Company Announcements

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28 June 2022

Marlowe plc

Preliminary unaudited results for the year ended 31 March 2022

Further strategic progress and strong start to the new financial year

Marlowe plc ("Marlowe", the "Group" or the "Company"), the UK leader in business-critical services and software which assure safety and regulatory compliance, announces its unaudited results for the year ended 31 March 2022 ("FY22").

Financial performance

¹ Earnings before interest, taxes, depreciation and amortisation ("EBITDA")

² Explanation of non-IFRS measures are contained within the Chief Finance Officer's review

³ Divisional EBITDA margin does not include central costs  

⁴ Excluding IFRS 16 lease liabilities

Marlowe is holding a full year results presentation for investors and analysts at 09:30 GMT today. A

link to this event is here.  

Financial highlights

Strong performance as we continue to execute our compliance strategy

·      Group revenue increased 65% to £315.9 million

§ Current annualised run-rate revenue £434 million with >85% recurring

·      Adjusted EBITDA increased 90% to £54.4 million

§ Current annualised run-rate adjusted EBITDA £77 million

·      Adjusted profit before tax increased 123% to £38.1 million

·      Adjusted basic EPS increased 51% to 37.7p

Strong organic growth

·      Underlying organic revenue growth of 9%, adjusted down from 11% to account for COVID-19 impact, representing an acceleration on prior years

Increasing software subscription revenues

·      Software Annual Recurring Revenue ("SaaS ARR"): c.£38 million; 9% of total revenue

·      Software generates approximately 25% of Group annualised run-rate adjusted EBITDA

Margin expansion

·      Divisional adjusted EBITDA margin increased 250bps to 18.7% as we continue to benefit from integration synergies, operational & technological improvements and attractive operational gearing

Strong balance sheet and operating cash flow: 

·      Net debt/EBITDA leverage ratio 1.6x at year-end; 1.8x following FY23 Q1 acquisitions  

·      Net cash generated from operations £34.0 million

Strategic and Operational highlights

Medium-term growth strategy

·      Expect to exceed run-rate targets of c.£500 million revenue and c.£100 million adjusted EBITDA with 90%+ cash conversion materially ahead of our original end of FY24 target

Successful execution of acquisitions and integrations

·      £314m capital deployed in FY22 over 20 earnings enhancing acquisitions including:

o  £135 million acquisition of Optima Health, transforming the scale of our occupational health consultancy within our GRC division

o  £113 million on broadening our software capabilities

o  £30 million on Hydro-X, building further scale in TIC division

·      Integrations on-track and acquisitions trading in-line with, or significantly ahead of, pre-acquisition expectations

Broadening our software capabilities

·      Major progress towards being the UK leader in compliance software, with SaaS ARR increasing from <2% in FY20 to 9% in FY22

·      £70 million capital allocated to strengthen compliance eLearning offering via VinciWorks, Essential Skillz, SkillBoosters and Cylix acquisitions

·      £32 million acquisition of Barbour, the UK's leading environmental, health & safety intelligence platform

·      £11 million acquisition of CoreStream, the leading governance, risk and compliance SaaS platform to target enterprise level clients

Organic investment in product launches

·      Launch of ProSure 360 software now contributing to revenue, and roll-out of YouManage and Meridian software across GRC client base

·      Recent launch of ESG software to support clients' management of ESG strategies, following organic investment in OmniTrack, VinciWork's GRC software platform

Current trading and outlook

·      Strong start to the new financial year with good levels of organic growth consistent with our medium-term high single digit target

·      Six acquisitions completed since year end with £26 million capital deployed, further deepening presence in key markets across Consultancy and Intelligence within GRC and assurance within TIC

·      Inflationary and recruitment pressures not materially impacting the Group as a result of ability to manage customer pricing and recruitment

·      Significant pipeline of earnings-enhancing service and software acquisitions

Commenting on the results Alex Dacre, Chief Executive, said:

"We are pleased to report a strong financial performance in the year and further significant progress in the execution of our strategy.

Our results reflect strong underlying organic growth of 9% and the contribution from acquisitions, which we are integrating successfully. We continue to exceed the growth of our regulatory compliance markets through our ability to cross-sell services and software and our high levels of customer service, which results in low rates of customer attrition. We are delivering at pace on our vision of becoming a one-stop provider for our customers' compliance needs, with run-rate revenue now exceeding £430 million.  We have become the UK market leader in compliance software, with 25% of our profits now generated from software, and have further strengthened our operations through effective integration programmes and organic investments, increasing our adjusted EBITDA margin by 250 bps to 18.7%.

We operate in highly attractive acyclical markets with strong structural tailwinds, and benefit from the business-critical requirements for our services, which are driven by increasingly stringent regulations, greater enforcement and increased ESG requirements.  We have high visibility with over 85% recurring revenue from delivering our services through SaaS-based subscriptions and multi-year contracts.

As we announced at our recent Capital Markets Day, we remain confident in our progress towards the targets we set in February 2021, which are to achieve run-rate revenue of c.£500 million and adjusted run-rate EBITDA of c.£100 million by the end of FY24, which we expect to deliver materially ahead of schedule.

We have made a strong start to the new financial year, with good levels of organic growth, £26 million of capital deployed in completing six further acquisitions and continued successful integration programmes. Our acquisition pipeline is well-developed and we expect to report on further progress as the year develops."

Annual Report and Financial Statements and Notice of Annual General Meeting

The Company will shortly publish its Annual Report and Financial Statements for the year ended 31 March 2022 together with a notice convening the Company's annual general meeting. The AGM will be held at 10am on 14 September 2022 at 20 Grosvenor Place, London, SW1X 7HN.

The FY22 Annual Report and Financial Statements and the Notice of AGM will be posted to shareholders and will be capable of being viewed at or downloaded from the Company's corporate website at www.marloweplc.com.

CHIEF EXECUTIVE'S REVIEW

Group Results

The Group delivered a strong financial performance in the year with revenue increasing 65% to £315.9 million (FY21: £192.0 million), driven by strong organic growth of 11% and the contribution from acquisitions. After adjusting down for the estimated impact of COVID-19 in FY21 underlying organic revenue growth was 9%, representing an acceleration on prior years.

Adjusted EBITDA increased 90% to £54.4 million (FY21: £28.7 million) with adjusted divisional EBITDA margins increasing 250bps to 18.7% (FY21: 16.2%) as we continue to drive efficiencies and integration synergies, as well as benefit from our pricing power and increased scale.  Adjusted profit before tax increased by 123% to £38.1 million (FY21: £17.1 million), and adjusted basic EPS increased 51% to 37.7p (FY21: 25.0p), including the impact of the equity placings in the year.

On a statutory basis the Group has also made a step forward in profitability. Statutory operating profit increased to £10.5 million (FY21: £1.0 million). Profit before tax improved to £5.9 million compared to a £1.6 million loss in the prior year. Basic earnings per share of 0.8p (FY21: (3.1)p) reflected the increased tax provision on deferred tax balances resulting from the change in tax rate to 25% on 1st April 2023.

Our business is highly cash-generative. For the year ending 31 March 2022, the Group generated £34 million of operating cash flow and, over the last 24-month period taking into account the distortive impact of COVID-related deferrals, we delivered cash conversion of 91%, slightly above our FY24 target. At the year-end net debt was £110.7 million (FY21: £43.3 million - cash), excluding lease liabilities of £22.6 million (FY21: £19.0 million), with a proforma net debt/adjusted EBITDA gearing ratio of 1.6x, within our target range of 1.5x-2.5x.

The Group has built major scale across its target markets and is well capitalised to take advantage of further acquisition opportunities. As a result of our significant operating cash flows, we are able to fund bolt-on acquisitions via cash generated from the business, rather than relying on external financing.

Major Progress

Marlowe has successfully become a compliance platform addressing the full life cycle of risk: a proposition we deliver to c.50,000 clients operating across B2B markets, with our clients relying on our one-stop shop of services and software to ensure their businesses have what they need to be safe, efficient and compliant. Key focus areas such as safety, health, wellbeing and ESG continue to take on increased importance for our clients and, as a result, their budgets continue to grow.

We continued our fast-paced momentum during the year with strong organic growth and a well-executed M&A programme. During the year we deployed £314 million on 20 earnings-enhancing acquisitions, of which £267 million was deployed within our GRC division, representing 85% of capital deployed within the year. Of these acquisitions, the largest was Optima Health, which built on our existing occupational health activities to create a UK market leading corporate health and wellbeing platform. We also completed the acquisition of VinciWorks, Corestream and Barbour, consistent with our ambition to become the UK leader in compliance software.  Within TIC, our acquisitions included Hydro-X, Alarm Communications ("ACL") and Santia which further deepened our market share across these attractive regulated testing & inspection markets. On a run-rate basis the GRC division now represents c.40% of Group revenue and c.60% of Group adjusted EBITDA, with SaaS ARR representing 9% of Group revenue. A further £26 million has been deployed on six acquisitions since the start of the current financial year across both GRC and TIC.

With our leading market shares, high service and compliance standards and technology-driven model, we are well-positioned to continue to benefit from the favourable growth trends in our markets. We operate in a heavily fragmented UK addressable market estimated to be £8.4 billion, with attractive medium-term growth rates of between 3% and 10% per annum. With Marlowe accounting for 5% to 10% share of each of its markets, the Group has significant scope for future expansion.

Strategy

Marlowe's vision is to be the leader in services and software which assure regulatory compliance. Our strategy is to deliver a one-stop approach for our clients' compliance needs from content, intelligence and consultancy, through to software and assurance services:

·      Using our proprietary software, we provide regulatory data, information and practical guidance that enables decision makers to assess the regulations applicable to their organisations - this is our compliance content and intelligence capability.

·      Our consultants and auditors provide the advisory services our clients depend on to help them apply regulations to their organisations - this is our compliance consulting capability.

·      Our SaaS applications also help to monitor, control and automate a range of compliance risks - this is our software capability.

·      We deliver field-based compliance services to test and inspect business premises, in areas such as fire safety & water hygiene - this is our compliance assurance capability.

So, whether by training your staff via innovative eLearning on the latest workplace compliance standards, providing regulatory intelligence software, giving advice on an employee dispute, auditing health & safety standards, assessing the health & wellbeing of your staff or certifying fire safety compliance, all our activities are bound by the same mission of assuring compliance.

This focus is not just strategically coherent but financially compelling too, with >85% recurring revenues delivered as SaaS subscriptions or through multi-year contracts. As a result of the regulations that drive our model and the essential nature of our services and software, we have a defensive and resilient business model with a diverse customer base and long-term revenue streams affording excellent earnings visibility.

Our six business lines operate autonomously, but are bound by common sales channels resulting in strong synergies between them. We understand what our clients care about and we apply similar processes and methodologies across the Group to attract and retain clients. We benefit from the major competitive advantage of being able to cross-sell services and software, as this both accelerates our organic growth and and also reduces the cost of customer acquisition. Our end-to-end compliance model often brings the market to us, as Compliance or Health & Safety Directors responsible for many different risk areas often prefer to have a single supplier addressing their requirements.

Outperformance against FY24 targets

As previously announced, we expect to exceed our end of FY24 strategic and financial targets materially ahead of schedule. We set these targets at our Capital Markets Day in February 2021, which was to double our run-rate revenue to c.£500 million and almost triple our run-rate Group adjusted EBITDA to c.£100 million. We said that we targeted a software ARR of at least 10% of overall Group revenue, or £50 million, and would deliver at least 90% cash conversion. We have made very significant progress towards reaching these financial targets and we have done this through executing our Deepen, Broaden, Strengthen and Digitalise strategy:

·      Deepening our presence in our markets both organically and through further M&A, building leading, positions across our markets.

·      Broadening our capabilities across the compliance and business-critical service and software landscape.

·      Strengthening the Group through organic investment initiatives, cross-selling our software and services, and expanding our margins through effective integration programmes.

·      Digitalising our compliance proposition by becoming the leading compliance software Group.

We have made major progress on each of these strategic fronts, achieving our cash conversion target, and making major progress towards our FY24 revenue, profit and SaaS ARR targets.

Software  

Software is a core part of the service that we deliver, a key competitive differentiator and a central part of our future growth strategy. We refer to this as our Digitalise strategy. We have made significant progress on this front through both organic and M&A investment, having deployed £113 million of capital into software acquisitions during the year.

On a standalone basis Marlowe's Compliance Software business is one of the largest GRC software businesses in the UK.

We first announced our Digitalise strategy in February 2021 when our software ARR was 3% of overall Group revenue. Since then our software ARR has grown to around 9% of Group revenues and 25% of Group adjusted EBITDA. These revenues are generated through recurring SaaS-based subscriptions and we achieve customer net retention rates which are comfortably over 100%. Our Compliance Software business now generates over £38 million of ARR, with each product growing organically in the high teens and above. We are now also delivering a software EBITDA margin in excess of 40%, with our digital products serving over 3 million users.

Since launching the Digital strategy we have executed eight software acquisitions, and compliance software remains a key corporate focus area. We expect our SaaS revenue as a proportion of total revenues to continue to grow, as we benefit from continued fast growth in software markets and cross-selling our products across our enlarged client base. We plan to expand into compliance areas in adjacent markets such as supply chain risk and quality management, initially by acquiring new businesses.

We will continue to develop the Group's digital offering organically - leveraging the compliance and technology expertise within the Group to launch organic initiatives. Organic investment in our product roadmap has increased, and we have the in-house expertise to bring our own SaaS products to market. Following a software acquisition we will typically increase development investment by around 20%-30%. There are two clear examples of this investment in FY22: firstly, the in-year launch of ProSure360, a supplier verification tool, which allows our clients to vet and qualify their supply chain, and which is now generating revenues and being sold alongside our Elogbooks contractor management and Meridian health and safety software. In addition, following investment in the year, our VinciWorks business has recently launched a new ESG software product to help clients design, assess, implement and manage their ESG strategies and goals.

Acquisitions

We have completed 20 transactions during FY22, deploying £314 million of capital, with a further £26 million deployed on six acquisitions post year-end. Key acquisitions completed in the year include:

·      Optima Health (January 2022, £135 million) - making the Group the UK leader in the corporate health & wellbeing sector.

·      VinciWorks (October 2021, £39 million) - building our leading compliance eLearning and GRC software offer.

·      Barbour (July 2021, £32 million) - broadening our activities into the compliance intelligence space.

·      Essential Skillz (October 2021, £25 million) - building further scale in compliance eLearning.

·      CoreStream (July 2021, £11 million) - a leading provider of enterprise risk management software.

·      Hydro-X (October 2021, £30 million) - further consolidating our leading position in water and air compliance.

We have refined and industrialised our M&A process. We are set up to pursue and integrate both large transformational opportunities - like Optima Health or VinciWorks - as well as smaller bolt-on acquisitions, or complex carve outs like Barbour - which we bought from Informa plc.  We are proficient at sourcing targets, completing transactions and efficiently executing integration programmes.  Our agility and flexibility to pursue acquisitions, that others may find hard to complete, supports our ability to source deals for attractive multiples.

We have continued to execute our bolt-on M&A strategy at pace. Our bolt-on acquisitions are often sourced off-market and we have well-rehearsed processes to execute and integrate these types of deals. These include the £6 million acquisition of ACL or the £4 million acquisition of Santia which have continued to scale our TIC activities, adding around £20 million of run-rate revenue in the year, as well as providing cost synergies.

We will continue to use M&A to both consolidate our fragmented markets and to compound our organic growth in GRC and TIC whilst executing this strategy in a disciplined way which creates value and delivers attractive returns for our shareholders.

Strengthening and Integrating 

We have a well-designed organisational structure which is focused on divisional entrepreneurial autonomy and agility. This structure gives our operational managers the clear responsibility and necessary resources to deliver profitable organic growth, whilst also driving integration programmes at pace. Each of our six business lines has entrepreneurial leadership teams supported by dedicated integration resources, with a well-developed integration strategy.

This structure enables us to integrate acquired businesses simultaneously across business lines, with an integration programme for one acquisition being largely discrete from another.  We can therefore integrate multiple businesses concurrently without straining management resources, whilst also delivering organic growth.

The integration programmes for all of our acquisitions, including the significant deals within Occupational Health and Employment Law, HR and Health & Safety, remain on-track, with synergies in line with expectations. The trading performance of each acquisition has been in-line with, or in some cases significantly ahead of, our pre-acquisition expectations.

Restructuring acquired businesses is an essential part of our integration programmes and ensures that synergies, returns and customer service are optimised.  Restructuring costs as a percentage of capital deployed are reducing over time, and we are achieving attractive returns from this investment. The integration of acquired businesses is typically completed within a year of acquisition, and often in a significantly shorter timeframe for smaller acquisitions.

In line with our strategy and targets, divisional adjusted EBITDA margin has increased by 250bps to 18.7%. This is a clear indicator of our ability to integrate businesses and create value through unlocking synergies.  Our operational efficiencies include merging back-office functions and physical locations, integrating service delivery and rolling out in-house technology and central IT platforms. There are also benefits from economies of scale, including route density, which allows us to improve efficiency and productivity across our field-based operations in our TIC division. As we continue to build scale, both organically and inorganically, we expect to further improve our margins.

The means by which we deliver improvements to acquired businesses are now well-rehearsed, with 74 acquisitions completed since 2016. WorkNest, is a clear example of our integration strategy in action.  It is the result of the integration of 11 acquisitions, into what was originally Ellis Whittam, before being rebranded in October 2021. We are now leveraging WorkNest's sales and marketing expertise to accelerate organic growth across the operation, selling additional products such as eLearning, HR or safety software across the client base.

Environmental, Social and Governance

Marlowe is taking action on a number of sustainability fronts, both to support clients and employees and also to mitigate our own business risks. During FY22 we implemented our sustainability strategy:

·      Products: all of Marlowe's businesses provide services that promote a safe and sustainable future. All are bound by the common purpose of protecting people, ensuring adherence to essential regulation and promoting environmental sustainability.

·      Planet: We are committed to reducing the environmental impact of our own activities and that of our supply chain. As a result, we are developing a sustainability action plan to reach Net Zero carbon emissions by 2035, a new target set in the year.

·      People: We are committed to being a responsible employer and creating a work environment where employees are actively engaged and part of our success. Our people strategy is driven by our belief that there is a direct correlation between engaged, motivated employees and a high-performance culture.

Through Marlowe's decentralised operating model, our businesses have considerable autonomy over their own operations within a well-defined framework. To reflect this, we will report on our Group level framework in future, as well as at the divisional level, to demonstrate how we are delivering effective and sustainable change.

We are committed to continuing to improve our contribution to a sustainable future.  Group actions for FY23 include: 

·      Further developing a Group level multi-year sustainability action plan to reach Net Zero carbon emissions by 2035.

·      Further develop our sustainability management and governance structure, including internal sustainability reporting capabilities and information capture.

·      Set targets in line with selected UN SDGs. 

·      Assess how we can mitigate climate risks in line with the recommendations of the Task Force on Climate Related Financial Disclosures.

·    Establish a Group-wide energy procurement strategy, so all sites can migrate to renewable energy use.

Outlook

As we announced at our recent Capital Markets Day, we expect to materially overachieve against the financial targets we set in February 2021 to reach Group run-rate revenue of c.£500 million and adjusted run-rate EBITDA of c.£100 million by the end of FY24.

We expect to maintain our high single digit organic revenue growth, which is underpinned by structural growth across our markets, and particularly fast growth in our digital markets.  We intend to continue compounding this growth through fast-paced acquisition and effective integration programmes. Via effective operational improvements we plan to continue expanding our margins.

We have made a strong start to the new financial year, with good levels of organic growth, £26 million of capital deployed in completing six further acquisitions and continued successful integration programmes. Our acquisition pipeline is well-developed and we expect to report on further progress as the year develops.

Governance, Risk & Compliance

GRC encompasses our consulting and software solutions across Compliance Software & eLearning, Health & Safety, Employment Law & HR and Occupational Health. 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.

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 strongly during FY22, with revenue increasing 172% to £94.2 million (FY21: £34.6 million).  This reflected strong organic growth and the benefits from acquisitions completed in the year, together with the full year contribution from those completed in FY21. Underlying organic revenue¹ growth was 7%, driven by new business, increased customer retention rates, cross-selling and price increases across our business lines. Underlying organic revenue growth excludes the benefit of COVID-19 testing work undertaken in the occupational health business in FY21. The vast majority of our GRC revenue are recurring and are delivered as multi-year contracted consultancy or SaaS subscriptions.

Adjusted EBITDA  increased by 151% to £28.4 million (FY21: £11.3 million), reflecting strong organic growth, operational improvements, and the benefit from integrating acquisitions. The adjusted EBITDA margin was 30.1% (FY21: 32.6%).  This reflects the mix of business within the division following significant acquisition activity in occupational health which, as expected, which operates at a lower margin than some of our other consultancy and software business lines. There is attractive potential to increase the divisional margin over time from integration synergies and operational improvements, additional scale, operational gearing and an increasing proportion of revenue from higher-margin software subscriptions.

On a run-rate basis, GRC now accounts for c.40% of Group revenue and c.60% of adjusted EBITDA.

1 Underlying organic revenue growth excludes the impact of COVID-19 testing work undertaken in the occupational health business in FY21. Including this work, organic growth was 6%.

Operational review

Compliance software

Our Compliance Software business line encompasses compliance eLearning and compliance SaaS products. Our platforms enable customers to comply with numerous regulations and also improve governance and control. One of our key value-adds is that our software is built by developers who are able to collaborate closely with industry-expert colleagues - it is developed by practitioners with deep end-market expertise.

We have made significant progress in adding scale to our compliance software offering in the year.  We have completed six acquisitions, for a total initial consideration of £113 million, and we have built a UK market leading position in the highly attractive eLearning compliance market.  This market is a vital part of modern-day learning, enabling clients to train their staff in essential regulatory and workplace standards including health & safety, company code of conduct and data protection.  Key GRC acquisitions include:

·      CoreStream has made pleasing progress since it was acquired in July 2021.  It has broadened Marlowe's digital and ESG service offerings and has further deepened the Group's relationships with leading blue-chip organisations. CoreStream has presented a number of cross-selling opportunities across the Group's software and service portfolio. Since acquisition we have increased investment in the CoreStream software development team and businesses enterprise sales resources.

·      Barbour has significantly enhanced Marlowe's digital strategy since it was acquired in July 2021. Barbour has been integrated into the division and is trading ahead of expectations. We are working on a number of organic initiatives to integrate Barbour's products into the Group's software environment. Once integrated, Barbour data and functionality will be accessible via other Marlowe software products.  The recent acquisition of Cedrec for £2 million, which completed in May 2022, adds further valuable scale and capability to the Barbour platform.

·      VinciWorks has become a core pillar of our compliance software offering in the six months since acquisition in October 2021. We have invested in a number of organic initiatives including  software development and course content creation, in areas like Anti Money Laundering (AML), where  we are experiencing significant demand in the legal sector.  Our AML capabilities have been significantly enhanced by the May 2022 acquisition of Compliance Office.  This provides consultancy and audit services to law firms looking to meet Solicitors Regulation Authority compliance, broadening VinciWorks' capabilities to provide consultancy alongside software. Following organic investment, we will imminently launch our ESG software product, which will help clients achieve their ESG strategies. We have added diversity and inclusion eLearning capability to VinciWorks to provide a more comprehensive approach to compliance culture and behavioural change. In support of these initiatives we have significantly increased investment in sales & marketing to further accelerate organic growth.

Compliance software will continue to be a key focus for the Group and our compliance software platforms are increasingly providing an end-to-end solution for clients' governance, risk and compliance strategies. Our software platforms deliver strong organic revenue growth and also benefit from highly attractive investment characteristics. We are able to add additional users with a low incremental cost to deliver, which benefits our margin. Revenue is delivered through multi-year subscriptions, with net retention rates comfortably over 100%.

Employment Law, HR and Health & Safety

Our Employment Law, HR and Health & Safety businesses delivers a range of subscription-based consultancy services.  These ensure regulatory compliance and safety, and support clients' commercial objectives via the delivery of responsive, support and innovative digital solutions. Our Health & Safety consultants provide advice, conduct audits and risk assessments and our Meridian SaaS platform helps customers track safety and compliance. We extend this health & safety proposition into HR and Employment Law compliance, which we deliver alongside a range of digital products such as HR, safety and case management software as well as eLearning.

Within the year substantial new business has been won and we have been successful in further optimising client pricing. We have also experienced improved renewal levels, and cross-selling with our eLearning offering proving to be particularly successful.

Our continued growth is supported by favourable market conditions - notably increasing employee claims, a greater regulatory burden and increased interventions and rising insurance premiums which drive the need for advisory and digital support from UK employers.  Bolt-on acquisitions like Cater Leydon, which was acquired in June 2021, have helped to develop our Employment Law & HR offering to mid-market clients.  Through the CQC acquisition in June 2021, we have entered the care quality compliance market - a growing and important area following recent regulatory changes.

The WorkNest brand, which makes up a significant proportion of our activities in this space, brings together 12 acquisitions and makes up just under half of overall GRC profits. The first major deal we completed in the space was the £60 million Ellis Whittam acquisition in late 2020.  At the time of acquisition, Ellis Whittam was generating revenues of £16 million and adjusted EBITDA of £4 million, with around 98 employees. Through the integration of 11 bolt-on acquisitions and strong organic growth, the business has grown its revenue to over £50 million and now employs some 500 people.

The  businesses now benefit from a single organisational structure and leadership, common technology platforms and integrated service delivery. We are seeing a reducing cost to acquire new customers and increasingly efficient service delivery.  As a result of this ongoing success, and the investment made in building its infrastructure, which helps deliver high operational leverage, we expect its profitability to increase organically in the next three years by more than 70% before the impact of any further acquisitions.

Occupational Health

In 2019 we identified the occupational health market as highly complementary to our Employment Law, HR and Health & Safety business. This is because the occupational health decision maker at our clients are often also responsible for other related compliance disciplines, such as HR and health & safety. The need for these services is also often closely aligned, with HR absence management issues, frequently related to occupational health matters and, in turn, often linked to health & safety issues. We cross-sell a large amount of work across these business lines with some 550 client cross-referrals in the past year.

Within Occupational Health we assure regulatory compliance for our clients, improving the physical and mental health and wellbeing of employees, minimising workplace risk and maximising corporate productivity.  In many cases the services are regulated by legislation like The Health & Safety at Work Act. The UK market is estimated to be worth close to £1 billion per annum, with annual growth of 4%-5% and there is increasing pressure on corporates to invest in this critical compliance area.

The key event for this business during the year was the significant acquisition of Optima Health, the leading provider of technology-enabled Occupational Health services in the UK. The transaction completed in January 2022, transforming the scale of our existing £23 million revenue business, and adding c.£70 million of revenue and £11 million of adjusted EBITDA per annum, to which we expect to add a further £2 million of integration-related efficiencies during our first year of ownership.

Prior to the Optima Health acquisition we completed two other acquisitions in the year: Integral OH for £2 million and Healthwork for £14 million. Additionally, since the year-end, we acquired TP Health for £13 million, a leading provider of technology-enabled occupational health services. Good progress has been made integrating our existing occupational health businesses and TP Health into Optima Health and we expect full integration to take around 12 months. We anticipate further significant synergies to arise from the removal of duplicated overhead cost, the efficiency benefits that we expect to arise from the use of the Optima technology and service efficiencies.

We are now the leader in the UK occupational health market. The scale and breadth of capability that we now have allows us to improve the efficiency with which we can manage each client and reduce the cost to acquire new clients and so enhance our margins. We also expect to see continued strong organic growth in this attractive market.

Testing, Inspection & Certification

The majority of our services in TIC revolve around our clients' business premises and include services such as testing and inspecting water and air systems to ensure efficiency, hygiene and compliance or testing, inspecting and certifying fire safety and security systems to assure standards.  A large portion of the services we deliver are recurring and essential to our clients' operations and are also stipulated by regulation.

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 strongly in the year with revenue increasing 41% to £221.7 million (FY21: £157.4 million), reflecting strong organic growth and the benefit from acquisitions in the year, together with the full year contribution from those made in FY21. Underlying organic revenue growth was 9% reflecting new customer wins, additional work with existing customers and a focus on customer retention.  Underlying organic revenue growth excludes the impact of an estimated COVID-19 recovery primarily relating to the catch-up of service visits. Including this work, organic growth was 14%. 

Adjusted EBITDA was up 54% to £30.6 million (FY21: £19.9 million) as a result of organic revenue growth, productivity improvements and the benefit from integration synergies. The adjusted EBITDA margin also increased to 13.8% (FY21: 12.6%), benefiting from efficiencies such as, including improved route density as we add scale from more customers, resulting in increased revenue per day per fee earner. 

We also benefit from a well-invested and scalable back-office infrastructure, resulting in attractive operational gearing.  As a result of back-office and operational integration, we have exited a number of properties during the year and removed further significant duplication of headcount in the overhead, supporting future profit and margin enhancement.  We are confident that we can expand margins further by continuing to drive integration synergies along with increasing our scale and efficiency.

Operational Review

Fire Safety & Security

The services we deliver across Fire Safety & Security are underpinned by ever-evolving regulations which apply to commercial premises in the UK.  Typically, the burden and legal obligation is put on the employer or landlord to ensure premises are compliant with these complex regulations, with non-compliance leading to fines, difficulties with obtaining insurance cover and, in the worst-case, injury or loss of life. Our services provide clients with very high levels of compliance that are comfortably above the market average.

Marlowe is a UK market leader in Fire, Safety & Security, albeit with a share of less than 10% in this fragmented market, which we estimate to be worth over £1.6 billion.  We have delivered significant organic growth, well above the market rate estimated to be around 3% per annum, as well as growth from acquisition. As we build scale we deliver operational efficiencies, benefit from economies of scale and leverage route density.  Our operational planning systems allow us to provide services more efficiently. The Fire Safety & Security business has performed strongly as a result of a number of new organic customer wins, and expanded customer contracts. The continued investment made in our cross-selling function team has proved beneficial, in particular in conjunction with our Water & Air Hygiene business with buyers of Fire Safety seeing Water & Air compliance services as a very complementary addition. In the region of 35% of our Fire Safety clients also procure Water and Air services from the Group. We continue to invest in our sales and marketing capability to help realise the incremental revenue available from offering complementary services via shared customer channels.

We completed four bolt-on acquisitions in the year for a total consideration of £8 million with a further two acquisitions completed so far this financial year. Integration of these businesses is on-track with each business trading in-line with expectations. Acquisitions included ACL for £6 million, which has enhanced the division by adding to the Group's customer base in and around the London region, offering attractive operational synergies with our existing London-focused operations whilst adding further valuable route density and adding additional capabilities in the passive fire safety arena.

In May 2022, we also completed the acquisition of MJ Fire and Ruthven Alarms for a combined consideration of £4 million. MJ Fire, based in Kent, provides a range of fire safety services across Greater London and elsewhere in the country.

We have also continued to invest in the business organically with further investments in sales & marketing, improvements to our operating systems and infrastructure and enhancements to our employee value proposition to ensure that we continue to be well placed to attract and retain the talent we require to support our growth.  An example of this employee value proposition is the launch during the year of our new training academy, the "Marlowe Academy", allowing us to develop and train employees. In addition, we continue to make organic investments in broadening our fire safety capabilities with further investments in building our passive fire solutions capabilities in response to new regulation and significant client demand in this area.  

We have made a positive start to FY23 following the very strong growth seen in FY22 and expect margins to continue to improve as we carry on building scale, benefiting from our enhanced route density and realising operational improvements such as improving revenue per day per fee earner.

Water & Air Hygiene

Within Water & Air Hygiene we have continued to make good progress. Our Water business has the broadest service capabilities and coverage in the markets and performed well during the year. It now generates run-rate revenue of c.£150 million, at an increased margin. We have continued to invest significantly in operational technology and as a result we are seeing continuing improvements in service efficiency, control and productivity levels. 

We have delivered good underlying organic revenue growth, driven by a mix of pricing, upselling & cross-selling and good new business levels. We are seeing some inflationary pressures from the cost of materials and fuel which we are successfully passing on to our customers via regular pricing reviews. As we build scale across our compliance markets, cross-selling becomes an ever more attractive tool for growth: for instance, this element of our strategy has delivered major contracts with a national UK pharmacy chain and a leading telecommunications provider during the year, amongst others

In line with the industry, we have experienced some recruitment challenges which we continue to manage proactively, continuing to actively look to recruit additional headcount to support our growth. For example, we are continuing our investment in training and graduate programmes, to build on our expertise in this area.

The largest acquisition in the year was Hydro-X, a leading water and air hygiene business, for £30 million.  Hydro-X provides synergies with the existing business: a number of cost-efficiencies, including route density and the benefits from Marlowe's existing sales, operational and back-office platforms.  Additionally, we made four bolt-on acquisitions during the year: Agritek, Musketeer Services, Santia and Sterling Hydrotech for a combined consideration of £9 million.

The integration of the acquisitions completed in the year remains on track and we expect to deliver synergies in line with pre-acquisition plans.  In addition, taking advantage of our scale, we have closed eight offices and warehouse locations during the year and merged into four new warehouses, consolidating the Group's property footprint and removing further duplicated cost.

FY23 has started well and we expect to see similar levels of underlying organic growth as in FY22, as we continue to build scale, benefit from route densities, and expand our cross-selling initiatives in this strategically important and attractive market. Integration and operational improvement plans are proceeding to plan.

CHIEF FINANCIAL OFFICER'S REVIEW

Revenue in the year grew to £315.9 million (FY21: £192.0 million). The increase reflects continued strong underlying organic growth of 9% and the contribution from acquisitions completed in the year, together with the full year benefit of those completed in FY21. Organic growth is measured by comparing current year revenues to prior year revenues.  These are adjusted to include the pre-acquisition performance of acquired business as if they had been part of the Group for the same part of the prior year, so that a like-for-like comparison can be made. 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 113% to £42.0 million (FY21: £19.7 million) and adjusted EBITDA increased by 90% to £54.4 million (FY21: £28.7 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 18.7% from 16.2% in FY21. The increase in margin demonstrates the successful execution of our Deepen, Broaden, Strengthen and Digitalise strategy which has seen organic margin improvement in our existing businesses, complemented by the increase in size of the higher margin GRC division.  On a statutory basis operating profit increased to £10.5 million (FY21: £1.0 million).

Adjusted profit before tax was £38.1 million (FY21: £17.1 million).  On a statutory basis, profit before tax for the year was £5.9 million (FY21: loss of £1.6 million).

Non-IFRS measures

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.

To arrive at FY22 adjusted profit before tax the following adjustments have been made:

Acquisition and other costs

Acquisition and other costs totalled £32.2 million in the year (FY21: £18.7 million).

Acquisition costs 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 year were £10.5 million (FY21: £5.6 million). The increase reflects the significant step up in both the scale and pace of acquisitions during the year. As a percentage of the capital we deployed during the year restructuring costs significantly reduced which is a trend we expect to continue The integration programmes for the acquired businesses are on track and typically take up to one year to complete, although this is often shorter for smaller bolt on businesses.

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 The majority of these costs are incurred in the 12 months following the completion of an acquisition.

Amortisation of intangible assets for the year was £14.9 million (FY21: £6.5 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.

Certain legacy and share based long term incentive schemes have been established to incentivise key members of the Group's senior management to create shareholder value through the successful acquisition, restructuring and integration of businesses in their chosen service sectors. As such, we consider the charge associated with these schemes to be part of "Acquisition and other costs" as we continue to execute our stated strategy. Share based long term incentive costs decreased to £3.6 million (FY21: £4.2 million) during the year.

Movements in contingent consideration in the year of £3.5 million reflect adjustments to estimates of contingent consideration both receivable and payable.

Exceptional finance costs of £0.7m (FY21: £nil) relate to the write off of prepaid arrangement fees on Marlowe's previous debt facility upon its increase and extension in February 2022.

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.

*Refer to note 5

Interest

Finance costs, excluding exceptional finance costs, amounted to £3.9 million in the year (FY21: £2.6 million). The increase reflects the expansion and higher levels of utilisation of the Group's debt facilities as the strategic plan has been delivered.

Taxation

UK Corporation Tax is calculated at 19% (FY21: 19%) of the estimated assessable profit for the year. In addition, deferred taxes at the statement of financial position date have been 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 2022 of £446.0 million (31 March 2021: £263.4 million), the increase being primarily due to the placing of shares in the year. At the same date, property, plant and equipment totalled £12.1 million (2021: £7.3 million), comprising freehold and long leasehold property, leasehold improvements, operational equipment, vehicles and computer systems.

Cash flow

The Group benefits from a high proportion of recurring revenues which have beneficial underlying working capital characteristics which result in working capital as a % of revenue of 1%. In the prior year the group benefitted from a significant reduction in working capital as a result of COVID related VAT and payroll tax deferrals and a temporary reduction in working capital levels in the TIC Division. These factors have normalised in current year. Combined underlying cash conversion for the 24-month period covering FY21 and FY22 was 91%, in line with our medium-term target.

Net cash inflow from operating activities before acquisition and restructuring costs was £25.1 million in the year (FY21: £28.3 million). Management of working capital remains a key focus across the Group with a strong emphasis on cash collection and overdue debt reduction.

Capital expenditure totalled £9.1 million (FY21: £4.5 million) following investment in our software systems and ongoing investment in our businesses.  

In order to fund the acquisitions in the period and to provide the Group with significant additional resources with which to capitalise on future acquisition opportunities, the Group raised net proceeds of £176.7 million from two equity placings in the year.

Net debt and financing

Net debt as at 31 March 2022, including inter alia £22.6 million of IFRS 16 lease liabilities, was £133.3 million (2021: net cash £24.3 million). Net debt (excluding IFRS 16 lease liabilities) at the end of the year was £110.7 million (FY21: net cash £43.3 million).

During the year, the Group undertook a wider refinance exercise with a view implementing a lending solution to support the next stage of the growth agenda. In February 2022 the Group announced a new £180 million, 3-year, RCF facility which extended the lending syndicate to a total of six lenders. In addition, there is a further £60 million optional accordion facility.

The Group remains well funded and continues to have sufficient resources, including headroom on its financing facility, to meet the needs of the business and to fund acquisitions as part of its strategy.

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 and adjusted operating profit.

Unaudited Consolidated Statement of Comprehensive Income

For the year ended 31 March 2022

Unaudited Consolidated Statement of Changes in Equity

For the year ended 31 March 2022

Unaudited Consolidated Statement of Financial Position

As at 31 March 2022

Unaudited Consolidated Statement of Cash Flows

For the year ended 31 March 2022

Notes to the preliminary unaudited financial information for the year ended 31 March 2022

1. 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 2022 and 31 March 2021 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 2021 have been delivered to the registrar of companies and those for the year ended 31 March 2022 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 2022. Statutory accounts for the year ended 31 March 2022 have not yet been reported on by the Group's Independent Auditor, Grant Thornton UK LLP.

The Group meets its day-to-day working capital requirements through cash generated from operations and its

financing facility which is due to expire in February 2025.

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 19% 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 £8.0m (excluding a £60m accordion facility) 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 previous financial year, the impact was manageable and, given the regulations that govern the requirement for its essential services, the business model has demonstrated resilience. To mitigate against the additional risks and uncertainties that arose the Group used the government furlough scheme throughout the prior year. 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. In addition, successful placings of 18,612,679 shares during the financial year have raised gross proceeds of £181m. 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.

The preliminary announcement has been prepared using accounting policies applied in the year ended 31 March 2022 and are consistent with those applied in the financial statements for the year ended 31 March 2021.

Re-presentation of comparative consolidated statement of financial position and statement of changes

in equity

Under s612 of the Companies Act, the Company has an exemption from recognising share premium arising on ordinary shares issued as consideration for an acquisition of shares in another company. Instead, the difference between the fair value of the shares issued and the nominal value is recorded in the merger relief reserve. For the year ending 31 March 2021, the Company had in error classified £1.7m of premium on shares issued as consideration through share premium.

As a result, the prior year financial statements have reclassified £1.7m of share premium to merger relief reserve. A third balance sheet has not been presented as this is not considered to provide a user of the financial statements with any additional information.

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 gains/losses in contingent consideration, share based payments and legacy long term incentives and loss on disposal of non-core business. 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 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.

The above tables reconcile segment adjusted operating profit/(loss), 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 2022, no customers (2021: nil) individually accounted for more than 10% of the Group's total revenue.

3. Adjusting items

Due to the nature of acquisition 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 Director's view that these should be included as adjusting items are detailed below:

4. Taxation

The charge for the year can be reconciled to the profit in the Consolidated Statement of Comprehensive income as follows:

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.

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:

The adjusted earnings per share, based on weighted average number of shares in issue during the period, is calculated below:

6. Dividends

The Company has not declared any dividends in respect of the current year or prior year.

7. Business Combinations

If the acquisitions had been completed on the first day of the financial year, Group revenue would have been

£412.0m and Group profit before tax would have been £8.9m. Post completion, acquisitions made during the year contributed £71.5m revenue and £9.7m profit before tax. 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.

Acquisition of Healthwork Limited

On 9 June 2021 the Group acquired Healthwork Limited ("Healthwork"), a provider of occupational health services for a total consideration of £20.6m, satisfied by the payment of £15.8m in cash on completion and £4.8m payable subject to the achievement of certain performance targets by the acquired business 24 months post acquisition. The £4.8m payable has been discounted to its present value £3.7m by applying the weighted average cost of capital used in the purchase price allocation. The final fair values are shown to the right.

One hundred percent of the equity of Healthwork 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 £0.3m have been charged to profit or loss. If the acquisition had been completed on the first day of the financial year Healthwork would have generated £10.8m revenue and £1.1m profit before tax.

Acquisition of Core Stream Ltd

On 16 July 2021 the Group acquired Core Stream Ltd ("Core Stream"), a provider of a GRC cloud-based software platform for a total consideration of £18.8m, satisfied by the payment of £10.1m in cash on completion and £8.7m payable subject to the achievement of certain performance targets by the acquired business 12, 24, 36 and 48 months post acquisition. The £8.7m payable has been discounted to its present value £6.0m by applying the weighted average cost of capital used in the purchase price allocation.

One hundred percent of the equity of Core Stream 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 £0.4m have been charged to profit or loss.

If the acquisition had been completed on the first day of the financial year Core Stream would have generated £4.0m revenue and £1.6m profit before tax.

Acquisition of Acquisition of Barbour EHS Limited

On 30 July 2021 the Group acquired Barbour EHS Limited ("Barbour"), a provider of specialist information services for a total consideration of £32.2m, satisfied by the payment of £32.2m in cash on completion.

One hundred percent of the equity of Barbour 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 £0.2m have been charged to profit or loss. If the acquisition had been completed on the first day of the financial year Barbour would have generated £4.0m revenue and £1.7m profit before tax.

Acquisition of Hydro-X Group Limited

On 1 October 2021 the Group acquired Hydro-X Group Limited ("Hydro-X"), a provider of water and air hygiene services for a total consideration of £32.1m, satisfied by the payment of £32.1m in cash on completion.

One hundred percent of the equity of Hydro-X 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 £0.4m have been charged to profit or loss.

If the acquisition had been completed on the first day of the financial year Hydro-X would have generated £21.4m revenue and £2.3m profit before tax.

Acquisition of VinciWorks Holdings Limited

On 4 October 2021 the Group acquired VinciWorks Holdings Limited ("Vinciworks"), a provider of an international eLearning platform for a total consideration of £57.5m, satisfied by the payment of £42.1m in cash on completion and £15.4m payable subject to the achievement of certain performance targets by the acquired business 12 and 24 months post acquisition. The £15.4m payable has been discounted to its present value (£13.0m) by applying the weighted average cost of capital used in the purchase price allocation.

One hundred percent of the equity of Vinciworks 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 £1.1m have been charged to profit or loss.

If the acquisition had been completed on the first day of the financial year Vinciworks would have generated £6.1m revenue and £2.8m profit before tax.

Acquisition of Riskwize Limited

On 20 October 2021 the Group acquired Riskwize Limited ("Essentialskillz"), a provider of a Health and Safety eLearning platform for a total consideration of £29.9m, satisfied by the payment of £29.9m in cash on completion. Since the acquisition date is less than 12 months prior to the Group's accounts being signed off, the acquisition balance sheet is still subject to finalisation.

One hundred percent of the equity of Essentialskillz 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 £0.5m have been charged to profit or loss.

If the acquisition had been completed on the first day of the financial year Essentialskillz would have generated £4.7m revenue and £2.4m profit before tax.

Acquisition of Optima Health Group Limited

On 24 January 2022 the Group acquired Optima Health Group Limited ("Optima"), a provider of occupational health services for a total consideration of £138.4m, satisfied by the payment of £138.4m in cash on completion. Since the acquisition date is less than 12 months prior to the Group's accounts being signed off, the acquisition balance sheet is still subject to finalisation.

One hundred percent of the equity of Optima 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 £2.6m have been charged to profit or loss.

If the acquisition had been completed on the first day of the financial year Optima would have generated £73.5m revenue and £0.9m 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.

8. Trade and Other Receivables

* Accrued income has been reclassified from contract assets to prepayments and accrued income and represents work completed but not yet invoiced.

As at 31 March 2022, trade and other receivables includes amounts due from contract assets of £2.2m (2021: £1.4m). 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 £7.0m 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 are provided for based on, and in accordance with IFRS 9, an expected 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 71% of those over 120 days past due to 1% of those between 0 and 30 days past due.

As at 31 March 2022, trade receivables of £21.1m (2021: £11.9m) were past due but for which no expected credit loss has been recognised because it has been assessed to be immaterial. These relate to a number of independent customers with no recent history of default.

9. Trade and Other Payables

Trade and other payables principally comprise amounts outstanding for trade purchases, ongoing costs and contingent consideration. Included within contingent consideration is £2.6m (2021: £3.4m) in respect of amounts due under put and call options. Included within accruals is £4.3m (2021: £4.5m) in respect of Long Term Incentive Plans.

10. Net cash generated from operations

11. 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 £26m of run-rate revenues and £4m of run rate EBITDA as set out below:

On 14 April 2022 a Marlowe plc subsidiary acquired TP Health (Holdings) Limited, a UK provider of technology-enabled occupational health services, for a total consideration of £16.3m, satisfied by the payment of £14.4m in cash on completion and £1.9m in cash payable subject to the achievement of certain performance targets by the acquired business 12 months post acquisition.

On 19 April 2022 a Marlowe plc subsidiary acquired Ruthven Alarms Limited, a provider of alarm system installation and maintenance services, for a total consideration of £0.3m, satisfied by the payment of £0.3m in cash on completion.

On 9 May 2022 a Marlowe plc subsidiary acquired The Compliance Office Ltd, a provider of SRA compliance consultancy services, for a total consideration of £1.5m, satisfied by the payment of £1.2m in cash on completion and £0.3m in cash payable subject to the achievement of certain performance targets by the acquired business 12 months post acquisition.

On 23 May 2022 a Marlowe plc subsidiary acquired MJ Fire Safety Ltd, a provider of fire safety installation, maintenance and inspection services, for a total consideration of £4.4m, satisfied by the payment of £4.4m in cash on completion.

On 24 May 2022 a Marlowe plc subsidiary acquired Cedrec Information Systems Limited, a leading digital platform providing Environmental, Health and Safety ("EHS") data & information, for a total consideration of £4.0m, satisfied by the payment of £3.4m in cash on completion and £0.6m in cash payable subject to the achievement of certain performance targets by the acquired business 12 months post acquisition.

On 7 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 £5.8m, satisfied by the payment of £5.8m in cash on completion.

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.