Company Announcements

14 September 2022

Marlowe plc

AGM Statement

Marlowe plc ("Marlowe" or the "Group"), the leader in business-critical services and software which assure regulatory compliance, provides the following trading update covering the four-month period from 1 April 2022 to 31 July 2022 (the "Period") ahead of the Group's Annual General Meeting ('AGM') to be held at 10.00am at 20 Grosvenor Place, London, SW1X 7HN today.

Summary

·      Strong financial progress with trading in the Period in line with expectations

·      Revenues up 66% over the same period in the prior year, of which >85% of Group revenues are recurring

·      High single digit organic revenue growth in the Period, expected to continue for the rest of the financial year to 31 March 2023 (FY23), with encouraging new business wins across both Governance, Risk and Compliance ("GRC") and Testing, Inspection and Certification ("TIC")

·      Limited cost inflation being successfully managed via contract pricing

·      Acquisition integration programmes on track

·      Disciplined execution of well-developed M&A pipeline with nine bolt-on acquisitions completed in FY23 year to date for total consideration of £39m

·      Software subscriptions now contribute approximately 25% of Group run-rate adjusted EBITDA

·      Group run-rate revenues and adjusted EBITDA are now over £450m and £79m respectively

Continued organic growth

Market demand for software, information, and consulting to ensure compliance and mitigate risk continues to grow, particularly in the areas of health, safety, HR, and the environment. Marlowe's business model is highly resilient and driven by attractive structural growth characteristics. We are able to outperform these markets due to our excellent customer service, advantages of scale, holistic compliance proposition which allows us to cross-sell and software differential. Our services are mission-critical to our clients with high switching costs and we benefit from long, 12-year average, client relationships.

The Group is trading well with strong organic growth in the Period and we expect to deliver organic growth for the full year in the high single digits (FY22: 9%). The Group has significantly expanded in scale and scope over the past year and revenues have grown 66% compared to the same period last year. We expect to deliver another year of significant earnings per share growth in FY23.

Highly defensive and resilient markets

Marlowe's software and services are predominantly non-discretionary and clients require them through the economic cycle. This provides the Group excellent revenue visibility with over 85% of revenues recurring and benefiting from multi-year contracts. These revenues are delivered either as SaaS-based subscriptions, retained consultancy subscriptions or contracted assurance services and they are necessitated by increasingly stringent and complex regulations, greater enforcement activity and increasing ESG requirements on our clients.

Successfully managing inflation

Wage inflation in the period has been mitigated through inflation linked contractual arrangements in place with our clients or via increased contract pricing. The Group is not exposed to other material inflationary cost pressures and we do not expect inflation to adversely impact the Group's operating margins.

Integration programmes are on track

We have delivered further progress with integration programmes across our GRC and TIC divisions. Acquisitions completed in FY22 across eLearning, employment law & HR, compliance software and fire & water safety are performing in line with expectations and have been integrated into our business lines. In employment law & HR compliance, businesses have been successfully integrated into the Worknest brand after a particularly acquisitive period of growth resulting in attractive operational synergies and significant cross-sales activity. Within Occupational Health, the integration of Optima Health, Healthwork and TP Health is progressing well with cost synergies now expected to be ahead of our pre-acquisition expectations.  

Our focus on continuous operational improvements, and the significant integration bandwidth we have as a result of our well-designed organisational structure which enables us to integrate multiple acquired businesses at once, is resulting in margins that are trending higher as we drive further efficiency and productivity and remove duplicated costs.

Disciplined execution of well-developed M&A pipeline

We have completed nine bolt-on acquisitions in FY23 year to date for a total consideration of £39m. These acquisitions deepen our presence across GRC in employment law & HR, compliance software, occupational health and in our TIC compliance services. Our continued ability to source bolt-on deals off-market allows us to achieve attractive valuations, with an average of 6.1x adjusted EBITDA multiple (before synergies) being paid year to date. Our pipeline of earnings enhancing acquisitions is well developed, and we are in a strong financial position to capitalise on these opportunities.

Outlook and progress towards medium term targets

The Group's run-rate revenues and adjusted EBITDA have grown to over £450m and £79m respectively. We remain confident of achieving our run-rate targets of £500m of revenues and £100m of adjusted EBITDA materially ahead of the end of FY24, as originally targeted, as we continue to build our positions across the highly attractive and resilient compliance markets that we occupy.

The strong and increasing margins in our business, and its low capital intensity, makes our business highly cash generative and we continue to expect to generate at least 90% cash conversion per annum. This enables us to fund increasing organic investment in our business, as well as fund further bolt-on acquisitions.

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About Marlowe plc

Marlowe is a UK leader in business-critical services and software which assure regulatory compliance. The company was formed to create sustainable shareholder value through the acquisition and development of businesses that provide regulated safety and compliance services and software. It is focused on compliance software, eLearning, health & safety, employment law & HR compliance, fire safety & security, water & air hygiene and occupational health services - all of which are vital to the wellbeing of its customers operations and are invariably governed by regulation. Marlowe currently provides software to over 1 million users and services to over 25% of Britain's commercial premises. The Group provides customers with a single outsourced, nationwide, provider of a range of regulated compliance and safety solutions. Our customers can be found in office complexes, high streets & leisure facilities, manufacturing plants and industrial estates, and include thousands of SMEs, local authorities, facilities management providers, multi-site NHS trusts and FTSE 100 companies.