TIDMMRL
RNS Number : 8292U
Marlowe PLC
28 November 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.
28 November 2023
Marlowe plc
Interim results for the six months to 30 September 2023
Resilient first half performance
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 the six-month period ended 30 September 2023 ("HY24").
Key Highlights
-- Strong revenue growth of 13% with organic growth of 6% demonstrating resilience of business
-- Major progress on integration programmes across multiple
businesses in the context of having deployed GBP426m into 36
acquisitions since April 2021
-- Strategic review positioning the group to generate shareholder value
-- Executed a long-term strategic goal of expanding into ISO
certification market via IMSM acquisition
-- Prioritise deleveraging in the second half of the year with
expected net debt/EBITDA at around 2x by year end
Financial performance
ADJUSTED RESULTS H1 FY24 H1 FY23 Change
---------------------------------------- ---------- ---------- --------
Revenue GBP251.3m GBP222.9m 13%
EBITDA(1,2) GBP43.0m GBP39.2m 10%
EBITDA margin(2) 17.1% 17.6% (50)bps
Operating profit(2) GBP33.0m GBP30.4m 9%
Profit before tax(2) GBP24.1m GBP26.4m (9)%
Earnings per share - basic(2) 18.8p 22.3p (16)%
Net debt (excluding lease liabilities) GBP192.7m GBP156.2m
---------------------------------------- ---------- ---------- --------
STATUTORY RESULTS H1 FY24 H1 FY23
---------------------------------------- ---------- ----------
Revenue GBP251.3m GBP222.9m
EBITDA GBP22.8m GBP26.3m
Operating profit GBP0.0m GBP5.7m
(Loss)/profit before tax GBP(8.9)m GBP1.7m
(Loss)/earnings per share - basic (9.6)p 1.1p
Net cash generated from operations GBP27.5m GBP22.6m
Net debt GBP219.4m GBP184.2m
---------------------------------------- ---------- ----------
(1) Earnings before interest, taxes, depreciation and
amortisation ("EBITDA")
(2) Explanation of non-IFRS measures are contained within the
Chief Financial Officer's review
Marlowe is holding a virtual H1 FY24 results presentation for
investors and analysts at 09:30 GMT 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 after the event.
HY24 Highlights
-- Revenue increased 13% reflecting above market organic growth
of 6% and the contributions from acquisitions
Organic growth of 6% in Testing, Inspection and Certification
("TIC") and 5% in Governance, Risk and Compliance ("GRC")
-- Adjusted EBITDA increased 10% to GBP43.0 million
- Group EBITDA margins at 17.1% down 50bps from HY23
- GRC margins increased 40bps to 26.3% despite a slight
compression in Occupational Health which has been positively offset
by continued margin accretion across the rest of the division.
Occupational Health margins expected to expand in the medium term
as integration programmes conclude and associated synergies are
realised with substantial synergies expected to be delivered in the
second half
- TIC margins of 12.9% slightly down in the first half
reflecting the dilutive impact of bolt-on M&A and a temporary
increase in the use of sub-contractor labour in support of strong
organic growth
-- Adjusted EPS down 16% to 18.8p as a result of a GBP4.9
million increase in interest expense to GBP8.9 million in the
period and an increase in the UK corporation tax rate from 19% to
25%
-- Operating cash flow increased +22% to GBP27.5 million, net
debt (excluding leases) increased to GBP192.7 million
- A significant improvement in operating cash delivery on the prior year
- H1 cash is typically weaker due to timing impacts on working
capital which unwind in the second half
- Operating cash flows will continue to improve through the
second half and into FY25 as synergies are realised and the Group
continues to scale
- We expect net debt/EBITDA to be around 2x as at 31 March 2024
as we prioritise using the cash we generate in the second half of
the year to pay down debt
-- The Group began a strategic review of Group structure during HY24
- Marlowe's Board regularly evaluates the optimal organisational
and capital structure for the business to continue both the
successful delivery of the Group's strategy and to maximise
shareholder value
- Since 2016, when the Group was formed, the focus of the
Group's strategy and operations has continued to rapidly evolve and
pivot towards high margin regulated technology and services
- The outcome of this review may or may not lead to the Board
deciding to undertake a managed separation of certain Group
businesses with a view to optimising the Group's organisational and
capital structure
- The Board remains committed to open and transparent engagement
with all of its stakeholders and will communicate further as
appropriate
-- Successful execution of M&A and integration programmes
- GBP37.2 million of capital invested (1) in HY24 including the
strategic acquisition of IMSM which broadens our compliance
offering into ISO certification and audit
- Extensive integration projects across the Group have
progressed well following significant M&A activity, having
deployed GBP426 million since April 2021 into acquisitions
- Integrations include TP Health and Healthwork Occupational
Health businesses into Optima, Cedrec into Barbour (our regulatory
intelligence business), the combination of five Compliance
eLearning businesses into VinciWorks, and recent bolt-on
acquisitions into WorkNest, Fire Safety & Security and Water
& Air Hygiene, respectively
- We expect integration costs to reduce in the second half and
continue to diminish significantly into the first half FY25
1 Based on enterprise value of GBP37.2 million which includes
expected deferred consideration of GBP3.8 million
-- Current trading and outlook
- The Group remains mindful of the challenging macroeconomic
backdrop but notes that demand for compliance services and software
remains resilient. We continue to see good demand across Marlowe's
client base, supported by the non-discretionary nature of our
services & software which are driven by regulatory
requirements.
- For the full year, the Group expects to deliver mid-single
digit organic growth in revenues, supported by additional growth
from recent acquisitions, continued double-digit growth in adjusted
EBITDA and further strategic and operational progress across our
GRC and TIC divisions.
- Adjusted EPS will continue to be impacted by an increase in
borrowing costs associated with higher base rates and an increase
in the UK corporation tax rate from 19% to 25%.
Commenting on the results Alex Dacre, Chief Executive, said:
"The Group delivered a good performance against a challenging
macroeconomic backdrop in the first half of the year with organic
growth of 6% demonstrating the resilience of our business and the
markets we serve.
We completed five acquisitions in the period including the
strategic acquisition of IMSM which broadens our offering into the
attractive ISO certification and audit space.
Integration programmes are making good progress. The three major
programmes within Occupational Health, Water & Air and
Compliance eLearning, alongside multiple smaller integration
programmes, are either complete or expected to conclude in the
coming months. We expect these programmes to continue to deliver
operational and financial synergies as they progress.
We have made a good start to the second half of the year and
expect to see mid single digit organic growth supported by
additional growth from acquisitions and continued double-digit
growth in adjusted EBITDA."
For further information:
Marlowe plc
Alex Dacre, Chief Executive www.marloweplc.com
Adam Councell, Chief Financial Officer 0203 813 8498
Benjamin Tucker, Investor Relations Manager IR@marloweplc.com
Cavendish Securities plc (Nominated Adviser
& Joint Broker) 0207 220 0500
Ben Jeynes
George Lawson
Berenberg (Joint Broker) 0203 207 7800
Mark Whitmore
Dan Gee-Summons
Stifel (Joint Broker) 0207 710 7600
Matthew Blawat
Francis North
FTI Consulting 0203 727 1340
Nick Hasell
Alex Le May
CHIEF EXECUTIVE'S REVIEW
Group Results
The Group delivered another strong performance in the first half
of the year with further financial, operational and strategic
progress. Revenue grew 13% to GBP251.3 million, driven by organic
growth of 6% and the contribution from acquisitions. We have
continued to invest significantly whilst integrating and improving
the quality and breadth of our operations and the services or
products that we provide.
Adjusted EBITDA of GBP43.0 million increased 10% on the prior
year. Adjusted EBITDA margin was 17.1%, a reduction of 50bps on
HY23. We saw a slight compression of TIC divisional margins which
were impacted by bolt-on M&A with dilutionary effects in the
period and increased costs associated with a temporary increase in
the use of subcontract labour to support inhouse fee-earners to
resource the strong and continuing levels of organic growth that
has been delivered across TIC in recent periods. This was partially
offset by continued margin improvement in the GRC division,
reflecting operational and scale efficiencies achieved particularly
in SaaS, alongside the benefits that are accruing to the Group as
we deliver on our ongoing integration programmes. We expect margins
to continue their long-term improvement trend during the second
half as we benefit from further operational and integration
efficiencies.
Our businesses have highly cash generative characteristics and
free cash flow remains a key management focus. The Group generated
GBP27.5 million (HY23: GBP22.6 million) of operating cash flows in
the period, representing growth of 22% on HY23. We expect strong
operating cash conversion in H2 FY24 with our financial year
significantly second half weighted from this perspective (during
HY23 net cash generated was GBP22.6 million vs GBP51.7 million in
H2 FY23).
Statutory operating profit was GBP0.0 million (HY23: GBP5.7
million). Loss before tax was GBP8.9 million (HY23 profit before
tax: GBP1.7 million) reflecting the non-cash increased amortisation
of acquisition related intangibles, movement in deferred
consideration on historic acquisitions and a significant
non-recurring investment in integration activities. Basic loss per
share was 9.6p (HY23 earnings per share: 1.1p).
At 30 September 2023 adjusted net debt was GBP192.7 million (30
September 2022: GBP156.2 million), excluding lease liabilities of
GBP26.7 million (30 September 2022 GBP28.0 million), with a
proforma net debt/adjusted EBITDA gearing ratio of 2.3x. The
increase in net debt is directly attributable to M&A activity
and settlement of deferred consideration during the period. Cash
generation in the second half will be used to reduce leverage to
around 2x by the end of the year, with a target of reducing
leverage to below 2x in the medium term.
Strengthening and integrating
A key focus over the past 18 months has been integration. Since
April 2021 we have deployed GBP426 million into M&A. This scale
of investment requires the appropriate focus and resource to build
businesses which can benefit from margin enhancement and
sustainable organic growth into the future.
There have been several significant integration programmes
undertaken in the past 18 months:
-- The integration of Compliance eLearning (the Essential
Skillz, Deltanet, SkillBoosters, Cylix acquisitions) into
VinciWorks is now complete with major synergies delivered across
the Group's proprietary Astute platform and tech stack, back office
and client support costs, office closures and various other areas
of staff duplication. Now integrated, VinciWorks is able to focus
on accelerating the organic growth of its unified SaaS platform
with a significantly expanded portfolio of compliance topics and
modules to offer its client base. This complex integration
programme has been delivered within approximately twelve months of
commencement.
-- Integration of Healthwork and TP Health into Optima has been
ongoing for fourteen months and is well-progressed with the
majority of integration activities expected to wind down during the
next six months. The business now trades as Optima with a single
integrated operating and digital platform (My OH Portal) and
integrated service delivery, consolidated systems and processes,
and an optimised organisational structure. Significant further
synergies are planned during H2 FY24 now the business operates
under this single national operating platform.
-- Integration of Cedrec into Barbour EHS, the Group's
regulatory intelligence SaaS platform, is nearing completion with
the Barbour software platform upgrade programme progressing well.
The relaunch is planned for the first quarter in FY25 and the
Cedrec brand has now been retired. The breadth of regulatory areas
covered as a result of integration of the platforms is
significantly expanded, with a significantly enhanced client
proposition.
-- Integration of Business HR Solutions, Vista, Care4Quality, ESP and CLM into Worknest is now well-progressed. Third party legacy SaaS cost (EHS and eLearning SaaS) in Worknest have now been largely replaced with the Group's EHS and eLearning SaaS (Meridian and VinciWorks) platforms delivering enhanced client experience and major cost synergies. There has been further investment in the redevelopment of the YouManage HR SaaS and implementation of AI technology within our Employment Law & HR business. CaseNest (Worknest's proprietary case management platform) and Salesforce are now in place across the majority of the business.
-- Integration of Clymac, Victory Fire, Merryweather, MRFS, MJ
Fire and JCR into Marlowe Fire & Security is proceeding as
planned with extensive further activity taking place during H2
FY24.
-- Integration of Phase Technology and PCS into WCS Group and
the implementation of the target operating model is expected to
substantively complete during the remainder of the financial
year.
Disciplined approach to M&A
Acquisition has been a key tool that we have used to build the
scale that we enjoy across our markets. We are either a market
leader or have a top-3 position in each of the compliance markets
we occupy yet they remain highly fragmented and we estimate we
currently serve only c.6% of our GBP8.6 billion addressable
market.
We completed five acquisitions in HY24 for a consideration of
GBP37.2 million. We have broadened into ISO Certification and
Audit, a new highly attractive compliance vertical, through the
acquisition of IMSM for GBP20.6 million. The ISO Certification and
Audit market has been a corporate development area of key strategic
interest for some time and offers cross-sell opportunities with our
GRC customer base. IMSM provides a platform for growth in this core
compliance market, with attractive structural growth and a high
degree of recurring revenues.
IMSM is performing in line with pre-acquisition expectations and
integration activity has commenced with a focus on digitalising the
businesses client proposition via the use of the Group's CoreStream
platform. This digitalisation is expected to complete by early
FY25.
We have deepened our presence across Fire Safety & Security
through four bolt-on acquisitions in the period.
We will prioritise reducing balance sheet leverage to around 2x
by the end of the year with a target of reducing leverage to below
2x in the medium term.
Strategic Review of Group Structure
During the first half, we commenced a major strategic review of
the Group's structure. Marlowe's Board regularly evaluates the
optimal organisational and capital structure for the business to
continue both the successful delivery of the Group's strategy and
to maximise shareholder value. Marlowe consists of a portfolio of
compliance service and SaaS businesses, which each have benefited
from significant investment and have strong growth prospects in
sizeable markets with strong competitive positioning. During the
first half the Group has been working with advisers to evaluate the
merits of a potential separation of certain Group assets as a route
to maximising shareholder value.
Since 2016, when the company was first formed, Marlowe has
evolved from a pure play compliance service business focused on the
route-based Fire Safety, Water & Air Testing & Inspection
sectors to a much broader SaaS and service provider addressing both
software and service markets across Governance, Risk &
Compliance and Testing, Inspection & Certification. As the
Group has grown and evolved, its operational activities have
diversified into sectors with varying operational and financial
characteristics. In some cases, these businesses have varying
operating models, financial profiles and capital requirements. For
instance, Software as a service (SaaS) currently accounts for
approximately 25% of Group profitability. It is in the context of
this growth strategy and the continuing pivot towards the high
margin GRC regulated technology and service sectors that the Board
is undertaking this review.
The outcome of this review may or may not lead to the Board
making a decision in the future to undertake a managed separation
of certain Group businesses at an optimal point in the future. This
may be via a divestment in the form of a sale, a spin off or a
public listing of certain Group assets. Such an action, if pursued,
could potentially provide an optimised organisational and capital
structure, growth capital for certain Group businesses whilst also
enabling a potential significant return of capital to shareholders
in the future.
The Board remains committed to open and transparent engagement
with all of its stakeholders and will communicate further as
appropriate.
Our Markets
Set against a challenging macroeconomic backdrop the market for
compliance services and software has demonstrated a good level of
resilience. We continue to see good demand across Marlowe's client
base, supported by the non-discretionary nature of our services
& software which are driven by regulatory requirements. Whilst
we estimate that market growth has slightly slowed over the past
twelve months, we believe that we are operating in markets that are
demonstrating on average at least low-mid single digit growth.
New and evolving regulatory change requires the ever-increasing
use of Marlowe's software and services. For instance, the Fire
Safety (England) Regulations 2022 Act which came into effect in
January this year has placed the legal onus of ensuring fire safety
standards onto the property manager or building owner,
significantly increasing the regulatory burden. This new
legislation, coupled with the growing costs and fines associated
with non-compliance has resulted in an increase in outsourcing for
even the most basic of fire and safety inspections.
A significant proportion of our compliance markets remain
un-vended which is especially relevant in the SME markets within
our GRC division and across our SaaS markets. For example, there
has been a considerable rise in employee tribunals year on year
following the removal of legal fees associated with taking an
employer to court with the average costs of being found liable of
GBP14,000. This is resulting in an increasing proportion of the SME
market obtaining retained legal and HR advice from services such as
Marlowe's WorkNest to make sure that it remains compliant.
An increasing focus on employee wellbeing continues to drive
demand for our software and services. This can be seen within our
Occupational Health division. Poor mental health amongst employees
costs UK employers an estimated c.GBP42 billion(2) each year which
has resulted in both large organisation and SMEs increasing their
investment into Occupational Health services to reduce absenteeism
and improve employee efficiency.
Our organic initiatives build on these structural tailwinds.
Through investment we look to add additional capabilities which we
can then upsell and cross-sell to existing customers. We have
invested and moved our entire content library in eLearning into our
VinciWork's proprietary Learning Management System (LMS), which
enables us to sell additional eLearning software courses more
easily to existing customers. Similarly, we have invested in
off-the-shelf modules in our Enterprise Risk Management software,
exploring new areas of enterprise risk to sell to new customers
(for instance, Anti Money Laundering SaaS). We look to drive
organic growth and customer retention through digitalising our
offering, which we have already commenced in the ISO Certification
and Audit market following our recent acquisition of IMSM.
Scale and investing in inorganic growth and integration has also
opened new opportunities across Marlowe's portfolio of businesses.
In several compliance areas we are one of only a few providers that
can effectively compete for large multisite and complex customers.
We have benefited from this trend significantly in our Fire Safety
business where we have seen strong levels of organic growth,
particularly over the past 18 months.
With more than 40,000 customers across the Group, we have been
able to cross-sell and up-sell to accelerate organic growth. The
individual responsible for procuring fire and security services is
often also responsible for procuring water & air hygiene
services and health and safety software. Similarly, within GRC if
an individual is responsible for procuring HR and employment law
services, they are also likely be responsible for procuring
occupational health, compliance eLearning or HR software. It is
this same channel to market which allows the Group to successfully
cross-sell services and software to existing customers, which each
year contributes approximately 1%-2% to our organic growth.
(2) This is made up of absence costs of around GBP7 billion,
presenteeism costs ranging from about GBP27 billion to GBP29
billion and turnover costs of around GBP9bn
Current trading and outlook
The Group remains mindful of the challenging macroeconomic
backdrop but notes that demand for compliance services and software
remains resilient. We continue to see good demand across Marlowe's
client base, supported by the non-discretionary nature of our
services & software which are driven by regulatory
requirements. For the full year, the Group expects to deliver
mid-single digit organic growth in revenues, supported by
additional growth from acquisitions, continued double-digit growth
in adjusted EBITDA and further strategic and operational progress
across our GRC and TIC divisions. Adjusted EPS will continue to be
impacted by an increase in borrowing costs associated with higher
base rates and an increase in the UK corporation tax rate from 19%
to 25%.
Our main operational focus for the remainder of the financial
year remains firmly on the completion of integration programmes and
the associated wind down of integration investments associated to
the significant M&A activity that we have conducted in recent
periods. This integration activity is in the context of the Group
having invested GBP426 million in M&A since April 2021 and is a
vital investment in order to deliver long-term shareholder value.
Whilst we anticipate a further relatively intensive period of
integration activity during the second half of the year, we
currently expect the majority of this to be completed by the end of
FY24, with a significantly reduced level of restructuring activity
in FY25 and beyond.
Governance, Risk & Compliance
GRC encompasses our consulting and software solutions across
Compliance Software & eLearning, Health & Safety,
Employment Law & HR, Occupational Health and ISO. Our software
compliance platforms are used to implement governance frameworks
and manage and monitor audit and control risk. The majority of the
compliance services we deliver revolve around employees and
organisational risks.
H1 FY24 H1 FY23
GBPm GBPm Change
------------------------------------ ---------- --------- -------------
Revenue GBP102.0m GBP92.3m 11%
Adjusted EBITDA (1,2) GBP26.8m GBP23.9m 12%
Adjusted operating profit (2) GBP22.9m GBP20.6m 11%
Adjusted EBITDA margin (1,2) 26.3% 25.9% 40bps
------------------------------------ ---------- --------- -------------
(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 in line with expectation in HY24,
with revenue increasing 11% to GBP102.0 million (HY23: GBP92.3
million). This reflects good organic growth supported by growth
from acquisitions. Organic revenue growth was 5%, reflecting high
single digit growth within our software lines and low to mid-single
digit growth within our GRC retained advisory & subscription
businesses. The vast majority of our GRC revenue is recurring and
is delivered as multi-year contracted consultancy or SaaS-based
subscriptions.
Adjusted EBITDA increased by 12% to GBP26.8 million (HY23:
GBP23.9 million). Adjusted EBITDA margin improved by 40bps
reflecting operational efficiencies realised within the division.
Excluding Occupational Health, GRC margins have increased by
c.150bps as a result of the strong progress made with operational
improvements and the attractive operating leverage we are seeing as
a result of higher volumes across our SaaS and advisory
subscription activities. Margins in Occupational Health were
slightly weaker and will continue to be impacted in H2 as a result
of lower volumes related to a significant customer executing a
planned insource of their corporate health requirements and the
timing lag of new client mobilisations related to new business
already secured.
We continue to expect that we can increase divisional EBITDA
margin to at least 30% over the medium term as we benefit from
further operational improvements, additional scale, operational
gearing, and an increasing proportion of revenue from higher-margin
software subscriptions.
Operational review
Compliance Software , which encompasses eLearning, Enterprise
Risk Management solutions (EHS, GRC, HR & Contractor Risk) and
regulatory data and information, performed strongly in the period.
SaaS now contributes approximately GBP45 million on a run-rate
basis and has very attractive financial characteristics. In
addition, we deliver compliance software revenues related to
implementation. Software is usually paid for in advance and is
delivered through multi-year subscriptions, with net customer
revenue retention rates remaining over 100% and EBITDA margins
close to 50%.
Within our software offering, compliance eLearning is now
operating under one management team and under one brand,
VinciWorks. We expect organic growth to accelerate in the coming
months as we leverage an integrated and well-invested sales and
marketing function and explore international opportunities. We are
in the midst of a planned re-platforming of our regulatory data and
information business, Barbour, and expect this to further enhance
our offering and user experience which will drive the next phase of
growth.
Employment Law, HR and Health & Safety businesses deliver a
range of subscription-based consultancy services. We saw mid-single
digit organic growth in the first half of the year. New business
conversions were slower in the first quarter of the financial year
with client decision-making cycles extending but has since improved
to back towards historic levels. Our continued growth is supported
by favourable market conditions, notably a greater regulatory
burden, increased regulatory interventions and rising insurance
premiums.
Our Occupational Health business assures regulatory compliance
for our clients by improving the physical and mental health of
employees, minimising workplace risk and maximising corporate
productivity. In many cases occupational health services are
regulated by legislation including The Health & Safety at Work
Act.
Organic revenue growth was in the low single digits in the first
half and volumes are expected to continue to be impacted in H2 by a
significant customer insourcing a significant portion of their
corporate health & wellbeing requirements. This churn has
exerted some temporary pressure on margins which we expect to
revert as secured new business comes on stream during H2. The new
business pipeline of secured and potential opportunities remains
strong and we are beginning to leverage our position, now that
integration of the division is well progressed, as by far the
largest digitally enabled corporate health and wellbeing provider
in the UK with the broadest range of health & wellbeing
compliance capabilities, to look to accelerate organic growth
towards our mid-high single digit medium-term target. Additionally,
we expect Occupational Health margins to expand as a result of the
significant synergies we are realising through ongoing integration
programme.
We are in the final period of a significant integration and
restructuring programme within Occupational Health, during which we
have consolidated all of our historic occupational health
acquisitions into our Optima platform.
We have added a new compliance vertical in the first half of the
year, ISO Certification, through the acquisition of IMSM for an
enterprise value of GBP20.6 million. This acquisition is a key step
in Marlowe's strategy in broadening its GRC capabilities into the
highly complementary ISO certification and audit market and
presents an attractive opportunity to cross-sell into the Group's
existing SME customer base, particularly across the Worknest
business. IMSM has performed well in the brief period since
acquisition, and we expect it to deliver organic growth in the high
to mid-single digits.
Integration activities have begun and we have already made good
progress with digitalising IMSM's services through collaboration
with our existing compliance software offering and expect this to
drive organic growth and improve customer retention in future
periods.
Testing, Inspection & Certification
The majority of our services in TIC revolve around our clients'
business premises and include services such as the testing and
inspection of water and air systems, water hygiene compliance and
the inspection and certification of fire safety and security
systems. A large portion of the services we deliver are recurring
and are essential to our clients' operations. These are also
stipulated by regulatory obligations.
H1 FY24 H1 FY23
GBPm GBPm Change
--------------------------------- ---------- ---------- ---------
Revenue GBP149.2m GBP130.6m 14%
Adjusted EBITDA (1,) (2) GBP19.3m GBP18.1m 7%
Adjusted operating profit (2) GBP13.5m GBP12.8m 5%
Adjusted EBITDA margin (1,) (2) 12.9% 13.9% (100)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 TIC division performed well with revenue increasing 14% to
GBP149.2 million (HY23: GBP130.6 million), reflecting good organic
growth and the benefit from acquisitions. Organic revenue growth
was 6% reflecting mid-single digit growth within Water & Air
Hygiene and continued strong organic growth within Fire Safety
& Security. We continue to benefit from our ability to service
and retain multisite and complex customers and to upsell additional
capabilities.
Adjusted EBITDA increased by 7% to GBP19.3 million (HY23:
GBP18.1 million). Adjusted EBITDA margin was 12.9% (HY23: 13.9%),
due to the dilutive impact of bolt-on M&A and a temporary
increase in costs associated to sub contract labour as a result of
increased volumes associated with strong organic growth in the past
12 months. We expect margins to improve over the next 6 months as
we reduce sub contract labour costs and benefit form scale
efficiencies such as improved route density, improved pricing
strategies and increased operational efficiencies.
Operational Review
Our Fire Safety & Security division has continued to deliver
strong organic growth as we benefit from our large geographic reach
and comprehensive range of capabilities which allows us to
successfully compete for large multi-site and complex customers. We
have been able to deliver consistently high compliance service
levels which has resulted in the successful upsell of new
capabilities to existing customers and the displacing of
competitors who struggle to achieve similar compliance service
levels and lack our breadth of offering.
We completed four bolt-on acquisitions within Fire Safety &
Security in HY24, the largest being the acquisition of Clymac for
GBP8.5 million in April 2023 adding around GBP10 million of annual
revenues. The acquisitions have been slightly dilutive from a
margin perspective but through effective integration we expect to
bring acquisition margins in line with the divisional TIC margin
over the next 12 months.
Our market-leading Water & Air Hygiene business generates
run-rate revenues of over GBP150 million and has the broadest
service capabilities and coverage in its markets. We serve over
14,000 customers across numerous industries.
We have seen low to mid-single digit organic growth, driven by
upselling capabilities to existing customers and our ability to
service large multi-site customers. Cross-sell between Marlowe's
divisions, particularly between our TIC businesses, remains strong
and continues to be a key focus of management to drive further
growth. Additionally, even though a relatively small aspect of our
business, the revenue generated from water treatment chemical sales
has dropped due to a significant reduction in chemical prices.
A large proportion of our businesses are now on our proprietary
ERP system, Wave, where pricing strategies can be more effectively
implemented going forward. We have seen good levels of net new
customer wins, and with an average customer longevity of around 11
years.
We continue to drive best-in-class compliance rates, well above
market average of around 90%, through strong governance implemented
across all of our businesses by our successful integration
programmes. We expect to materially reduce integration costs within
Water & Air during the remainder of the current financial
year
We have seen a good start to the second half of FY24 and expect
margins for the full year to be in line with FY23.
CHIEF FINANCIAL OFFICER'S REVIEW
Revenue in the half grew to GBP251.3 million (HY23: GBP222.9
million). The increase reflects good organic growth of 6%, combined
with contribution from acquisitions completed in the year and the
full year benefit of those completed in HY23.
Adjusted operating profit increased by 9% to GBP33.0 million
(HY23: GBP30.4 million) demonstrating the strong operational
performance of the Group despite the challenging wider economic
environment. Adjusted EBITDA increased by 10% to GBP43.0 million
(HY23: GBP39.2 million). Adjusted EBITDA means operating profit
before interest, tax, depreciation and amortisation and excludes
separately disclosed acquisition and other costs.
Group adjusted EBITDA margin was 17.1%, down from 17.6% in HY23
reflecting the dilutive impact of bolt-on acquisitions and higher
subcontract labour requirements within the TIC divisions already
noted.
We remain confident that we can continue our long-term trend of
improving margins as we leverage operational efficiencies as a
result of the completion of integration programmes, which will be
complemented by the increasing scale of the higher margin GRC
division. On a statutory basis, operating profit was GBP0.0 million
(HY23: GBP5.7 million) reflecting the one-off costs associated with
the strategic review and fair value movement in contingent
consideration combined with higher amortisation of acquired
intangible assets.
Adjusted profit before tax was GBP24.1 million (HY22: GBP26.4
million) and has been adversely impacted by the increase in finance
costs on the back of the Bank of England base rate changes and
higher utilisation of the Group's debt facility. On a statutory
basis, loss before tax for the half year was GBP8.9 million (HY23
profit before tax: GBP1.7 million), reflecting the lower statutory
operating profit and the increase in finance costs.
Non-IFRS measures
The interim financial results contain all the information and
disclosures required by all accounting standards and regulatory
obligations that apply to the Group. The results 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:
H1 FY24 H1 FY23
Continuing operations GBPm GBPm
--------------------------------------------------- -------- --------
Operating profit 0.0 5.7
Amortisation of acquisition intangibles 12.8 11.8
Depreciation and amortisation of non-acquisition
intangibles 10.0 8.8
EBITDA 22.8 26.3
A reconciliation between statutory (loss)/profit and the
adjusted performance measures noted above is shown below:
(Loss)/profit Operating EBITDA
Six months ended 30 September 2023 before tax profit GBPm GBPm
Continuing operations GBPm
----------------------------------------- -------------- ------------- -------
Statutory reported (8.9) 0.0 22.8
Acquisition costs 1.4 1.4 1.4
Restructuring costs 9.4 9.4 9.4
Amortisation of acquisition intangibles 12.8 12.8 -
Share based payments (excluding
SAYE schemes) 0.8 0.8 0.8
Fair value losses in contingent
consideration and acquisition related
incentive schemes 4.5 4.5 4.5
Strategic review costs 4.1 4.1 4.1
Adjusted results 24.1 33.0 43.0
Profit Operating EBITDA
Six months ended 30 September 2022 before tax profit GBPm GBPm
Continuing operations GBPm
----------------------------------------- ------------ ------------- -------
Statutory reported 1.7 5.7 26.3
Acquisition costs 1.5 1.5 1.5
Restructuring costs 10.0 10.0 10.0
Amortisation of acquisition intangibles 11.8 11.8 -
Share based payments (excluding
SAYE schemes) 0.9 0.9 0.9
Fair value losses in contingent
consideration and acquisition related
incentive schemes 0.5 0.5 0.5
Adjusted results 26.4 30.4 39.2
Acquisition and other costs
Acquisition costs totalled GBP1.4 million in the half year
(HY23: GBP1.5 million) and include legal fees, professional fees
and staff costs incurred as part of the acquisitions.
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. Restructuring costs for the first half of the year were
GBP9.4 million (HY22: GBP10.0 million) reflecting acquisitions made
in year and the three key integration programmes within
Occupational Health, Water and Compliance eLearning, which have now
either completed or are being finalised. Restructuring costs
primarily consist of:
-- The cost of duplicated staff roles 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
Amortisation of intangible assets for the half year was GBP12.8
million (HY22: GBP11.8 million). This is attributable to the
carrying value of intangible assets resulting from the execution of
the Group's M&A strategy.
Non-cash share-based payment charges for the half year were
GBP0.8 million (HY23: GBP0.9 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 half year totalled
GBP4.5 million (HY23: GBP0.5 million).
As noted already the Group began a strategic review of Group
structure in the half-year to assess the merits of a potential
separation of certain businesses across its TIC and GRC Divisions.
Strategic Review costs include professional fees, legal fees and
staff costs. These costs are non-recurring and not considered to be
reflective of the underlying trading performance. 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) HY24 HY23
----------------------------------- ------- ------
Basic adjusted earnings per share 18.8p 22.3p
Basic (loss)/earnings per share (9.6)p 1.1p
----------------------------------- ------- ------
*Refer to note 5
The primary driver in the reduction in adjusted earnings per
share is the GBP4.9m increase in finance costs during the period.
This have been further compounded by the increase in the rate of
corporation tax to 25%.
Interest
Finance costs amounted to GBP8.9 million in the first six months
(HY23: GBP4.0 million). This movement reflects the increased costs
of borrowing driven by increased base rates and higher levels of
utilisation of the Group's debt facility.
Taxation
UK Corporation Tax is calculated at 25% (HY23: 19%) of the
estimated assessable profit for the year.
Statement of financial position
The Group looks to maintain a strong balance sheet that is
commensurate with the high levels of recurring revenues associated
with the business model. Net assets at 30 September 2023 were
GBP438.3 million (31 March 2023: GBP443.3 million). Property, plant
and equipment totalled GBP13.1 million (31 March 2023: GBP11.7
million), comprising freehold and long leasehold property,
leasehold improvements, operational equipment, vehicles and
computer systems.
Cash flow
The Group benefits from revenues which have beneficial
underlying working capital characteristics. As a result, working
capital as a % of revenue at the half year remained low. As
expected, operating cash flow in the first half included a working
capital outflow of GBP10.1 million (HY23: GBP16.6 million). This
included the usual timing elements such as the settlement of
business-as-usual accruals present at the year end, such as annual
bonus payments and the increase in prepayments driven by factors
such as annual insurance premiums. We also experienced adverse
timing on a significant customer invoice of approximately GBP2
million which has now been resolved. As usual we expect an inflow
in working capital in the second half relating to timing benefits
in the second half of the year.
Capital expenditure totalled GBP7.3 million (HY23: GBP7.6
million) reflecting the continued investment in our software
systems and ongoing investment in our businesses.
Net debt and financing
Net debt at 30 September 2023, including inter alia GBP26.7
million of lease liabilities, was GBP219.4 million (FY23: GBP188.9
million). Net debt (excluding lease liabilities) at the half was
GBP192.7 million (FY23: GBP160.8 million). The increase in net debt
since the year end reflects the targeted execution of the M&A
strategy with the completion of the IMSM acquisition a key
strategic step taking the Group into the ISO accreditation market.
The focus in the second half will primarily be on reducing leverage
down to around 2x adjusted EBITDA (excluding leases) by the end of
the financial year.
In July 2023 the Group completed a Capital Reduction and whilst
the Board and management remain focussed on the continued execution
of the Company's stated growth strategy, the Capital Reduction now
removes a potential restriction on the Company's ability to either
make dividend payments and other distributions or to purchase its
own shares in the future. The Capital Reduction will not change the
number of Ordinary Shares in issue or the paid-up share capital of
the Company or change any rights attaching to the Ordinary
Shares.
Key Performance Indicators ('KPIs')
The Group uses many different KPI's 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
profit before tax, adjusted operating profit and cash-flow,
including debtor analysis.
Unaudited Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2023
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2023 2022 2023
Notes GBP'm GBP'm GBP'm
----------------------------------------- ------ ---------------- ---------------- ------------
Revenue 2 251.3 222.9 465.7
Cost of sales (143.6) (131.0) (276.7)
----------------------------------------- ------ ---------------- ---------------- ------------
Gross profit 107.7 91.9 189.0
Administrative expenses excluding
costs separately disclosed below (74.7) (61.5) (124.7)
Acquisition costs 3 (1.4) (1.5) (2.7)
Restructuring costs 3 (9.4) (10.0) (21.1)
Amortisation of acquisition intangibles 3 (12.8) (11.8) (24.0)
Share based payments (excluding
SAYE schemes)(3) 3 (0.8) (0.9) (1.7)
Fair value losses in contingent
consideration and acquisition(3)
related incentive schemes 3 (4.5) (0.5) (8.4)
Strategic review costs 3 (4.1) - -
Total administrative expenses (107.7) (86.2) (182.6)
Operating profit 0.0 5.7 6.4
Exceptional finance costs - - (2.6)
Finance costs (8.9) (4.0) (10.7)
Total finance costs (8.9) (4.0) (13.3)
(Loss)/profit before tax (8.9) 1.7 (6.9)
Income tax (charge)/credit 4 (0.3) (0.6) 3.1
(Loss)/profit for the year and
total comprehensive income for the
year from continuing operations (9.2) 1.1 (3.8)
Attributable to owners of the parent (9.2) 1.1 (3.8)
----------------------------------------- ------ ---------------- ---------------- ------------
Earnings/(loss) per share attributable to owners
of the parent
(pence)
------------------------------------------------------ ---- ------
Total
-------------------------- ------ ------------------ ---- ------
Basic 5 (9.6) 1.1 (3.9)
Diluted 5 (9.6) 1.1 (3.9)
-------------------------- ------ ------------------ ---- ------
3 Acquisition related incentive schemes have been reclassified
in the prior year as documented in note 3
Unaudited Consolidated Statement of Changes in Equity
For the six months ended 30 September 2023
Share Share Merger Other Retained Total
capital premium Reserve reserves earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Balance at 1 April 2022 47.9 384.8 9.9 3.5 (0.1) 446.0
Profit for the period - - - - 1.1 1.1
----------------------------- --------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - - 1.1 1.1
----------------------------- --------- --------- --------- ---------- ---------- --------
Transaction with owners
Share-based payments - - - 1.0 - 1.0
- - - 1.0 - 1.0
----------------------------- --------- --------- --------- ---------- ---------- --------
Balance at 30 September
2022 (unaudited) 47.9 384.8 9.9 4.5 1.0 448.1
Balance at 1 October 2022 47.9 384.8 9.9 4.5 1.0 448.1
Loss for the period - - - - (4.9) (4.9)
----------------------------- --------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - - (4.9) (4.9)
----------------------------- --------- --------- --------- ---------- ---------- --------
Transaction with owners
Share-based payments - - - 1.3 - 1.3
Deferred tax on share-based
payments - - - (1.2) - (1.2)
----------------------------- --------- --------- --------- ---------- ---------- --------
- - - 0.1 - 0.1
----------------------------- --------- --------- --------- ---------- ---------- --------
Balance at 31 March 2023 47.9 384.8 9.9 4.6 (3.9) 443.3
----------------------------- --------- --------- --------- ---------- ---------- --------
Balance at 1 April 2023 47.9 384.8 9.9 4.6 (3.9) 443.3
Loss for the period - - - - (9.2) (9.2)
------------------------------- ----- -------- ----- ---- ------ ------
Total comprehensive income
for the period - - - - (9.2) (9.2)
------------------------------- ----- -------- ----- ---- ------ ------
Transaction with owners
Share-based payments - - - 1.2 - 1.2
Issue of shares during the
period 0.3 - 2.7 - - 3.0
0.3 - 2.7 1.2 - 4.2
------------------------------- ----- -------- ----- ---- ------ ------
Cancellation of share premium - (384.8) - - 384.8 -
Balance at 30 September
2023 (unaudited) 48.2 - 12.6 5.8 371.7 438.3
------------------------------- ----- -------- ----- ---- ------ ------
Unaudited Consolidated Statement of Financial Position
As at 30 September 2023
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2023 2022 2023
Notes GBP'm GBP'm GBP'm
------------------------------------------- ------ -------------- -------------- ----------
ASSETS
Non-current assets
Intangible assets 7 667.4 645.2 644.1
Property, plant and equipment 13.1 13.6 11.7
Right of use assets 25.7 26.4 27.4
Trade and other receivables 9 2.1 4.7 4.8
Deferred tax asset 4.4 3.9 4.4
------------------------------------------- ------ -------------- -------------- ----------
712.7 693.8 692.4
------------------------------------------- ------ -------------- -------------- ----------
Current assets
Inventories 9.9 9.0 9.3
Trade and other receivables 9 132.0 114.3 116.4
Held for sale property - - 1.3
Current tax asset 2.3 2.0 1.8
Cash and cash equivalents 10 36.3 19.8 30.2
------------------------------------------- ------ -------------- -------------- ----------
180.5 145.1 159.0
------------------------------------------- ------ -------------- -------------- ----------
Total assets 893.2 838.9 851.4
------------------------------------------- ------ -------------- -------------- ----------
LIABILITIES
Current liabilities
Trade and other payables (129.4) (118.9) (123.2)
Financial liabilities - lease liabilities 10 (9.4) (9.5) (9.7)
Provisions (1.6) (1.1) (1.4)
------------------------------------------- ------ -------------- -------------- ----------
(140.4) (129.5) (134.3)
Non-current liabilities
Trade and other payables (12.2) (13.8) (12.0)
Financial liabilities - borrowings 11 (229.0) (176.0) (191.0)
Financial liabilities - lease liabilities 10 (17.3) (18.5) (18.4)
Deferred tax liabilities (54.7) (51.8) (51.2)
Provisions (1.3) (1.2) (1.2)
------------------------------------------- ------ -------------- -------------- ----------
(314.5) (261.3) (273.8)
------------------------------------------- ------ -------------- -------------- ----------
Total liabilities (454.9) (390.8) (408.1)
------------------------------------------- ------ -------------- -------------- ----------
Net assets 438.3 448.1 443.3
------------------------------------------- ------ -------------- -------------- ----------
EQUITY
Share capital 12 48.2 47.9 47.9
Share premium account - 384.8 384.8
Merger relief reserve 12.6 9.9 9.9
Other reserves 5.8 4.5 4.6
Retained earnings 371.7 1.0 (3.9)
------------------------------------------- ------ -------------- -------------- ----------
Equity attributable to owners of
parent 438.3 448.1 443.3
------------------------------------------- ------ -------------- -------------- ----------
Unaudited Consolidated Statement of Cash Flows
For the six months ended 30 September 2023
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2023 2022 2023
Notes GBP'm GBP'm GBP'm
-------------------------------------------- ------ -------------- -------------- ----------
Net cash generated from operations 13 27.5 22.6 74.3
Net finance costs (8.3) (2.5) (8.6)
Income taxes paid (1.0) (5.9) (8.3)
-------------------------------------------- ------ -------------- -------------- ----------
Net cash generated from operating
activities before acquisition and
restructuring costs 18.2 14.2 57.4
Acquisition and restructuring costs (10.8) (11.5) (23.8)
-------------------------------------------- ------ -------------- -------------- ----------
Net cash generated from operating
activities 7.4 2.7 33.6
Cash flows used in investing activities
Purchases of property, plant and
equipment and non-acquisition intangibles (7.3) (7.6) (16.4)
Disposal of property, plant and
equipment 0.4 0.3 1.4
Purchase of subsidiary undertakings
net of cash acquired (26.3) (37.1) (59.0)
Cash flows used in investing activities (33.2) (44.4) (74.0)
-------------------------------------------- ------ -------------- -------------- ----------
Cash flows from financing activities
Utilisation of debt facility 42.0 36.0 65.0
Repayment of debt facility (4.0) - (14.0)
Repayment of debt upon purchase
of subsidiary undertaking (0.4) (0.4) (0.5)
Lease repayments (5.7) (5.3) (11.1)
Net cash generated from financing
activities 31.9 30.3 39.4
-------------------------------------------- ------ -------------- -------------- ----------
Net increase/(decrease) in cash
and cash equivalents 6.1 (11.4) (1.0)
Cash and cash equivalents at start
of period 30.2 31.2 31.2
-------------------------------------------- ------ -------------- -------------- ----------
Cash and cash equivalents at the
end of period 36.3 19.8 30.2
-------------------------------------------- ------ -------------- -------------- ----------
Cash and cash equivalents shown
above comprise:
Cash at bank 10 36.3 19.8 30.2
-------------------------------------------- ------ -------------- -------------- ----------
Notes to the consolidated Interim Report
For the six months ended 30 September 2023
1. Basis of Preparation
Basis of preparation
The consolidated interim financial information of the Group for
the six months ended 30 September 2023 was approved by the Board of
Directors and authorised for issue on 28 November 2023. The
disclosed figures are not statutory accounts in terms of Section
434 of the Companies Act 2006. Statutory accounts for the year
ended 31 March 2023, on which the auditors gave an audit report
which was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006, have been filed with the
Registrar of Companies. The annual financial statements of the
Group are prepared in accordance with applicable law and UK-adopted
International Accounting Standards (UK-IAS).
The comparative figures for the financial year ended 31 March
2023 and the six months ended 30 September 2022 are consistent with
the Group's annual financial statements and interim financial
statements respectively.
Going concern
Based on the Group's cash flow forecasts and projections, the
Directors are satisfied that the Group has adequate resources to
continue in operational existence for the foreseeable future. In
the event of further disruption to the business in the future as a
result of the crises in Ukraine and Gaza, 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. They continue to
adopt the going concern basis of accounting in preparing these
interim financial statements.
Accounting policies
This interim report has been prepared in accordance with the
recognition and measurement requirements of UK adopted
International Accounting Standards (IAS) but does not include all
the disclosures that would be required under IAS. The accounting
policies adopted in the interim financial statements are consistent
with those adopted in the last annual report for financial year
ended 31 March 2023 and those applicable for the year ending 31
March 2024.
There were no new relevant Standards or Interpretations to be
adopted for the six months ended 30 September 2023.
Critical accounting estimates and judgements continue to be
applied to the identification of separable intangibles on
acquisition and rate of customer attrition, acquisition and other
costs, valuation of separable intangibles on acquisition,
impairment of non-financial assets, impairment of trade receivables
and recoverability of amounts due from contract assets.
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 adjusted
operating profit, adjusted EBITDA and adjusted profit before tax
and are shown before acquisition and restructuring costs,
amortisation of acquisition intangibles, fair value losses in
contingent consideration and acquisition related incentive schemes,
share based payments and strategic review costs. 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.
Six months ended 30 September 2023 - Unaudited
Head
GRC TIC Office Total
Continuing operations GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------- ------- -------- --------
Revenue 103.2 153.8 0.1 257.1
Inter-segment elimination (1.2) (4.6) - (5.8)
----------------------------------------------- ------- ------- -------- --------
Revenue from external customers 102.0 149.2 0.1 251.3
----------------------------------------------- ------- ------- -------- --------
Segment adjusted operating profit/(loss) 22.9 13.5 (3.4) 33.0
Acquisition costs (1.4)
Restructuring costs (9.4)
Amortisation of acquisition intangibles (12.8)
Share based payments (excluding SAYE
schemes) (0.8)
Fair value losses in contingent consideration
and acquisition related incentive
schemes (4.5)
Strategic review costs (4.1)
Operating profit -
Finance costs (8.9)
Loss before tax (8.9)
Tax charge (0.3)
----------------------------------------------- ------- ------- -------- --------
Loss after tax (9.2)
----------------------------------------------- ------- ------- -------- --------
Segment assets 132.6 280.6 480.0 893.2
Segment liabilities (64.4) (79.8) (310.7) (454.9)
Capital expenditure (4.9) (2.4) - (7.3)
Depreciation and amortisation (3.9) (5.8) (13.1) (22.8)
----------------------------------------------- ------- ------- -------- --------
Six months ended 30 September 2022 - Unaudited
Head
GRC TIC Office Total
Continuing operations GBP'm GBP'm GBP'm GBP'm
----------------------------------------------- ------- ------- -------- --------
Revenue 92.8 135.1 - 227.9
Inter-segment elimination (0.5) (4.5) - (5.0)
----------------------------------------------- ------- ------- -------- --------
Revenue from external customers 92.3 130.6 - 222.9
----------------------------------------------- ------- ------- -------- --------
Segment adjusted operating profit/(loss) 20.6 12.8 (3.0) 30.4
Acquisition costs (1.5)
Restructuring costs (10.0)
Amortisation of acquisition intangibles (11.8)
Share based payments (excluding SAYE
schemes) (0.9)
Fair value losses in contingent consideration
and acquisition related incentive
schemes (0.5)
Operating profit 5.7
Finance costs (4.0)
----------------------------------------------- ------- ------- -------- --------
Profit before tax 1.7
Tax charge (0.6)
----------------------------------------------- ------- ------- -------- --------
Profit after tax 1.1
----------------------------------------------- ------- ------- -------- --------
Segment assets 128.0 168.6 542.3 838.9
Segment liabilities (58.2) (71.1) (261.5) (390.8)
Capital expenditure (5.0) (2.4) (0.2) (7.6)
Depreciation and amortisation (3.3) (5.3) (12.0) (20.6)
----------------------------------------------- ------- ------- -------- --------
Audited year ended 31 March 2023
Head
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)
Share based payments (excluding SAYE
schemes) (1.7)
Fair value losses in contingent consideration
and acquisition related incentive
schemes (8.4)
----------------------------------------------- ------- ------- -------- --------
Operating profit 6.4
Exceptional finance costs (2.6)
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)
----------------------------------------------- ------- ------- -------- --------
Six months ended 30 September 2023 - Unaudited
Head
GRC TIC Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------------------ ------ ------ -------- ------
Segment adjusted operating profit/(loss) 22.9 13.5 (3.4) 33.0
Depreciation and amortisation of
non-acquisition intangibles 3.9 5.8 0.3 10.0
------------------------------------------ ------ ------ -------- ------
Adjusted EBITDA 26.8 19.3 (3.1) 43.0
------------------------------------------ ------ ------ -------- ------
Six months ended 30 September 2022 - Unaudited
Head
GRC TIC Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------------------ ------ ------ -------- --------
Segment adjusted operating profit/(loss) 20.6 12.8 (3.0) 30.4
Depreciation and amortisation of
non-acquisition intangibles 3.3 5.3 0.2 8.8
------------------------------------------ ------ ------ -------- --------
Adjusted EBITDA 23.9 18.1 (2.8) 39.2
------------------------------------------ ------ ------ -------- --------
Audited year ended 31 March 2023
Head
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
------------------------------------------ ------ ------ -------- ------
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 six-month period ended 30 September 2023, no customers
(30 September 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
with that programme would cease.
-------------------------------------------------------------
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
non-cash charges arising from investment activities.
As such, they are not considered to be reflective
of the underlying trading performance of the Group.
-------------------------------------------------------------
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
adjusting items. Although share-based compensation
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
from 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 write
finance down of deferred finance costs associated with the
costs debt facilities which were replaced in FY23. 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.
-------------------------------------------------------------
Strategic review Strategic Review costs include professional fees,
costs legal fees and staff costs associated with performing
a strategic review of the merits of a potential separation
of the TIC and GRC divisions. These costs are non-recurring
and not considered to be reflective of the underlying
trading performance.
-------------------------------------------------------------
In the September 2022 comparative figures, the 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 losses in contingent consideration and
acquisition related incentive schemes' to better reflect the nature
of these schemes. As a result, the September 2022 charge for
'Share-based payments and legacy long-term incentives' has reduced
from GBP1.4m to GBP0.9m and the September 2022 charge for 'Fair
value gains/(losses) in contingent consideration and acquisitions
related incentive schemes' has increased from GBP0.0m to GBP0.5m.
The March 2023 comparative figures already include this
reclassification.
4. Taxation
The underlying tax charge is based on the expected tax rate
(25%) for the year ending 31 March 2024 applied to taxable trading
profits for the period. The tax rate applied to the comparative
periods ending 30 September 2022 and 31 March 2023 was 19%.
5. Earnings per ordinary share
Basic earnings per share have been calculated on the
(loss)/profit after tax for the period and the weighted average
number of ordinary shares in issue during the period.
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended 31
September September March
2023 2022 2023
Weighted average number of shares in
issue 96,072,077 95,856,682 95,868,871
Total (loss)/profit after tax for the GBP(9.2)m GBP1.1m GBP(3.8)m
period
--------------------------------------------- ------------ -------------- -------------
Total basic (loss)/earnings per ordinary
share (pence) (9.6)p 1.1p (3.9)p
--------------------------------------------- ------------ -------------- -------------
Weighted average number of shares in
issue 96,072,077 95,856,682 95,868,871
Potential dilution of share options 1,111,486 1,531,699 1,291,637
Weighted average fully diluted number
of shares in issue 96,072,077 97,388,381 95,868,871
Total fully diluted (loss)/earnings
per share (pence) (9.6)p 1.1p (3.9)p
--------------------------------------------- ------------ -------------- -------------
Potentially dilutive shares have not been included in the
diluted EPS for the period ending 30 September 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:
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended 31
September September March
2023 2022 2023
GBP'm GBP'm GBP'm
(Loss)/profit before tax for the period (8.9) 1.7 (6.9)
Adjustments:
Acquisition costs 1.4 1.5 2.7
Restructuring costs 9.4 10.0 21.1
Amortisation of acquisition intangibles 12.8 11.8 24.0
Share based payments (excluding SAYE
schemes) 0.8 0.9 1.7
Fair value losses in contingent consideration
and acquisition related incentive schemes 4.5 0.5 8.4
Exceptional finance costs - - 2.6
Strategic review costs 4.1 - -
Adjusted profit before tax for the
period 24.1 26.4 53.6
----------------------------------------------- ------------ ------------ ----------
The adjusted earnings per share, based on weighted average
number of shares in issue during the period, is calculated
below:
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended 31
September September March
2023 2022 2023
Adjusted profit before tax (GBP'm) 24.1 26.4 53.6
Tax at 25%,19%,19% (6.0) (5.0) (10.2)
------------------------------------------- ------------ ------------ ----------
Adjusted profit after taxation (GBP'm) 18.1 21.4 43.4
------------------------------------------- ------------ ------------ ----------
Adjusted basic earnings per share (pence) 18.8 22.3 45.3
------------------------------------------- ------------ ------------ ----------
Adjusted fully diluted earnings per
share (pence) 18.8 22.0 45.3
------------------------------------------- ------------ ------------ ----------
6. Dividends
The Company has not declared any dividends in respect of the
current year or prior year.
7. Intangible assets
Customer Applications Content Trade
Goodwill relationships software database name Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------- ---------------- --------------- ------------- ---------- ------ ------
Cost
1 April 2022 395.5 185.0 45.4 7.5 6.1 639.5
Acquired with
subsidiary 24.8 17.7 1.7 0.5 - 44.7
Additions - - 4.7 - - 4.7
30 September 2022 420.3 202.7 51.8 8.0 6.1 688.9
------------------- ---------------- --------------- ------------- ---------- ------ ------
1 October 2022 420.3 202.7 51.8 8.0 6.1 688.9
Acquired with
subsidiary 4.7 2.0 1.3 - - 8.0
Additions - - 4.8 - - 4.8
Disposals (0.3) - - - - (0.3)
------------------- ---------------- --------------- ------------- ---------- ------ ------
31 March 2023 424.7 204.7 57.9 8.0 6.1 701.4
------------------- ---------------- --------------- ------------- ---------- ------ ------
1 April 2023 424.7 204.7 57.9 8.0 6.1 701.4
Acquired with
subsidiary 18.5 14.5 - 0.3 - 33.3
Additions - - 5.0 - - 5.0
Disposals - - (0.3) - - (0.3)
30 September 2023 443.2 219.2 62.6 8.3 6.1 739.4
------------------- ---------------- --------------- ------------- ---------- ------ ------
Accumulated amortisation and
impairment
1 April 2022 - 24.3 4.9 0.6 0.2 30.0
Charge for the
period - 9.0 3.7 0.6 0.3 13.6
------------------- ---------------- --------------- ------------- ---------- ------ ------
30 September 2022 - 33.3 8.6 1.2 0.5 43.6
------------------- ---------------- --------------- ------------- ---------- ------ ------
1 October 2022 - 33.3 8.6 1.2 0.5 43.6
Charge for the
period - 9.1 3.6 0.7 0.3 13.7
------------------- ---------------- --------------- ------------- ---------- ------ ------
31 March 2023 - 42.4 12.2 1.9 0.8 57.3
------------------- ---------------- --------------- ------------- ---------- ------ ------
1 April 2023 - 42.4 12.2 1.9 0.8 57.3
Charge for the
period - 9.7 4.2 0.7 0.3 14.9
Disposals - - (0.2) - - (0.2)
------------------- ---------------- --------------- ------------- ---------- ------ ------
30 September 2023 - 52.1 16.2 2.6 1.1 72.0
------------------- ---------------- --------------- ------------- ---------- ------ ------
Carrying amount
------------------- ---------------- --------------- ------------- ---------- ------ ------
30 September 2022 420.3 169.4 43.2 6.8 5.6 645.2
------------------- ---------------- --------------- ------------- ---------- ------ ------
31 March 2023 424.7 162.3 45.7 6.1 5.3 644.1
------------------- ---------------- --------------- ------------- ---------- ------ ------
30 September 2023 443.2 167.1 46.4 5.7 5.0 667.4
------------------- ---------------- --------------- ------------- ---------- ------ ------
8. Business Combinations
During the period ending 30 September 2023 the Group made 5
acquisitions. The provisional fair values are as follows:
Net Intangible Intangible Intangible
Cash Share based Contingent assets assets-customer assets-content assets-deferred
Acquisition Division consideration consideration consideration Total acquired relationships database tax Goodwill
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---------------- ------------- ------------------ -------------- -------------- ------- ---------- ------------------ --------------- ---------------- -----------
Victory Fire TIC 5.5 - 1.0 6.5 2.4 1.2 - (0.3) 3.2
Clymac TIC 8.2 - 0.3 8.5 0.4 4.5 - (1.1) 4.7
JCR Security TIC 0.4 - 0.3 0.7 0.1 0.2 - - 0.4
Trans-Fire
Holdings TIC 0.7 - 0.2 0.9 0.2 0.4 - (0.1) 0.4
IMSM GRC 15.6 3.0 2.0 20.6 4.5 8.2 0.3 (2.2) 9.8
Total 30.4 3.0 3.8 37.2 7.6 14.5 0.3 (3.7) 18.5
9. Trade and other receivables
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended 31
September September March
2023 2022 2023
GBP'm GBP'm GBP'm
Current
Trade receivables 81.4 78.6 81.9
Less: provision for impairment of trade
receivables (1.8) (2.6) (1.9)
----------------------------------------- ------------ ------------ ----------
Trade receivables - net 79.6 76.0 80.0
----------------------------------------- ------------ ------------ ----------
Other receivables 4.6 2.4 2.8
Contract assets 5.3 2.6 2.1
Accrued income 29.5 21.9 22.8
Prepayments 12.3 10.7 8.1
Deferred consideration receivable in
less than one year 0.7 0.7 0.6
132.0 114.3 116.4
----------------------------------------- ------------ ------------ ----------
Non-current
Deferred consideration receivable in
more than one year 2.1 4.7 4.8
----------------------------------------- ------------ ------------ ----------
2.1 4.7 4.8
----------------------------------------- ------------ ------------ ----------
Deferred consideration receivable 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. 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 consideration is subject to a number of variables which may
result in the amount received being materially greater or lower
than currently recognised.
10. Net debt
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended 31
September September March
2023 2022 2023
GBP'm GBP'm GBP'm
Cash at bank and in hand 36.3 19.8 30.2
Bank loans due after one year (229.0) (176.0) (191.0)
Leases due within one year (9.4) (9.5) (9.7)
Leases due after one year (17.3) (18.5) (18.4)
------------------------------- ------------ ------------ ----------
Net (debt) (219.4) (184.2) (188.9)
------------------------------- ------------ ------------ ----------
11. Financial liabilities - Borrowings
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended 31
September September March
2023 2022 2023
GBP'm GBP'm GBP'm
Current
Bank loans - - -
--------------- ------------ ------------ ----------
- - -
--------------- ------------ ------------ ----------
Non - current
Bank loans 229.0 176.0 191.0
--------------- ------------ ------------ ----------
229.0 176.0 191.0
--------------- ------------ ------------ ----------
12. Called up share capital
Allotted,
issued
and fully No. of Issue
paid ordinary price
GBP'm shares
(p)
Balance at 1 April 2022 47.9 95,833,853
Share Options ("SAYE 2020") 6,204 460p
Marlowe plc Long Term Incentive Plan
2019 37,879 50p
Balance at 30 September 2022 (unaudited) 47.9 95,877,936
------------------------------------------------ ----------- ----------- -------
Share Options ("SAYE 2020") 4,129 460p
Balance at 31 March 2023 (audited) 47.9 95,882,065
------------------------------------------------ ----------- ----------- -------
Share-based consideration for IMSM Acquisition 597,609 502p
Share Options ("SAYE 2020") 2,217 460p
Balance at 30 September 2023 (unaudited) 48.2 96,481,891
------------------------------------------------ ----------- ----------- -------
13. Net cash generated from operations
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended 31
September September March
2023 2022 2023
GBP'm GBP'm GBP'm
------------------------------------------------ ------------ ------------ ----------
Continuing operations
(Loss)/profit before tax (8.9) 1.7 (6.9)
Depreciation of property, plant and
equipment and amortisation of non-acquisition
intangibles 10.0 8.8 18.4
Acquisition costs 1.4 1.5 2.7
Restructuring costs 9.4 10.0 21.1
Amortisation of acquisition related
intangible assets 12.8 11.8 24.0
Share based payments (excluding SAYE
schemes) 0.8 0.9 1.7
Fair value losses in contingent consideration
and acquisition related incentive schemes 3.2 0.5 8.4
Net finance costs 8.9 4.0 13.3
Increase in inventories (0.2) (1.3) (1.7)
Increase in trade and other receivables (10.2) (11.2) (12.0)
Increase/(decrease) in trade and other
payables 0.3 (4.1) 5.3
------------------------------------------------ ------------ ------------ ----------
Net cash generated from operations 27.5 22.6 74.3
------------------------------------------------ ------------ ------------ ----------
14. Related party transactions and key management
compensation
Related party transactions
There were no related party transactions during the period.
Key management compensation
Transactions between the Group and key management personnel in
the period relate to remuneration consistent with the policy set
out in the Directors' Remuneration Report within the Group's 2023
Annual Report.
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END
IR UBURRONUAUUA
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