the write down
of deferred finance costs associated with the debt
facilities which were replaced in FY22. The requirement
to restructure and replace the debt facilities was
a direct result of the acquisitions completed during
the year and is therefore not considered part of
the underlying trading of the Group.
---------------------------------------------------------------
In the prior year charges arising on certain long-term incentive
schemes related to prior acquisitions were included within
'Share-based payments and legacy long-term incentives'. These have
been reclassified and are now included within 'Fair value
gains/(losses) in contingent consideration and acquisition related
incentive schemes' to better reflect the nature of these
schemes.
As a result, the 2022 charge for 'Share-based payments and
legacy long-term incentives' has reduced from GBP3.6m to GBP1.9m
and the 2022 credit for 'Fair value gains/(losses) in contingent
consideration and acquisitions related incentive schemes' has
reduced from GBP3.5m to GBP1.8m
4. Taxation
2023 2022
GBP'm GBP'm
Current tax:
UK corporation tax on profit for the year 4.0 3.9
Foreign tax 0.4 0.2
Adjustment in respect of previous periods (0.7) (0.1)
---------------------------------------------------- ---------- ---------
Total current tax 3.7 4.0
---------------------------------------------------- ---------- ---------
Deferred tax:
Current year (6.9) (3.3)
Adjustment in respect of previous periods 0.1 0.3
Effect of change in tax rate - 4.2
---------------------------------------------------- ---------- ---------
Total deferred tax (6.8) 1.2
---------------------------------------------------- ---------- ---------
Total tax (credit) / charge (3.1) 5.2
---------------------------------------------------- ---------- ---------
The charge for the year can be reconciled to the profit in the
Consolidated Statement of Comprehensive income as follows:
2023 2022
GBP'm GBP'm
(Loss)/profit before tax (6.9) 5.9
(Loss)/profit before tax multiplied by the
rate of corporation tax of 19.0% (1.3) 1.1
Effects of:
Expenses not deductible for tax purposes 0.9 0.3
Recognition of previously unrecognised deferred
tax assets on losses (1.5) -
Prior year adjustments (0.6) 0.2
Change in tax rates (0.6) 3.6
------------------------------------------------------- ---------- ---------
Tax (credit) / charge (3.1) 5.2
------------------------------------------------------- ---------- ---------
In the Spring Budget 2021, the UK Government announced that the
corporation tax rate would increase to 25% with effect from 1 April
2023. Deferred taxes at the statement of financial position date
have been remeasured at 25% as the announced change has been
enacted.
5. Earnings per ordinary share
Basic earnings per share have been calculated on the profit
after tax for the period and the weighted average number of
ordinary shares in issue during the period.
2023 2022
Weighted average number of shares in issue 95,868,871 81,994,955
Total (loss)/profit after tax for the period GBP(3.8)m GBP0.7m
------------------------------------------------------- ----------- ------------
Total basic earnings per ordinary share (pence) (3.9)p 0.8p
------------------------------------------------------- ----------- ------------
Weighted average number of shares in issue 95,868,871 81,994,955
Potential dilution to share options 1,291,637 1,304,678
Weighted average number of shares used in
calculating diluted EPS 95,868,871 83,299,633
Total fully diluted (loss)/earnings per share
(pence) (3.9)p 0.8p
------------------------------------------------------- ----------- ------------
Potentially dilutive shares have not been included in the
diluted EPS for the year ended 31 March 2023 on the basis that they
are anti-dilutive, however they may become dilutive in future
periods
Adjusted earnings per share
The Directors believe that the adjusted earnings per share
provide a more appropriate representation of the underlying
earnings derived from the Group's business. The adjusting items are
shown in the table below:
2023 2022
GBP'm GBP'm
(Loss)/profit before tax for the period (6.9) 5.9
Adjustments:
Acquisition costs 2.7 6.0
Restructuring costs 21.1 10.5
Amortisation of acquisition intangibles 24.0 14.9
Fair value losses/(gains) in contingent consideration
and acquisition related incentive schemes 8.4 (1.8)
Share based payments (excluding SAYE schemes) 1.7 1.9
Exceptional finance costs 2.6 0.7
Adjusted profit before tax for the period 53.6 38.1
------------------------------------------------------- ------ ------
The adjusted earnings per share, based on weighted average
number of shares in issue during the period, is calculated
below:
2023 2022
GBP'm GBP'm
Adjusted profit before tax (GBP'm) 53.6 38.1
Tax at 19% (10.2) (7.2)
------------------------------------------- ------- ------
Adjusted profit after taxation (GBP'm) 43.4 30.9
------------------------------------------- ------- ------
Adjusted basic earnings per share (pence) 45.3 37.7
------------------------------------------- ------- ------
Adjusted fully diluted earnings per share
(pence) 44.7 37.1
------------------------------------------- ------- ------
6. Dividends
The Company has not declared any dividends in respect of the
current year or prior year.
7. Business Combinations
During the year the Group completed 11 acquisitions to create
shareholder value by adding depth and breadth to the Group's
compliance based platforms.
If the acquisitions had been completed on the first day of the
financial year, Group revenue would have been GBP471.6m and Group
loss before tax would have been GBP7.7m. Post completion,
acquisitions made during the year contributed GBP32.4m revenue and
GBP6.1m profit before tax. As explained in note 5, following
acquisition a number of restructuring costs are incurred, and after
this post acquisition restructuring the acquisitions have a
positive impact on Group profit before tax.
Goodwill acquired in the business combinations represent a
payment made by the acquirer in anticipation of future economic
benefits from assets that are not capable of being individually
identified and separately recognised. Goodwill is not deductible
for tax purposes. Acquisition balance sheets are deemed provisional
when the post-acquisition integration period, typically up to 12
months post-acquisition, has yet to complete.
During the year the Group made the following acquisitions which
individually represent 5 per cent or more of the total Enterprise
Value of all acquisitions made during the year.
Finalisation of fair values for acquisitions acquired in the
current year
Acquisition of TP Health (Holdings) Ltd
On 14 April 2022 the Group acquired TP Health (Holdings) Ltd
("TP Health"), a provider of technology enabled occupational health
services for a total consideration of GBP22.5m, satisfied by the
payment of GBP14.5m in cash on completion and GBP8.0m payable
subject to the achievement of certain performance targets by the
acquired business 12 months post acquisition. The GBP8.0m payable
has been discounted to its present value of GBP7.2m by applying the
weighted average cost of capital used in the purchase price
allocation. The final fair values are shown below.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 8.5
Intangible assets - application software 2.3
Trade and other receivables 3.2
Cash 1.4
Inventories 0.1
Right of use assets 0.2
Property, plant and equipment 0.5
Trade and other payables (3.3)
Deferred tax liabilities (2.6)
Provisions (0.4)
Leases (0.4)
Tax liabilities (0.2)
------------------------------------------- ---------------
Net assets acquired 9.3
------------------------------------------- ---------------
Goodwill 12.4
------------------------------------------- ---------------
Consideration 21.7
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 14.5
Contingent cash consideration to vendors 7.2
------------------------------------------- ---------------
One hundred percent of the equity of TP Health was acquired in
this transaction. Deferred tax has been provided on the value of
the intangible assets at the tax rate applicable at the time the
asset is expected to be realised. Acquisition costs of GBP0.13m
have been charged to profit or loss.
If the acquisition had been completed on the first day of the
financial year TP Health would have generated GBP19.2m revenue and
GBP3.3m profit before tax.
Acquisition of MJ Fire Safety Ltd
On 23 May 2022 the Group acquired MJ Fire Safety Ltd ("MJ
Fire"), a provider of fire safety installation, maintenance and
inspection services, for a total consideration of GBP4.4m,
satisfied by the payment of GBP4.4m in cash on completion.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 1.3
Trade and other receivables 0.4
Cash 1.7
Property, plant and equipment 0.3
Trade and other payables (0.2)
Deferred tax liabilities (0.3)
Leases (0.2)
Tax liabilities (0.2)
Net assets acquired 2.8
------------------------------------------- ---------------
Goodwill 1.6
------------------------------------------- ---------------
Consideration 4.4
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 4.4
------------------------------------------- ---------------
One hundred percent of the equity of MJ Fire was acquired in
this transaction. Deferred tax has been provided
on the value of the intangible assets at the tax rate applicable
at the time the asset is expected to be realised. Acquisition costs
of GBP0.04m have been charged to profit or loss.
If the acquisition had been completed on the first day of the
financial year MJ Fire would have generated GBP3.5m revenue and
GBP0.7m profit before tax.
Acquisition of Cedrec Information Systems Limited
On 24 May 2022 the Group acquired Cedrec Information Systems
Limited ("Cedrec"), a digital platform providing Environmental,
Health and Safety ("EHS") data and information for a total
consideration of GBP4.2m, satisfied by the payment of GBP3.6m in
cash on completion and GBP0.6m payable subject to the achievement
of certain performance targets by the acquired business 12 months
post acquisition.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 1.2
Intangible assets - application software 0.1
Intangible assets - content database 0.2
Trade and other receivables 0.1
Cash 1.2
Right of use assets 0.2
Loan receivable 0.1
Trade and other payables (0.7)
Deferred tax liabilities (0.4)
Leases (0.2)
Tax liabilities (0.1)
------------------------------------------- ---------------
Net assets acquired 1.7
------------------------------------------- ---------------
Goodwill 2.5
------------------------------------------- ---------------
Consideration 4.2
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 3.6
Contingent cash consideration to vendors 0.6
------------------------------------------- ---------------
One hundred percent of the equity of Cedrec was acquired in this
transaction. Deferred tax has been provided on the value of the
intangible assets at the tax rate applicable at the time the asset
is expected to be realised. Acquisition costs of GBP0.04m have been
charged to profit or loss.
If the acquisition had been completed on the first day of the
financial year Cedrec would have generated GBP1.6m revenue and
GBP0.5m profit before tax.
Acquisition of Business HR Solutions (Consultancy) Limited and
Business Human Resources Solutions Limited
On 07 June 2022, the Group acquired Business HR Solutions
(Consultancy) Limited and Business Human Resources Solutions
Limited (together, "HR Solutions"), a provider of HR and H&S
compliance consultancy services for a total consideration of
GBP5.8m, satisfied by the payment of GBP5.8m in cash on
completion.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 3.0
Intangible assets - content database 0.1
Trade and other receivables 0.5
Cash 0.4
Trade and other payables (0.9)
Deferred tax liabilities (0.8)
Borrowings (0.3)
Tax liabilities (0.1)
Net assets acquired 1.9
------------------------------------------- ---------------
Goodwill 3.9
------------------------------------------- ---------------
Consideration 5.8
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 5.8
------------------------------------------- ---------------
One hundred percent of the equity of HR Solutions was acquired
in this transaction. Deferred tax has been provided on the value of
the intangible assets at the tax rate applicable at the time the
asset is expected to be realised. Acquisition costs of GBP0.05m
have been charged to profit or loss.
If the acquisition had been completed on the first day of the
financial year HR Solutions would have generated GBP3.7m revenue
and GBP0.7m profit before tax.
Acquisition of Vista Employer Services Limited
On 15 July 2022 the Group acquired Vista Employer Services Ltd
("Vista"), a provider of employment law services for a total
consideration of GBP3.9m, satisfied by the payment of GBP3.1m in
cash on completion and GBP0.8m payable subject to the achievement
of certain performance targets by the acquired business 12 months
post-acquisition.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 2.1
Trade and other receivables 0.9
Cash 0.3
Trade and other payables (0.8)
Deferred tax liabilities (0.5)
Borrowings (0.2)
Tax liabilities (0.1)
Net assets acquired 1.7
------------------------------------------- ---------------
Goodwill 2.2
------------------------------------------- ---------------
Consideration 3.9
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 3.1
Contingent cash consideration to vendors 0.8
------------------------------------------- ---------------
One hundred percent of the equity of Vista was acquired in this
transaction. Deferred tax has been provided on the value of the
intangible assets at the tax rate applicable at the time the asset
is expected to be realised. Acquisition costs of GBP0.03m have been
charged to profit or loss.
If the acquisition had been completed on the first day of the
financial year Vista would have generated GBP2.3m revenue and
GBP0.4m profit before tax.
Acquisition of PCS Asbestos Consultants Limited
On 01 February 2023 the Group acquired PCS Asbestos Consultants
Limited ("PCS"), a provider of asbestos risk management services
for a total consideration of GBP9.3m, satisfied by the payment of
GBP8.0m in cash on completion and GBP1.3m payable subject to the
achievement of certain performance targets by the acquired business
12 months post-acquisition.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 2.1
Intangible assets - application software 0.6
Trade and other receivables 1.2
Cash 2.6
Right of use assets 0.1
Property, plant and equipment 0.2
Loan Receivable 0.4
Trade and other payables (0.4)
Deferred tax liabilities (0.7)
Leases (0.1)
Net assets acquired 6.0
------------------------------------------- ---------------
Goodwill 3.3
------------------------------------------- ---------------
Consideration 9.3
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 8.0
Contingent cash consideration to vendors 1.3
------------------------------------------- ---------------
One hundred percent of the equity of PCS was acquired in this
transaction. Deferred tax has been provided on the value of the
intangible assets at the tax rate applicable at the time the asset
is expected to be realised. Acquisition costs of GBP0.10m have been
charged to profit or loss.
If the acquisition had been completed on the first day of the
financial year TP Health would have generated GBP3.7m revenue and
GBP1.0m profit before tax.
Further to the above the Group has made the following
acquisitions which individually form less than 5% of the total
Enterprise Value of all acquisitions made during the year.
Testing, Inspection and Certification (TIC) acquisitions
The Group has made the following acquisitions in the TIC
division:
On 19 April 2022 the Group acquired Ruthven Alarms Limited, a
provider of alarm system installation and maintenance services, for
a total consideration of GBP0.3m, satisfied by the payment of
GBP0.3m in cash on completion.
On 22 August 2022 the Group acquired Phase Technology 2gen
Holdings Limited ("Phase"), a provider of water hygiene &
treatment services for a total consideration of GBP2.6m, satisfied
by the payment of GBP2.6m in cash on completion
On 23 September 2022 the Group acquired Icegrade Group Limited
(trading as "MRFS"), a provider of fire alarm and security
maintenance services for a total consideration of GBP0.7m,
satisfied by the payment of GBP0.7m in cash on completion.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 1.1
Trade and other receivables 0.5
Cash 1.2
Right of use assets 0.1
Trade and other payables (0.5)
Deferred tax liabilities (0.3)
Leases (0.1)
Net assets acquired 2.0
------------------------------------------- ---------------
Goodwill 1.6
------------------------------------------- ---------------
Consideration 3.6
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 3.6
------------------------------------------- ---------------
One hundred percent of the equity was acquired in the
transactions with the exception of MRFS where the Group acquired
its business and assets. Deferred tax has been provided on the
value of the intangible assets at the tax rate applicable at the
time the assets is expected to be realised. Acquisition costs of
GBP0.05m have been charged to profit or loss.
If the acquisitions had been completed on the first day of the
financial year they would have generated GBP3.0m revenue and
GBP0.5m profit before tax.
Governance, Risk and Compliance (GRC) acquisitions
The Group has made the following acquisitions in the GRC
division:
On 09 May 2022, the Group acquired The Compliance Office Ltd, a
provider of SRA consultancy services for a total consideration of
GBP1.5m, satisfied by the payment of GBP1.2m in cash on completion
and GBP0.3m payable subject to the achievement of certain
performance targets by the acquired business 12 months post
acquisition.
On 24 August 2022 the Group acquired Care 4 Quality Limited
("C4Q"), a provider of Health & Social Care Quality Compliance
for a total consideration of GBP0.6m, satisfied by the payment of
GBP0.6m in cash on completion.
Fair value
at acquisition
GBP'm
------------------------------------------- ---------------
Intangible assets - customer relationships 0.4
Intangible assets - content database 0.2
Cash 0.4
Trade and other receivables 0.1
Trade and other payables (0.1)
Tax liabilities (0.1)
Net assets acquired 0.9
------------------------------------------- ---------------
Goodwill 1.2
------------------------------------------- ---------------
Consideration 2.1
------------------------------------------- ---------------
Satisfied by:
Cash to vendors 1.8
Contingent cash consideration to vendors 0.3
------------------------------------------- ---------------
One hundred percent of the equity was acquired in the
transactions. Deferred tax has been provided on the value of the
intangible assets at the tax rate applicable at the time the assets
is expected to be realised. Acquisition costs of GBP0.04m have been
charged to profit or loss.
If the acquisitions had been completed on the first day of the
financial year they would have generated GBP1.6m revenue and
GBP0.5m profit before tax.
8. Intangible assets
Customer Applications Content Trade
Goodwill relationships software database name Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- --------------- ------------- ---------- ------ -------
Cost
01-Apr-21 158.2 88.7 12.7 0.0 0.0 259.6
Arising on acquisition
of subsidiaries 237.3 96.3 27.2 7.5 6.1 374.4
Additions - - 5.6 - - 5.6
Disposals - - (0.1) - - (0.1)
31-Mar-22 395.5 185.0 45.4 7.5 6.1 639.5
Arising on acquisition
of subsidiaries 29.5 19.7 3.0 0.5 - 52.7
Additions - - 9.5 - - 9.5
Disposals (0.3) - - - - (0.3)
31-Mar-23 424.7 204.7 57.9 8.0 6.1 701.4
------------------------ --------- --------------- ------------- ---------- ------ -------
Accumulated amortisation and impairment
01-Apr-21 - 12.1 1.4 - - 13.5
Charge for the
year - 12.2 3.5 0.6 0.2 16.5
------------------------ --------- --------------- ------------- ---------- ------ -------
31-Mar-22 - 24.3 4.9 0.6 0.2 30.0
Charge for the
year - 18.1 7.3 1.3 0.6 27.3
------------------------ --------- --------------- ------------- ---------- ------ -------
31-Mar-23 - 42.4 12.2 1.9 0.8 57.3
------------------------ --------- --------------- ------------- ---------- ------ -------
Carrying amount
31-Mar-23 424.7 162.3 45.7 6.1 5.3 644.1
------------------------ --------- --------------- ------------- ---------- ------ -------
31-Mar-22 395.5 160.7 40.5 6.9 5.9 609.5
------------------------ --------- --------------- ------------- ---------- ------ -------
9. Trade and other receivables
2023 2022
GBP'm GBP'm
Current
Trade receivables 81.9 71.5
Less: provision for impairment of trade receivables (1.9) (2.9)
----------------------------------------------------- ------ ------
Trade receivables - net 80.0 68.6
----------------------------------------------------- ------ ------
Other receivables 2.8 0.7
Contract assets 2.1 2.2
Accrued income 22.8 18.6
Prepayments 8.1 7.4
Deferred consideration receivable in less
than one year 0.6 0.6
116.4 98.1
----------------------------------------------------- ------ ------
Non-current
Deferred consideration receivable in more
than one year 4.8 4.7
----------------------------------------------------- ------ ------
4.8 4.7
----------------------------------------------------- ------ ------
As at 31 March 2023, trade and other receivables includes
amounts due from contract assets of GBP2.1m (2022: GBP2.2m).
Revenue is recognised based on contracted terms with customers,
in accordance with a contract's stage of completion, with any
variable consideration estimated using the expected value method as
constrained if necessary. If a contract is in dispute, management
use their judgement based on evidence and external expert advice,
where appropriate, to estimate the value of accrued income
recoverable on the contract. Actual future outcome may differ from
the estimated value currently held in the financial statements. The
outcome of any amounts subject to dispute is not anticipated to
have a material impact on the financial statements.
Contingent consideration represents the divestment of non-core
activities within the Group's Air Quality business following the
sale of Ductclean (UK) Limited in March 2020 for a consideration of
up to GBP7.0m and additional amounts receivable on projects
concluded before the transaction. These are financial assets
classified as measured at fair value through profit or loss. The
fair value of this consideration is determined using an estimate of
discounted cash flows that are expected to be received within the
next five years. The discount rate used is based on a risk-free
rate adjusted for asset-specific risks. The consideration is
subject to a number of variables which may result in the amount
received being materially greater or lower than currently
recognised.
Trade receivables, accrued income and contract assets are
provided for based on, and in accordance with IFRS 9, an expect
credit loss ("ECL") model. The group have utilised a simplified
approach which is permitted by the standard, which applies a credit
risk percentage based against receivables that are grouped in age
brackets, which range from 41% of those over 120 days past due to
5% of those between 0 and 30 days past due.
As at 31 March 2023, the remaining balance of trade receivables
which were past due, after applying the ECL model to the age
buckets was GBP33.5m (2022: 21.1m). No further provision has been
recognised on these amounts because it has been deemed immaterial.
These relate to a number of independent customers with no recent
history of default.
10. Trade and other payables
2023 2022
GBP'm GBP'm
Current
Trade payables 33.7 29.9
Other taxation and social security 19.9 16.3
Other payables 4.0 2.5
Accruals 28.9 23.5
Deferred income 28.7 25.5
Contingent consideration payable in less than
one year 8.0 13.8
123.2 115.0
----------------------------------------------- ------ ------
Non-current
Contingent consideration payable in more than
one year 12.0 14.7
----------------------------------------------- ------ ------
12.0 14.7
----------------------------------------------- ------ ------
Trade and other payables principally comprise amounts
outstanding for trade purchases, ongoing costs and contingent
consideration. Included within contingent consideration is GBPnil
(2022: GBP2.6m) in respect of amounts due under put and call
options. Included within accruals is GBP8.6m (2022: GBP4.3m) in
respect of Long Term Incentive Plans.
Contingent consideration consists of the following amounts
payable in respect of previous acquisitions:
2023 2022
GBP'm GBP'm
------------------------------------ ------ ------
Core Stream 12.0 6.4
VinciWorks 1.8 8.4
Healthworks - 3.0
Skill Boosters 1.5 2.0
Other (comprising 17 acquisitions) 4.7 8.7
------------------------------------ ------ ------
20.0 28.5
------------------------------------ ------ ------
11. Net debt
2023 2022
GBP'm GBP'm
Cash at bank and in hand 30.2 31.2
Bank loans due after one year (191.0) (140.0)
Leases due within one year (9.7) (8.0)
Leases due after one year (18.4) (16.5)
------------------------------- -------- --------
Net (debt) (188.9) (133.3)
------------------------------- -------- --------
12. Financial liabilities - Borrowings
2023 2022
GBP'm GBP'm
Current
Bank loans and overdrafts due within one year
Bank loans - unsecured - -
----------------------------------------------- ------ ------
- -
----------------------------------------------- ------ ------
Non-current
Bank loans - unsecured 191.0 140.0
----------------------------------------------- ------ ------
191.0 140.0
----------------------------------------------- ------ ------
13. Called up share capital
2023 2022
----------------------------------------------- ------ ------
Allotted, issued and fully paid: GBP'm GBP'm
95,882,065 ordinary shares of 50p each (2022:
95,833,853 ordinary shares of 50p each) 47.9 47.9
----------------------------------------------- ------ ------
No. of shares
31-Mar-21 76,969,849
------------------------------------------------------ --------------
01 April 2021 - Consideration Shares ("LAW") 153,923
17 August 2021 - Bonus Shares 3,050
20 October 2021 - Subscription Shares 5,512,679
20 January 2022 - Share Options ("SAYE 2020") 1,336
24 January 2022 - Subscription Shares 13,100,000
27 January 2022 - Consideration Shares ("Elogbooks") 93,016
------------------------------------------------------ --------------
31-Mar-22 95,833,853
------------------------------------------------------ --------------
11 April 2022 - Share Options ("SAYE 2020") 1,630
26 April 2022 - Share Options ("SAYE 2020") 2,065
23 May 2022 - Share Options ("SAYE 2020") 923
4 July 2022 - Marlowe plc Long Term Incentive Plan
2019 37,879
05 July 2022 - Share Options ("SAYE 2020") 1,173
18 August 2022 - Share Options ("SAYE 2020") 413
19 October 2022 - Share Options ("SAYE 2020") 1,195
24 November 2022 - Share Options ("SAYE 2020") 2,934
------------------------------------------------------ --------------
31-Mar-23 95,882,065
------------------------------------------------------ --------------
14. Net cash generated from operations
2023 2022
GBP'm GBP'm
------------------------------------------------------- ------- -------
Continuing operations
(Loss)/profit before tax (6.9) 5.9
Depreciation of property, plant and equipment
and amortisation of non-acquisition intangibles 18.4 12.4
Amortisation of intangible assets 24.0 14.9
Total finance costs 13.3 4.6
Acquisition costs 2.7 6.0
Fair value gains/(losses) in contingent consideration
and acquisition related incentive schemes 8.4 (1.8)
Restructuring costs 21.1 10.5
Share based payments (excluding SAYE schemes) 1.7 1.9
Increase in inventories (1.7) (2.1)
Increase in trade and other receivables (12.0) (15.0)
Increase/(Decrease) in trade and other payables 5.3 (3.3)
------------------------------------------------------- ------- -------
Net cash generated from operations 74.3 34.0
15. Post balance sheet events
Since the year end the Group has acquired 100% interests in
several entities, as set out below, adding an aggregate of GBP15m
of run-rate revenues and GBP2m of run rate EBITDA as set out
below:
On 06 April 2023 the Group acquired Victory Fire Limited, a UK
provider of fire alarm and extinguishers installation and
maintenance services, for a total consideration of GBP6.7m,
satisfied by the payment of GBP5.5m in cash on completion and
GBP1.2m in cash payable subject to the achievement of certain
performance targets by the acquired business 12 months
post-acquisition.
On 13 April 2023 the Group acquired Clymac Limited, a UK
provider of fire alarm installation and maintenance services, for a
total consideration of GBP8.9m, satisfied by the payment of GBP8.6m
in cash on completion and GBP0.3m in cash payable subject to the
achievement of certain integration targets by the acquired business
3 months post acquisition.
On 20 April 2023 the Group acquired JCR Security Limited, a UK
provider of specialist smoke ventilation systems maintenance and
repair services , for a total consideration of GBP0.7m, satisfied
by the payment of GBP0.4m in cash on completion and GBP0.3m in cash
payable subject to the achievement of certain performance targets
by the acquired business 36 months post-acquisition.
On 13 June 2023 the Company acquired Trans-Fire Holdings Ltd, a
UK provider of fire extinguisher and fire alarm maintenance
services, for a total consideration of GBP0.9m, satisfied by the
payment of GBP0.8m in cash on completion and GBP0.1m in cash
payable subject to the achievement of certain integration targets
by the acquired business 6 months post-acquisition.
The fair value of the assets and liabilities in relation to the
above acquisitions have not been presented as, due to them being
recent acquisitions, the work is ongoing to perform the
valuations.
16. Related party transactions and key management
compensation
No trading related party transactions were identified in the
year.
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END
FR FPMBTMTATTPJ
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June 29, 2023 02:00 ET (06:00 GMT)
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